birner10q3rdqtr_11102008.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2008
OR
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transition period
from ________________ to ________________
Commission
file number 0-23367
|
BIRNER
DENTAL MANAGEMENT SERVICES, INC.
|
|
(Exact
name of registrant as specified in its
charter)
|
|
COLORADO
|
84-1307044
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer
Identification
No.)
|
|
3801
EAST FLORIDA AVENUE, SUITE 508
DENVER,
COLORADO
|
80210
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(303)
691-0680
|
|
(Registrant’s
telephone number, including area
code)
|
|
N/A
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
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
[
]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
One):
|
Large
accelerated filer [ ]
|
Accelerated
filer [ ]
|
Non-accelerated
filer [ ]
|
Smaller
reporting company [X]
|
| |
|
(Do not check
if a smaller
|
|
| |
|
reporting
company)
|
|
| |
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [
] No [X]
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
|
Class
|
|
Shares
Outstanding as of November
10, 2008
|
|
Common
Stock, without par value
|
|
1,890,608
|
BIRNER
DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
INDEX
TO FORM 10-Q
PART I - FINANCIAL
INFORMATION
|
Item
1. Financial Statements
|
Page
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of December 31, 2007 and September 30,
2008 (Unaudited)
|
3
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Income for the Quarters and Nine
Months Ended September, 2007 and 2008
|
4
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Shareholders’ Equity and
Comprehensive Income as of September 30, 2008
|
5
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2007 and 2008
|
6
|
|
|
|
|
|
|
Unaudited
Notes to Condensed Consolidated Financial Statements
|
8
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
16
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
25
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
26
|
|
|
|
|
|
|
|
|
|
PART II - OTHER INFORMATION
|
|
|
|
|
|
|
Item
1.A
|
Risk
Factors |
26
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
26
|
|
|
|
|
|
Item
6.
|
Exhibits
|
27
|
|
|
|
|
|
|
Signatures
|
28
|
PART I - FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
|
BIRNER
DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
September
30,
|
|
|
ASSETS
|
|
2007
|
|
|
2008
|
|
|
|
|
|
**
|
|
|
(Unaudited)
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
964,150 |
|
|
$ |
718,444 |
|
|
Accounts
receivable, net of allowance for doubtful
|
|
|
|
|
|
|
|
|
|
accounts
of $291,827 and $293,264, respectively
|
|
|
3,008,550 |
|
|
|
3,271,118 |
|
|
Deferred
tax asset
|
|
|
178,591 |
|
|
|
229,854 |
|
|
Income
taxes receivable
|
|
|
26,817 |
|
|
|
- |
|
|
Prepaid
expenses and other assets
|
|
|
620,365 |
|
|
|
541,376 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
4,798,473 |
|
|
|
4,760,792 |
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
4,533,531 |
|
|
|
4,249,909 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
NONCURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
|
11,393,590 |
|
|
|
10,816,933 |
|
|
Deferred
charges and other assets
|
|
|
171,687 |
|
|
|
161,433 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
20,897,281 |
|
|
$ |
19,989,067 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
1,945,420 |
|
|
$ |
1,681,520 |
|
|
Accrued
expenses
|
|
|
1,334,785 |
|
|
|
1,244,082 |
|
|
Accrued
payroll and related expenses
|
|
|
1,456,477 |
|
|
|
2,114,174 |
|
|
Income
taxes payable
|
|
|
- |
|
|
|
402,942 |
|
|
Current
maturities of long-term debt
|
|
|
920,000 |
|
|
|
920,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
5,656,682 |
|
|
|
6,362,718 |
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Deferred
tax liability, net
|
|
|
633,667 |
|
|
|
758,275 |
|
|
Long-term
debt, net of current maturities
|
|
|
4,784,511 |
|
|
|
5,654,158 |
|
|
Other
long-term obligations
|
|
|
291,266 |
|
|
|
287,554 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
11,366,126 |
|
|
|
13,062,705 |
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
|
Preferred
Stock, no par value, 10,000,000 shares
|
|
|
|
|
|
|
|
|
|
authorized;
none outstanding
|
|
|
- |
|
|
|
- |
|
|
Common
Stock, no par value, 20,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
2,123,440
and 1,899,867 shares issued and outstanding,
respectively
|
|
|
3,028,515 |
|
|
|
- |
|
|
Retained
earnings
|
|
|
6,536,796 |
|
|
|
6,952,045 |
|
|
Accumulated
other comprehensive loss
|
|
|
(34,156 |
) |
|
|
(25,683 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
9,531,155 |
|
|
|
6,926,362 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$ |
20,897,281 |
|
|
$ |
19,989,067 |
|
|
|
|
|
|
|
|
|
|
|
|
** Derived
from the Company’s audited consolidated balance sheet at December 31,
2007.
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
|
BIRNER
DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
(UNAUDITED)
|
|
| |
|
|
|
|
|
Quarters
Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUE:
|
|
$ |
8,640,137 |
|
|
$ |
8,763,895 |
|
|
$ |
27,118,172 |
|
|
$ |
26,504,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical
salaries and benefits
|
|
|
2,271,625 |
|
|
|
2,351,310 |
|
|
|
7,107,765 |
|
|
|
7,510,984 |
|
|
|
Dental
supplies
|
|
|
608,885 |
|
|
|
627,377 |
|
|
|
1,763,791 |
|
|
|
1,845,599 |
|
|
|
Laboratory
fees
|
|
|
628,877 |
|
|
|
693,809 |
|
|
|
1,998,289 |
|
|
|
2,085,682 |
|
|
|
Occupancy
|
|
|
1,174,333 |
|
|
|
1,213,074 |
|
|
|
3,448,489 |
|
|
|
3,601,979 |
|
|
|
Advertising
and marketing
|
|
|
143,023 |
|
|
|
105,227 |
|
|
|
559,100 |
|
|
|
331,775 |
|
|
|
Depreciation
and amortization
|
|
|
609,470 |
|
|
|
623,199 |
|
|
|
1,830,548 |
|
|
|
1,826,232 |
|
|
|
General
and administrative
|
|
|
1,126,024 |
|
|
|
1,192,403 |
|
|
|
3,421,685 |
|
|
|
3,629,391 |
|
|
|
|
|
|
6,562,237 |
|
|
|
6,806,399 |
|
|
|
20,129,667 |
|
|
|
20,831,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution
from dental offices
|
|
|
2,077,900 |
|
|
|
1,957,496 |
|
|
|
6,988,505 |
|
|
|
5,672,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORPORATE
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
894,079 |
(1) |
|
|
975,006 |
(1) |
|
|
3,194,729 |
(2) |
|
|
2,805,315 |
(2) |
|
|
Depreciation
and amortization
|
|
|
26,785 |
|
|
|
25,519 |
|
|
|
84,887 |
|
|
|
72,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
1,157,036 |
|
|
|
956,971 |
|
|
|
3,708,889 |
|
|
|
2,794,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
90,832 |
|
|
|
63,819 |
|
|
|
286,151 |
|
|
|
199,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
1,066,204 |
|
|
|
893,152 |
|
|
|
3,422,738 |
|
|
|
2,595,172 |
|
|
|
Income
tax expense
|
|
|
431,164 |
|
|
|
393,005 |
|
|
|
1,392,985 |
|
|
|
1,127,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
635,040 |
|
|
$ |
500,147 |
|
|
$ |
2,029,753 |
|
|
$ |
1,467,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share of Common Stock - Basic
|
|
$ |
0.31 |
|
|
$ |
0.25 |
|
|
$ |
0.96 |
|
|
$ |
0.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share of Common Stock - Diluted
|
|
$ |
0.28 |
|
|
$ |
0.24 |
|
|
$ |
0.89 |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends per share of Common Stock
|
|
$ |
0.15 |
|
|
$ |
0.17 |
|
|
$ |
0.45 |
|
|
$ |
0.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock and dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,074,314 |
|
|
|
1,992,821 |
|
|
|
2,108,006 |
|
|
|
2,070,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
2,243,889 |
|
|
|
2,045,245 |
|
|
|
2,287,075 |
|
|
|
2,141,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
(1)
|
Corporate
expense - general and administrative includes $81,030 of equity
compensation for a stock award and $102,100 related to stock-based
compensation expense in the quarter ended September 30, 2007,
and $186,306 related to stock-based compensation expense in the
quarter ended September 30, 2008.
|
|
(2)
|
Corporate
expense - general and administrative includes $243,090 of equity
compensation for a stock award and $292,686 related to stock-based
compensation expense in the nine months ended September 30, 2007, and
$544,337 related to stock-based compensation expense in the nine months
ended September 30, 2008.
|
The
accompanying notes are an integral part of these financial
statements
BIRNER
DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE
INCOME
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Comprehensive
Income
|
|
|
Retained
Earnings
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES,
December 31, 2007
|
|
|
2,123,440 |
|
|
$ |
3,028,515 |
|
|
$ |
(34,156 |
) |
|
$ |
6,536,796 |
|
|
$ |
9,531,155 |
|
|
Common
Stock options exercised
|
|
|
26,685 |
|
|
|
293,788 |
|
|
|
|
|
|
|
- |
|
|
|
293,788 |
|
|
Purchase
and retirement of Common Stock
|
|
|
(250,258 |
) |
|
|
(3,869,219 |
) |
|
|
|
|
|
|
(11,298 |
) |
|
|
(3,880,517 |
) |
|
Tax
benefit of Common Stock options exercised
|
|
|
- |
|
|
|
2,579 |
|
|
|
|
|
|
|
- |
|
|
|
2,579 |
|
|
Dividends
declared on Common Stock
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(1,041,355 |
) |
|
|
(1,041,355 |
) |
|
Stock-based
compensation expense
|
|
|
- |
|
|
|
544,337 |
|
|
|
|
|
|
|
- |
|
|
|
544,337 |
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
8,473 |
|
|
|
|
|
|
|
8,473 |
|
|
Net
income, nine months ended September 30, 2008
|
|
|
- |
|
|
|
- |
|
|
|
1,467,902 |
|
|
|
1,467,902 |
|
|
|
1,467,902 |
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
1,476,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES,
September 30, 2008
|
|
|
1,899,867 |
|
|
$ |
- |
|
|
$ |
(25,683 |
) |
|
$ |
6,952,045 |
|
|
$ |
6,926,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
|
|
|
|
|
|
|
|
|
BIRNER DENTAL MANAGEMENT
SERVICES, INC. AND SUBSIDIARIES
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
(UNAUDITED)
|
|
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
|
|
2007
|
|
|
2008
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,029,753 |
|
|
$ |
1,467,902 |
|
|
Adjustments
to reconcile net income to net
|
|
|
|
|
|
|
|
|
|
cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,915,435 |
|
|
|
1,898,405 |
|
|
Stock
compensation expense
|
|
|
535,776 |
|
|
|
544,337 |
|
|
Loss
on disposition of property
|
|
|
- |
|
|
|
885 |
|
|
Provision
for doubtful accounts
|
|
|
501,556 |
|
|
|
559,375 |
|
|
Provision
for deferred income taxes
|
|
|
(45,819 |
) |
|
|
73,345 |
|
|
Changes
in assets and liabilities net of effects
|
|
|
|
|
|
|
|
|
|
from
acquisitions:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(860,174 |
) |
|
|
(821,943 |
) |
|
Prepaid
expenses and other assets
|
|
|
91,542 |
|
|
|
78,989 |
|
|
Deferred
charges and other assets
|
|
|
8,383 |
|
|
|
10,254 |
|
|
Accounts
payable
|
|
|
46,849 |
|
|
|
(263,901 |
) |
|
Accrued
expenses
|
|
|
(141,674 |
) |
|
|
(87,741 |
) |
|
Accrued
payroll and related expenses
|
|
|
355,944 |
|
|
|
657,697 |
|
|
Income
taxes payable
|
|
|
472,710 |
|
|
|
429,759 |
|
|
Other
long-term obligations
|
|
|
(7,811 |
) |
|
|
(3,712 |
) |
|
Net
cash provided by operating activities
|
|
|
4,902,470 |
|
|
|
4,543,651 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(528,276 |
) |
|
|
(671,033 |
) |
|
Development
of new dental centers
|
|
|
- |
|
|
|
(367,977 |
) |
|
Net
cash used in investing activities
|
|
|
(528,276 |
) |
|
|
(1,039,010 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Advances
– line of credit
|
|
|
16,161,137 |
|
|
|
18,476,809 |
|
|
Repayments
– line of credit
|
|
|
(16,825,726 |
) |
|
|
(16,917,162 |
) |
|
Repayments
– Term Loan
|
|
|
(460,000 |
) |
|
|
(690,000 |
) |
|
Repayment
of long-term debt
|
|
|
(33,561 |
) |
|
|
- |
|
|
Proceeds
from exercise of Common Stock options
|
|
|
256,753 |
|
|
|
293,788 |
|
|
Purchase
and retirement of Common Stock
|
|
|
(2,808,158 |
) |
|
|
(3,880,517 |
) |
|
Tax
benefit of Common Stock options exercised
|
|
|
99,620 |
|
|
|
2,579 |
|
|
Common
Stock cash dividends
|
|
|
(912,269 |
) |
|
|
(1,035,844 |
) |
|
Net
cash used in financing activities
|
|
|
(4,522,204 |
) |
|
|
(3,750,347 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND
|
|
|
|
|
|
|
|
|
|
CASH
EQUIVALENTS
|
|
|
(148,010 |
) |
|
|
(245,706 |
) |
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
|
|
888,186 |
|
|
|
964,150 |
|
|
CASH
AND CASH EQUIVALENTS, end of period
|
|
$ |
740,176 |
|
|
$ |
718,444 |
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
BIRNER DENTAL MANAGEMENT SERVICES,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH
|
|
|
|
|
|
|
|
FLOW
INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for interest
|
|
$ |
350,677 |
|
|
$ |
245,548 |
|
|
Cash
paid during the year for income taxes
|
|
$ |
866,475 |
|
|
$ |
620,000 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
ITEM:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
recognized on interst rate swap (net of taxes)
|
|
$ |
- |
|
|
$ |
8,473 |
|
BIRNER DENTAL MANAGEMENT SERVICES,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
30, 2008
(1) UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The
condensed consolidated financial statements included herein have been prepared
by Birner Dental Management Services, Inc. (the “Company”) pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures included herein are adequate to make
the information presented not misleading. A description of the Company’s
accounting policies and other financial information is included in the audited
consolidated financial statements as filed with the Securities and Exchange
Commission in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007.
In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of September 30, 2008 and the results of
operations and cash flows for the periods presented. All such
adjustments are of a normal recurring nature. The results of
operations for the quarter and nine months ended September 30, 2008 are not
necessarily indicative of the results that may be achieved for a full fiscal
year and cannot be used to indicate financial performance for the entire
year.
Effective
April, 1, 2008, the Company has reclassified dentist and hygiene contract labor
expenses from clinical salaries and benefits to net revenue and has adjusted
prior periods in this filing. The reclassification had no effect on
contribution from dental offices or net income. The reclassification
was approximately $127,000 and $200,000 for the quarters ended September 30,
2008 and 2007, respectively. The reclassification was approximately
$497,000 and $461,000 for the nine months ended September 30, 2008 and 2007,
respectively.
Effective
July 1, 2008, the Company has reclassified dental assistant wages from clinical
salaries and benefits to net revenue and has adjusted prior periods in this
filing. The reclassification had no effect on contribution from
dental offices or net income. The reclassification was approximately
$1.3 million and $1.2 million for the quarters ended September 30, 2008 and
2007, respectively. The reclassification was approximately $3.8
million and $3.7 million for the nine months ended September 30, 2008 and 2007,
respectively.
Due to
the Company buying back common stock at prices higher than the issue price, the
Company’s common stock balance is a negative $11,297 as of September 30,
2008. The Company has reclassified this negative balance to retained
earnings on the balance sheet.
(2) SIGNIFICANT ACCOUNTING
POLICIES
Intangible
Assets
The Company's dental
practice acquisitions involve the purchase of tangible and intangible assets and
the assumption of certain liabilities of the acquired dental offices
(“Offices”). As part of the purchase price allocation, the Company allocates the
purchase price to the tangible and identifiable intangible assets
acquired and liabilities assumed, based on estimated fair market values. Costs
of acquisition in excess of the net estimated fair value of tangible assets
acquired and liabilities assumed are allocated to the management agreement
related to the Office (“Management Agreement”). The Management Agreement
represents the Company's right to manage the Offices during the 40-year term of
the Management Agreement. The assigned value of the Management Agreement is
amortized using the straight-line method over a period of 25
years. Amortization was $195,015 and $194,932 for the quarters ended
September 30, 2008 and 2007, respectively. Amortization was $584,990 and
$584,740 for the nine months ended September 30, 2008 and 2007,
respectively.
The
Management Agreements cannot be terminated by the related professional
corporation without cause, consisting primarily of bankruptcy or material
default by the Company.
In the
event that facts and circumstances indicate that the carrying value of
long-lived and intangible assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation were required, the estimated
future undiscounted cash flows associated with the asset would be compared to
the asset’s carrying amount to determine if a write-down to market value or
discounted cash flow value would be required.
Stock
Options
On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
(“SFAS”) No. 123(R), "Share-Based Payment." This standard revises
SFAS 123, “Accounting for Stock-Based Compensation” and supersedes Accounting
Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued to Employees.”
Under SFAS 123(R), the Company is required to measure the cost of employee
services received in exchange for stock options and similar awards
based on the grant date fair value of the award and recognize this cost in the
income statement over the period during which an employee is required to provide
service in exchange for the award.
The Company adopted SFAS
123(R) using the modified prospective method. Under this transition method,
stock-based compensation expense for the quarter and nine months ended
September 30, 2008 includes: (i) compensation expense for all stock-based
compensation awards granted prior to, but not yet vested as of January 1, 2006,
based on the grant date fair value estimated in accordance with the original
provision of SFAS 123; and (ii) compensation expense for all stock-based
compensation awards granted subsequent to January 1, 2006, based on the grant
date fair value estimated in accordance with the provision of SFAS 123(R). The
Company recognizes compensation expense on a straight line basis over the
requisite service period of the award. Total stock-based compensation expense
included in the Company’s statement of income for the quarters ended September
30, 2008 and 2007 was approximately $186,000 and $102,000, respectively. Total
stock-based compensation expense included in the Company’s statement of income
for the nine months ended June 30, 2008 and 2007 was approximately $544,000 and
$293,000, respectively. Total stock-based compensation expense was recorded as a
component of corporate general and administrative expense.
The
Black-Scholes option-pricing model was used to estimate the option fair values.
The option-pricing model requires a number of assumptions, of which the most
significant are expected stock price volatility, the expected pre-vesting
forfeiture rate, expected dividend rate and the expected option term (the amount
of time from the grant date until the options are exercised or expire). Expected
volatility was calculated based upon actual historical stock price movements
over the most recent periods ending September 30, 2008 equal to the expected
option term. Expected pre-vesting forfeitures were estimated based on actual
historical pre-vesting forfeitures over the most recent periods ending September
30, 2008 for the expected option term. From January 1, 2006 through December 31,
2007, the expected option term was calculated using the “simplified” method
permitted by Staff Accounting Bulletin 107. Starting January 1,
2008, the expected option term was calculated based on historical experience of
the terms of previous options.
Income
Taxes
Effective
January 1, 2007, the Company adopted the provisions of FASB Interpretation
No. 48, Accounting for
Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in a company’s financial
statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.
FIN 48 requires a company to determine whether it is more likely than not
that a tax position will be sustained upon examination based upon the technical
merits of the position. If the more-likely-than-not threshold is not met, a
company must measure the tax position to determine the amount to recognize in
the financial statements. The application of income tax law and regulations is
inherently complex and subject to change. The Company is required to make many
subjective assumptions and judgments regarding the income tax exposures. Changes
in these subjective assumptions and judgments can materially affect amounts
recognized in the Company’s financial statements.
At the
adoption date of January 1, 2007 and at September 30, 2008, the Company had
no unrecognized tax benefits which would affect the effective tax rate if
recognized, and as of September 30, 2008, the Company had no accrued interest or
penalties related to uncertain tax positions.
On
initial application, FIN 48 was applied to all tax positions for which the
statute of limitations remained open. The tax years 2004-2007 remain open to
examination by taxing jurisdictions to which the Company is subject. The IRS
report issued in July 2006 made no changes to the Company’s federal income tax
return for 2004. No other federal or state examinations are ongoing or have been
performed in the past three years.
SFAS
160
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statements” (“SFAS 160”). In SFAS 160, the FASB
established accounting and reporting standards that require noncontrolling
interests to be reported as a component of equity, changes in a parent’s
ownership interest while the parent retains its controlling interest to be
accounted for as equity transactions, and any retained noncontrolling equity
investment upon the deconsolidation of a subsidiary to be initially measured at
fair value. SFAS 160 is effective for annual periods beginning on or after
December 15, 2008. Retroactive application of SFAS 160 is prohibited. The
Company is currently evaluating the requirements of SFAS 160 and the
potential impact on its financial statements.
SFAS
141(R)
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141(R)”). In SFAS 141(R), the FASB retained the
fundamental requirements of Statement No. 141 to account for all business
combinations using the acquisition method (formerly the purchase method) and for
an acquiring entity to be identified in all business combinations. However, the
new standard requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. SFAS 141(R) is effective for annual periods beginning on or
after December 15, 2008. The Company is currently evaluating the
requirements of SFAS 141(R) and the potential impact on its financial
statements. SFAS 141(R) will only impact the Company if it is party
to a business combination after SFAS 141(R) is
effective.
FAS157-3
In
October 2008, the FASB issued FSP No. FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active. FSP No. FAS
157-3 clarifies the application of SFAS No. 157 as it relates to the valuation
of financial assets in a market that is not active for those financial assets.
This FSP is effective immediately and includes those periods for which financial
statements have not been issued. We currently do not have any financial assets
that are valued using inactive markets, and as a result we are not impacted by
the issuance of FSP No. FAS 157-3.
EITF
03-6-1
In June 2008, the Financial Accounting
Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. EITF
03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities (“FSP EITF
03-6-1”). FSP EITF 03-6-1 concludes that unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend equivalents
are participating securities and must be included in the computation of basic
earnings per share using the two-class method. FSP EITF 03-6-1 is
effective for us beginning January 1, 2009 and is to be applied on a
retrospective basis to all periods presented. We are currently evaluating
the potential impact of the adoption of FSP EITF 03-6-1 on our financial
position, cash flows and results of operations.
SFAS
162
In May 2008, the FASB issued Statement
of Financial Accounting Standard No. 162, The Hierarchy of
Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162
identifies the sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements that are
presented in conformity with U.S. generally accepted accounting principles
(“GAAP”) for nongovernmental entities. SFAS 162 was issued to include the GAAP
hierarchy in the accounting literature established by the FASB. SFAS 162
will be effective 60 days following the Securities and Exchange Commission
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of
Presented Fairly in Conformity With Generally Accepted Accounting
Principles. We do
not expect the application of SFAS 162 will have a material impact on our
financial position, cash flows or results of operations.
FAS
142-3
In April 2008, the FASB issued FSP FAS
No. 142-3, Determination of
the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3
amends the factors an entity should consider in developing renewal or extension
assumptions used in determining the useful life of recognized intangible assets
under SFAS No. 142, Goodwill and Other
Intangible Assets (“SFAS
142”). The intent of FSP FAS 142-3 is to improve the consistency between
the useful life of a recognized intangible asset under SFAS 142 and the period
of expected cash flows used to measure the fair value of the asset under SFAS
141(R) and other U.S. GAAP. FSP FAS 142-3 is effective for us beginning
January 1, 2009. Early adoption is prohibited. We do not expect the
application of FSP FAS 142-3 will have a material impact on our financial
position, cash flows or results of operations.
SFAS
161
In March 2008, the FASB issued
Statement of Financial Accounting Standard No. 161, Disclosures about
Derivative Instruments and Hedging Activities – An Amendment of FASB Statement
No. 133 (“SFAS
161”).
SFAS 161 enhances required
disclosures regarding derivatives and hedging activities, including enhanced
disclosures regarding how: a) an entity uses derivative instruments; b)
derivative instruments and related hedged items are accounted for under FASB
Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities; and c) derivative instruments and
related hedged items affect an entity’s financial position, financial
performance and cash flows. This statement is effective for us beginning
January 1, 2009. Early adoption is encouraged by the FASB. We do not
expect the application of SFAS 161 will have a material impact on our financial
position, cash flows or results of operations.
(3) EARNINGS PER
SHARE
The
Company calculates earnings per share in accordance with SFAS No. 128, “Earnings
Per Share.”
|
|
|
Quarters
Ended September 30,
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per
Share Amount
|
|
|
Income
|
|
|
Shares
|
|
|
Per
Share Amount
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to shares of Common Stock
|
|
$ |
635,040 |
|
|
|
2,074,314 |
|
|
$ |
0.31 |
|
|
$ |
500,147 |
|
|
|
1,992,821 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive shares of Common Stock from stock options and
warrants
|
|
|
- |
|
|
|
169,575 |
|
|
|
(0.03 |
) |
|
|
- |
|
|
|
52,424 |
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to shares of Common Stock
|
|
$ |
635,040 |
|
|
|
2,243,889 |
|
|
$ |
0.28 |
|
|
$ |
500,147 |
|
|
|
2,045,245 |
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
difference in weighted average shares outstanding between basic earnings per
share and diluted earnings per share for the quarters ended September 30, 2008
and 2007 relates to the effect of 52,423 and 169,575 shares, respectively, of
dilutive shares of Common Stock from stock options, which are included in total
shares for the diluted calculation. For the quarters ended September
30, 2008 and 2007, options to purchase 272,929 and 17,000 shares, respectively,
of the Company’s Common Stock were not included in the computation of dilutive
income per share because their effect was anti-dilutive.
|
|
|
Nine
Months Ended September 30,
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per
Share Amount
|
|
|
Income
|
|
|
Shares
|
|
|
Per
Share Amount
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to shares of Common Stock
|
|
$ |
2,029,753 |
|
|
|
2,108,006 |
|
|
$ |
0.96 |
|
|
$ |
1,467,902 |
|
|
|
2,070,157 |
|
|
$ |
0.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive shares of Common Stock from stock options and
warrants
|
|
|
- |
|
|
|
179,069 |
|
|
|
(0.07 |
) |
|
|
|
|
|
|
71,517 |
|
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to shares of Common Stock
|
|
$ |
2,029,753 |
|
|
|
2,287,075 |
|
|
$ |
0.89 |
|
|
$ |
1,467,902 |
|
|
|
2,141,674 |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
difference in weighted average shares outstanding between basic earnings per
share and diluted earnings per share for the nine months ended September 30,
2008 and 2007 relates to the effect of 71,517 and 179,069 shares, respectively,
of dilutive shares of Common Stock from stock options, which are included in
total shares for the diluted calculation. For the nine months ended September
30, 2008, options to purchase 252,400 shares of the Company’s Common Stock were
not included in the computation of dilutive income per share because their
effect was anti-dilutive.
(4) STOCK-BASED COMPENSATION
PLANS
At the
Company’s June 2005 annual meeting of shareholders, the Company’s shareholders
approved the 2005 Equity Incentive Plan (“2005 Plan”). The 2005 Plan was amended
at the June 2007 annual meeting of shareholders to reserve 425,000 shares of
Common Stock for issuance. The 2005 Plan provides for the grant of incentive
stock options, restricted stock, restricted stock units and stock grants to
employees (including officers and employee-directors) and non-statutory stock
options to employees, directors and consultants. The objectives of this plan
include attracting and retaining the best personnel, providing for additional
performance incentives by providing employees with the opportunity to acquire
Common Stock. As of September 30, 2008, there were 75,898 shares available for
issuance under the 2005 Plan. The exercise price of the stock options issued
under the 2005 Plan is equal to the market price, or market price plus 10% for
shareholders who own greater than 10% of the Company, at the date of grant.
These stock options expire seven years, or five years for shareholders who own
greater than 10% of the Company, from the date of the grant and vest annually
over a service period ranging from three to five years. The 2005 Plan is
administered by a committee of two or more independent directors from the
Company’s Board of Directors (the “Committee”). The Committee determines the
eligible individuals to whom awards under the 2005 Plan may be granted, as well
as the time or times at which awards will be granted, the number of shares to be
granted to any eligible individual, the life of any award, and any other terms
and conditions of the awards in addition to those contained in the 2005 Plan.
As of September 30, 2008, there were 78,654 vested options, 199,362
unvested options and 60,000 vested restricted shares outstanding under the 2005
Plan.
The
Employee Stock Option Plan (the ''Employee Plan'') was adopted by the Board of
Directors effective as of October 30, 1995, and as amended on September 4, 1997,
February 28, 2002, and June 8, 2004, reserved 479,250 shares of Common Stock for
issuance. The Employee Plan provided for the grant of incentive stock options to
employees (including officers and employee-directors) and non-statutory stock
options to employees, directors and consultants. The Employee Plan expired by
its terms on October 30, 2005. As of September 30, 2008, there were 141,000
vested options outstanding and 10,500 unvested options outstanding under the
Employee Plan.
The
Company uses the Black-Scholes pricing model to estimate the fair value of each
option granted with the following weighted average assumptions:
|
|
|
Quarters
Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
Valuation
Assumptions
|
|
2007
(6)
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
life
|
|
|
- |
|
|
|
3.1 |
(2) |
|
|
4.5 |
(1) |
|
|
4.0 |
(2) |
|
Risk-free
interest rate (3)
|
|
|
- |
|
|
|
2.30 |
% |
|
|
4.75 |
% |
|
|
2.28 |
% |
|
Expected
volatility (4)
|
|
|
- |
|
|
|
63 |
% |
|
|
58 |
% |
|
|
58 |
% |
|
Expected
dividend yield
|
|
|
- |
|
|
|
5.00 |
% |
|
|
3.07 |
% |
|
|
3.39 |
% |
|
Expected
Forteiture (5)
|
|
|
- |
|
|
|
9.39 |
% |
|
|
5.32 |
% |
|
|
2.70 |
% |
_____________________________
|
(1)
|
The
expected life, in years, of stock options is estimated using the
simplified-method calculation.
|
|
(2)
|
The
expected life, in years, of stock options is estimated based on historical
experience.
|
|
(3)
|
The
risk-free interest rate is based on U.S. Treasury bills whose term is
consistent with the expected life of the stock options.
|
|
(4)
|
The
expected volatility is estimated based on historical and current stock
price data for the Company.
|
|
(5)
|
Forfeitures
of options granted prior to the Company’s adoption of SFAS 123(R) on
January 1, 2006 are recorded as they occur. Forfeitures of options granted
since the Company’s adoption of SFAS 123(R) are estimated based on
historical experience.
|
|
(6)
|
The
Company did not issue any options during the quarter ended September 30,
2007.
|
A summary
of option activity as of September 30, 2008, and changes during the nine months
then ended, is presented below:
|
|
|
Number
of Options
|
|
|
Weighted-Average
Exercise Price
|
|
|
Range
of Exercise Prices
|
|
|
Weighted-Average
Remaining Contractual Term (years)
|
|
|
Aggregate
Intrinsic Value (thousands)
|
|
|
Outstanding
at December 31, 2007
|
|
|
377,133 |
|
|
$ |
14.36 |
|
|
$ |
5.50
- $21.85 |
|
|
|
3.7
|
|
|
|
2,677 |
|
|
Granted
|
|
|
104,000 |
|
|
$ |
20.29 |
|
|
$ |
13.60
- $21.00 |
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(26,685 |
) |
|
$ |
11.01 |
|
|
$ |
7.88
- $19.54 |
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(24,932 |
) |
|
$ |
17.15 |
|
|
$ |
12.50
- $20.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at September 30, 2008
|
|
|
429,516 |
|
|
$ |
15.84 |
|
|
$ |
5.50
- $21.85 |
|
|
|
3.7
|
|
|
$ |
648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2008
|
|
|
219,654 |
|
|
$ |
12.72 |
|
|
$ |
5.50
- $21.85 |
|
|
|
2.2
|
|
|
$ |
632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
weighted average grant date fair values of options granted were $7.57 per option
and $9.16 per option during the nine months ended September 30, 2008 and 2007,
respectively. Net cash proceeds from the exercise of stock options
during the nine months ended September 30, 2008 and 2007 were $293,788 and
$256,753, respectively. The associated income tax benefit from stock options
exercised during the nine months ended September 30, 2008 and 2007 was $2,580
and $99,620, respectively. As of the date of exercise, the total intrinsic
values of options exercised during the nine months ended September 30, 2008 and
2007 were $200,346 and $312,204, respectively. As of September 30, 2008, there
was $1.3 million of total unrecognized compensation expense related to
non-vested stock options, which is expected to be recognized over a weighted
average period of 2.1 years.
(5) RESTRICTED STOCK
GRANT
On July
1, 2005, the Company granted 60,000 shares of restricted Common Stock to the
Company’s Chairman and Chief Executive Officer (the “Employee”) under the 2005
Plan. In connection with the grant of restricted stock, the Company agreed to
reimburse the Employee an amount equal to the tax liability associated with the
grant. Such reimbursement totaled approximately $586,000 which was recognized as
an expense during the third quarter of 2005. As of December 31, 2007, all
compensation expense related to the restricted stock grant had been recognized.
The final 20,000 shares of restricted stock vested on January 1,
2008. Beginning June 30, 2007, the Company reclassified deferred
equity compensation to Common Stock.
A summary
of the vesting status of the shares of restricted stock as of September 30,
2008, and the changes during the nine months then ended, is presented
below:
| |
|
|
Nine
Months Ended
|
|
|
| |
|
|
September
30, 2008
|
|
|
| |
|
|
Number
of Restricted Shares
|
|
|
Weighted-Average
Grant-Date Fair Value
|
|
|
| |
|
|
|
|
|
|
|
|
| |
Non-vested
at December 31, 2007
|
|
|
20,000 |
|
|
$ |
13.51 |
|
|
| |
Granted
|
|
|
- |
|
|
|
- |
|
|
| |
Vested
|
|
|
(20,000 |
) |
|
|
13.51 |
|
|
| |
Forfeited
|
|
|
- |
|
|
|
- |
|
|
| |
Non-vested
at September 30, 2008
|
|
|
- |
|
|
$ |
- |
|
|
(6)
DIVIDENDS
Since 2004,
the Company has paid the following quarterly cash dividends.
| |
Date
Dividend Paid
|
|
Quarterly
Dividend Paid per Share
|
|
| |
|
|
|
|
| |
April
9, 2004; July 9, 2004; October 8, 2004; January 14, 2005
|
|
0.0375
|
|
| |
April
8, 2005; July 8, 2005; October 14, 2005; January 13, 2006
|
|
0.10
|
|
| |
April
14, 2006; July 14, 2006; October 13, 2006; January 12,
2007
|
|
0.13
|
|
| |
April
13, 2007; July 13, 2007; October 12, 2007; January 11,
2008
|
|
0.15
|
|
| |
April
11, 2008; July 11, 2008; October 10, 2008
|
|
0.17
|
|
The
payment of dividends in the future is subject to the discretion of the Company’s
Board of Directors, and various factors may prevent the Company from paying
dividends or require the Company to reduce the dividends. Such factors include
the Company’s financial position, capital requirements and liquidity, the
existence of a stock repurchase program, any loan agreement restrictions, state
corporate law restrictions, results of operations and such other factors the
Company’s Board of Directors may consider relevant.
(7)
LINE OF
CREDIT
On April
22, 2008, the Company amended its bank line of credit (“Credit
Facility”). The amended Credit Facility extends the expiration of the
credit agreement from May 31, 2009 to May 31, 2010. The Credit Facility allows
the Company to borrow, on a revolving basis, an aggregate principal amount not
to exceed $7.0 million at either, or a combination of, the lender’s Base Rate or
at LIBOR plus a LIBOR rate margin, at the Company’s option. The lender’s Base
Rate computes interest at the higher of the lender’s “prime rate” or the Federal
Funds Rate plus one-half percent (0.5%). The LIBOR option computes
interest at the LIBOR rate as of the date such LIBOR rate loan was made plus a
LIBOR rate margin of 1.25%. A commitment fee of 0.25% on the average
daily unused amount of the revolving loan commitment during the preceding
quarter is also assessed. The Company may prepay any Base Rate loan at any time
and any LIBOR rate loan upon not less than three business days prior written
notice given to the lender, but the Company is responsible for any loss or cost
incurred by the lender in liquidating or employing deposits required to fund or
maintain the LIBOR rate loan. At September
30, 2008, the Company had $3.8 million outstanding and $3.2 million
available for borrowing under the Credit Facility. This consisted of $3.0
million outstanding under the LIBOR rate option and $814,000 outstanding under
the Base Rate option. As of September 30, 2008, the LIBOR rate was 3.74% and the
Base Rate was 5%. The Credit Facility requires the Company to comply
with certain covenants and financial ratios. At September 30, 2008, the Company
was in full compliance with all of its covenants under the Credit
Facility.
(8)
TERM
LOAN
To fund
its “dutch auction” tender offer, the Company entered into a $4.6 million term
loan (“Term Loan”) in October 2006. Under the Term Loan, $2.3 million was
borrowed at a fixed interest rate of 7.05% and the remaining $2.3 million was
borrowed at a floating interest rate of LIBOR plus 1.5%. As of September 30,
2008, the rate was 4.29%. The principal amount borrowed is repaid quarterly in
20 equal payments of $230,000 plus interest beginning December 31, 2006. The
Term Loan matures on September 30, 2011. As of September 30, 2008,
$1.4 million was outstanding at the fixed rate of 7.05% and $1.4 million was
outstanding at LIBOR plus 1.5% floating rate. The Term Loan requires the
Company to comply with certain covenants and financial ratios. At
September 30, 2008, the Company was in full compliance with all of its covenants
under the Term Loan.
(9)
OTHER
The
Company’s retained earnings as of September 30, 2008 were approximately $7.0
million, and the Company had a working capital deficit on that date of
approximately $1.6 million. During the nine months ended September 30, 2008, the
Company had capital expenditures of approximately $1.0 million, paid dividends
of approximately $1.0 million and purchased approximately $3.9 million of Common
Stock and increased total bank debt by approximately $870,000.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking
Statements
The
statements contained in this report that are not historical in nature are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included in this report that address activities, events or
developments that we expect, believe, intend or anticipate will or may occur in
the future, are forward-looking statements. When used in this document, the
words “estimate,” “believe,” anticipate,” “project” and similar expressions are
intended to identify forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties, many of which cannot be predicted
with accuracy and some of which might not even be anticipated. These
forward-looking statements include statements in this Item 2, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,”
regarding intent, belief or current expectations of the Company or its officers
with respect to the development of de novo offices or
acquisition of additional dental practices (“Offices”) and the successful
integration of such Offices into the Company’s network, recruitment of
additional dentists, funding of the Company’s expansion, capital expenditures,
payment or nonpayment of dividends and cash outlays for income taxes and other
purposes.
Such
forward-looking statements involve certain risks and uncertainties that could
cause actual results to differ materially from anticipated results. These risks
and uncertainties include regulatory constraints, changes in laws or regulations
concerning the practice of dentistry or dental practice management companies,
the availability of suitable new markets and suitable locations within such
markets, changes in the Company’s operating or expansion strategy, the general
economy of the United States and the specific markets in which the Company’s
Offices are located or are proposed to be located, trends in the health care,
dental care and managed care industries, as well as the risk factors set forth
in Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2007, this report, and other factors as may be
identified from time to time in the Company’s filings with the Securities and
Exchange Commission or in the Company’s press releases.
General
The
following discussion relates to factors that have affected the results of
operations and financial condition of the Company for the quarters and nine
months ended September 30, 2007 and 2008. This information should be read in
conjunction with the Company’s condensed consolidated financial statements and
related notes thereto included elsewhere in this report.
Overview
The
Company was formed in May 1995 and currently manages 61 Offices in Colorado, New
Mexico and Arizona staffed by 81 general dentists and 34 specialists. The
Company derives all of its Revenue (as defined below) from its Management
Agreements with professional corporations (“P.C.s”), which conduct the practice
at each Office. In addition, the Company assumes a number of responsibilities
when it develops a de
novo Office or acquires an existing dental practice. These
responsibilities are set forth in a Management Agreement, as described
below.
The
Company was formed with the intention of becoming the leading provider of
business services to dental practices in Colorado. The Company’s growth and
success in the Colorado market led to its expansion into the New Mexico and
Arizona markets. The Company’s growth strategy is to focus on greater
utilization of existing physical capacity through recruiting more dentists and
support staff and through development of de novo Offices and selective
acquisitions.
Critical
Accounting Policies
The
Company’s critical accounting policies are set forth in its Annual Report on
Form 10-K for the year ended December 31, 2007. There have been no
changes to these policies since the filing of that report.
Components
of Revenue and Expenses
Total
dental group practice revenue (“Revenue”) represents the revenue of the Offices
reported at estimated realizable amounts, received from dental plans, other
third-party payors and patients for dental services rendered at the
Offices. Revenue is a non-GAAP measure. See the
reconciliation of Revenue to Net Revenue on page 18. The Company’s
Revenue is derived principally from fee-for-service revenue and managed dental
care revenue. Fee-for-service revenue consists of revenue received from
indemnity dental plans, preferred provider plans and direct payments by patients
not covered by any third-party payment arrangement. Managed dental care revenue
consists of revenue received from capitated managed dental care plans, including
capitation payments and patient co-payments. Capitated managed dental care
contracts are between dental benefits organizations and the P.C.s.
Net
revenue represents Revenue less amounts retained by the Offices. The amounts
retained by the Offices represent amounts paid as compensation to employed and
contract labor dentists, dental hygienists and dental assistants. The Company’s
net revenue is dependent on the Revenue of the Offices. Direct expenses consist
of the expenses incurred by the Company in connection with managing the Offices,
including salaries and benefits for personnel (other than dentists, dental
hygienists, and dental assistants), supplies, laboratory fees, occupancy costs,
advertising and marketing, depreciation and amortization and general and
administrative (including insurance, management information systems and other
expenses related to dental practice operations). The Company also incurs
personnel and administrative expenses in connection with maintaining a corporate
function that provides management, administrative, marketing, advertising,
development and professional services to the Offices.
Under
each of the Management Agreements, the Company manages the business and
marketing aspects of the Offices, including (i) providing capital, (ii)
designing and implementing marketing and advertising programs, (iii) negotiating
for the purchase of supplies, (iv) staffing, (v) recruiting, (vi) training of
non-dental personnel, (vii) billing and collecting certain fees for dental
services provided by the Offices, (viii) arranging for certain legal and
accounting services, and (ix) negotiating with third party payors. Under the
Management Agreements, the P.C. is responsible for, among other things (i)
supervision of all dentists, dental hygienists and dental assistants, (ii)
complying with all laws, rules and regulations relating to dentists, dental
hygienists and dental assistants, and (iii) maintaining proper patient
records.
Under the
typical Management Agreement used by the Company, the P.C. pays the Company a
management fee equal to the “Adjusted Gross Center Revenue” of the P.C. less
compensation paid to the dentists, dental hygienists and dental assistants
employed at the Office of the P.C. Adjusted Gross Center Revenue is
comprised of all fees and charges booked each month by or on behalf of the P.C.
as a result of dental services provided to patients at the Office, less any
adjustments for uncollectible accounts, professional courtesies and other
activities that do not generate a collectible fee. The Company’s
costs include all direct and indirect costs, overhead and expenses relating to
the Company’s provision of management services at each Office under the
Management Agreement, including (i) salaries, benefits and other direct costs of
employees who work at the Office (other than dentists’, hygienists’ and dental
assistants’ salaries), (ii) direct costs of all Company employees or consultants
who provide services to or in connection with the Office, (iii) utilities,
janitorial, laboratory, supplies, advertising and other expenses incurred by the
Company in carrying out its obligations under the Management Agreement, (iv)
depreciation expense associated with the P.C.’s assets and the amortization of
intangible asset value relating to the Office, (v) interest expense on
indebtedness incurred by the Company to finance any of its obligations under the
Management Agreement, (vi) general and malpractice insurance expenses and
dentist recruitment expenses, (vii) personal property and other taxes assessed
against the P.C.’s assets used in connection with the operation of the Office,
(viii) out-of-pocket expenses of the Company’s personnel related to mergers or
acquisitions involving the P.C., (ix) corporate overhead charges or any other
expenses of the Company, including the P.C.’s pro rata share of the expenses of
the accounting and computer services provided by the Company, and (x) a
collection reserve in the amount of 5.0% of Adjusted Gross Center
Revenue. As a result, substantially all costs associated with the
provision of dental services at the Offices are borne by the Company, except for
the compensation of the dentists, dental hygienists and dental
assistants who work at the Offices of the P.C.s. This enables the Company to
manage the profitability of the Offices. Each Management Agreement is
for a term of 40 years. Further, each Management Agreement generally may be
terminated by the P.C. only for cause, which includes a material default by or
bankruptcy of the Company. Upon expiration or termination of a Management
Agreement by either party, the P.C. must satisfy all obligations it has to the
Company.
Under the
Management Agreements, the Company negotiates and administers the capitated
managed dental care contracts on behalf of the P.C.s. Under a
capitated managed dental care contract, the dental group practice provides
dental services to the members of the dental benefits organization and receives
a fixed monthly capitation payment for each plan member covered for a specific
schedule of services regardless of the quantity or cost of services to the
participating dental group practice obligated to provide them. This
arrangement shifts the risk of utilization of these services to the dental group
practice providing the dental services. Because the Company assumes
responsibility under the Management Agreements for all aspects of the operation
of the dental practices (other than the practice of dentistry) and thus bears
all costs of the P.C.s associated with the provision of dental services at the
Offices (other than compensation of dentists, dental hygienists and dental
assistants), the risk of over-utilization of dental services at the Offices
under capitated managed dental care plans is effectively shifted to the Company.
In addition, dental group practices participating in a capitated managed dental
care plan often receive supplemental payments for more complicated or elective
procedures. In contrast, under traditional indemnity insurance arrangements, the
insurance company pays whatever reasonable charges are billed by the dental
group practice for the dental services provided. Under a preferred provider
plan, the dental group practice is paid for dental services provided based on a
fee schedule that is a discount to the usual and customary fees paid under an
indemnity insurance agreement.
The
Company seeks to increase its fee-for-service business by increasing the patient
volume at existing Offices through effective marketing and advertising programs
and by opening de novo
Offices. The Company seeks to supplement this fee-for-service business with
revenue from contracts with capitated managed dental care
plans. Although the Company’s fee-for-service business generally is
more profitable than its capitated managed dental care business, capitated
managed dental care business serves to increase facility utilization and dentist
productivity. The relative percentage of the Company’s Revenue
derived from fee-for-service business and capitated managed dental care
contracts varies from market to market depending on the availability of
capitated managed dental care contracts in any particular market and the
Company’s ability to negotiate favorable contract terms. In addition,
the profitability of managed dental care Revenue varies from market to market
depending on the level of capitation payments and co-payments in proportion to
the level of benefits required to be provided.
Results
of Operations
For the
quarter ended September 30, 2008, Revenue increased $250,000, or 1.7% to $15.0
million compared to $14.7 million for the quarter ended September 30,
2007. For the quarter ended September 30, 2008, net revenue increased
$124,000, or 1.4% to $8.8 million compared to $8.6 million for the quarter ended
September 30, 2007. This increase is attributable to an increase in
net revenue from specialty dentistry of $121,000 along with a de novo Office the Company
opened in May 2008 producing $38,000 in net revenue offset by a decrease in net
revenue from general dentistry of $35,000. Despite a slight increase
in net revenue for the quarter ended September 30, 2008 compared to the quarter
ended September 30, 2007, the Company believes it continues to experience a
general weakness in the economy in its markets.
For the
quarter ended September 30, 2008, net income decreased $135,000, or 21.3% to
$500,000, or $.24 per share compared to $635,000, or $.28 per share for the
quarter ended September 30, 2007.
For the
nine months ended September 30, 2008, Revenue decreased $415,000, or .9% to
$45.1 million compared to $45.6 million for the nine months ended September 30,
2007. For the nine months ended September 30, 2008, net revenue
decreased $614,000, or 2.3%, to $26.5 million compared to $27.1 million for the
nine months ended September 30, 2007. This decrease is attributable
to a decrease in net revenue from general dentistry of $1.0 million offset by an
increase in net revenue from specialty dentistry of $375,000 along
with a de
novo Office the Company opened in May 2008 producing $37,000 in net
revenue. The Company attributes the decreases in Revenue and net revenue to
general weakness in the economy in the Company’s markets as reflected by a
reduced number of patient procedures and in particular fewer crown and bridge
procedures.
For the
nine months ended September 30, 2008, net income decreased $562,000, or 27.7% to
$1.5 million, or $.69 per share compared to $2.0 million or $.89 per share for
the nine months ended September 30, 2007.
The
Company continues to generate strong cash flow from
operations. During the nine months ended September
30, 2008, the Company purchased $3.9 million of its outstanding
Common Stock, invested $1.0 million in capital expenditures, paid $1.0 million
in dividends, and repaid $690,000 of the Term Loan while increasing borrowings
under its Credit Facility by $1.6 million.
The
Company’s earnings before interest, taxes, depreciation, amortization and non
cash expense associated with stock-based compensation (“Adjusted EBITDA”)
decreased $922,000, or 15% to $5.2 million for the nine months ended September
30, 2008 compared to $6.2 million for the corresponding nine month period in
2007. Although Adjusted EBITDA is not a GAAP measure of performance or
liquidity, the Company believes that it may be useful to an investor in
evaluating the Company’s ability to meet future debt service, capital
expenditures and working capital requirements. However, investors should not
consider these measures in isolation or as a substitute for operating income,
cash flows from operating activities or any other measure for determining the
Company’s operating performance or liquidity that is calculated in accordance
with GAAP. In addition, because Adjusted EBITDA is not calculated in accordance
with GAAP, it may not necessarily be comparable to similarly titled measures
employed by other companies. A reconciliation of Adjusted EBITDA to net income
can be made by adding depreciation and amortization expense - Offices,
depreciation and amortization expense – corporate, stock-based compensation
expense, interest expense, net and income tax expense to net income as in the
following table.
|
|
|
Quarters
|
|
|
Nine
Months
|
|
|
|
|
Ended
September 30,
|
|
|
Ended
September 30,
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
RECONCILIATION
OF ADJUSTED EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
635,040 |
|
|
$ |
500,147 |
|
|
$ |
2,029,753 |
|
|
$ |
1,467,902 |
|
|
Add
back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization - Offices
|
|
|
609,470 |
|
|
|
623,199 |
|
|
|
1,830,548 |
|
|
|
1,826,232 |
|
|
Depreciation
and amortization - Corporate
|
|
|
26,785 |
|
|
|
25,519 |
|
|
|
84,887 |
|
|
|
72,173 |
|
|
Stock-based
compensation expense
|
|
|
183,130 |
|
|
|
186,306 |
|
|
|
535,776 |
|
|
|
544,337 |
|
|
Interest
expense, net
|
|
|
90,832 |
|
|
|
63,819 |
|
|
|
286,151 |
|
|
|
199,817 |
|
|
Income
tax expense
|
|
|
431,164 |
|
|
|
393,005 |
|
|
|
1,392,985 |
|
|
|
1,127,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$ |
1,976,421 |
|
|
$ |
1,791,995 |
|
|
$ |
6,160,100 |
|
|
$ |
5,237,731 |
|
Revenue
is total dental group practice revenue generated at the Company’s Offices from
professional services provided to its patients. Amounts retained by dental
Offices represents compensation expense to the dentists, hygienists and dental
assistants and is subtracted from total dental group practice revenue to arrive
at net revenue. The Company reports net revenue in its financial statements to
comply with Emerging Issues Task Force Issue No. 97-2, Application of SFAS No.
94 (Consolidation of All Majority Owned Subsidiaries) and APB Opinion No. 16
(Business Combinations) to Physician Practice Management Entities and Certain
Other Entities With Contractual Management Arrangements. Revenue is not a U.S.
generally accepted accounting principles (“GAAP”) measure. The Company discloses
Revenue and believes it is useful to investors because it is a critical
component for management’s evaluation of Office performance. However, investors
should not consider this measure in isolation or as a substitute for net
revenue, operating income, cash flows from operating activities or any other
measure for determining the Company’s operating performance that is calculated
in accordance with generally accepted accounting principles. The following table
reconciles Revenue to net revenue.
|
|
|
Quarters
Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
dental group practice revenue
|
|
$ |
14,726,411 |
|
|
$ |
14,976,112 |
|
|
$ |
45,561,904 |
|
|
$ |
45,146,842 |
|
|
Less
- amounts retained by dental Offices
|
|
|
(6,086,274 |
) |
|
|
(6,212,217 |
) |
|
|
(18,443,732 |
) |
|
|
(18,642,723 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$ |
8,640,137 |
|
|
$ |
8,763,895 |
|
|
$ |
27,118,172 |
|
|
$ |
26,504,119 |
|
The
following table sets forth the percentages of net revenue represented by certain
items reflected in the Company’s condensed consolidated statements of income.
The information contained in the following table represents the historical
results of the Company. The information that follows should be read in
conjunction with the Company’s condensed consolidated financial statements and
related notes thereto contained elsewhere in this report.
|
BIRNER
DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
(UNAUDITED)
|
|
| |
|
|
|
|
Quarters
Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUE:
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical
salaries and benefits
|
|
|
26.3 |
% |
|
|
26.8 |
% |
|
|
26.2 |
% |
|
|
28.3 |
% |
|
Dental
supplies
|
|
|
7.0 |
% |
|
|
7.2 |
% |
|
|
6.5 |
% |
|
|
7.0 |
% |
|
Laboratory
fees
|
|
|
7.3 |
% |
|
|
7.9 |
% |
|
|
7.4 |
% |
|
|
7.9 |
% |
|
Occupancy
|
|
|
13.6 |
% |
|
|
13.8 |
% |
|
|
12.7 |
% |
|
|
13.6 |
% |
|
Advertising
and marketing
|
|
|
1.7 |
% |
|
|
1.2 |
% |
|
|
2.1 |
% |
|
|
1.3 |
% |
|
Depreciation
and amortization
|
|
|
7.1 |
% |
|
|
7.1 |
% |
|
|
6.8 |
% |
|
|
6.9 |
% |
|
General
and administrative
|
|
|
13.0 |
% |
|
|
13.6 |
% |
|
|
12.6 |
% |
|
|
13.7 |
% |
|
|
|
|
76.0 |
% |
|
|
77.7 |
% |
|
|
74.2 |
% |
|
|
78.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution
from dental offices
|
|
|
24.0 |
% |
|
|
22.3 |
% |
|
|
25.8 |
% |
|
|
21.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORPORATE
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
10.3 |
% |
|
|
11.1 |
% |
|
|
11.8 |
% |
|
|
10.6 |
% |
|
Depreciation
and amortization
|
|
|
0.3 |
% |
|
|
0.3 |
% |
|
|
0.3 |
% |
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
13.4 |
% |
|
|
10.9 |
% |
|
|
13.7 |
% |
|
|
10.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
1.1 |
% |
|
|
0.7 |
% |
|
|
1.1 |
% |
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
12.3 |
% |
|
|
10.2 |
% |
|
|
12.6 |
% |
|
|
9.8 |
% |
|
Income
tax expense
|
|
|
5.0 |
% |
|
|
4.5 |
% |
|
|
5.1 |
% |
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
7.3 |
% |
|
|
5.7 |
% |
|
|
7.5 |
% |
|
|
5.5 |
% |
Quarter
Ended September 30, 2008 Compared to Quarter Ended September 30,
2007:
Net revenue. For the quarter
ended September 30, 2008, net revenue increased $124,000, or 1.4%, to $8.8
million compared to $8.6 million for the quarter ended September 30, 2007. This
increase is attributable to an increase in same store net revenue from specialty
dentistry of $121,000 offset by a decrease in same store net revenue from
general dentistry of $35,000. A de novo Office that opened in
May 2008 contributed $38,000 of additional net revenue.
Clinical salaries and
benefits. For the quarter ended September 30, 2008, clinical salaries and
benefits increased $80,000, or 3.5%, to $2.4 million compared to $2.3
million for the quarter ended September 30, 2007. This increase was primarily
related to additional employees at the de novo Office opened in May
2008, health insurance premiums and annual wage increases that became effective
February 1, 2008. As a percentage of net revenue, clinical salaries
and benefits increased to 26.8% for the quarter ended September 30, 2008
compared to 26.3 % for the quarter ended September 30, 2007.
Dental supplies. For the
quarter ended September 30, 2008, dental supplies increased to $627,000 compared
to $609,000 for the quarter ended September 30, 2007, an increase of $18,000 or
3.0%. This increase was primarily the result of the initial dental supply
inventory purchased at the de
novo Office that opened in May 2008. As a percentage of net
revenue, dental supplies increased to 7.2% for the quarter ended September 30,
2008 compared to 7.0% for the quarter ended September 30, 2007.
Laboratory fees. For the
quarter ended September 30, 2008, laboratory fees increased to $694,000 compared
to $629,000 for the quarter ended September 30, 2007, an increase of $65,000 or
10.3%. This increase is primarily related to overall increased material cost for
crowns and bridges and an increased number of implant procedures, which carry an
increased laboratory fee. As a percentage of net revenue, laboratory
fees increased to 7.9% for the quarter ended September 30, 2008 compared to 7.3%
for the quarter ended September 30, 2007.
Occupancy. For the quarter
ended September 30, 2008 and 2007, occupancy expense remained constant at $1.2
million. As
a percentage of net revenue, occupancy expense increased to 13.8% for the
quarter ended September 30, 2008 compared to 13.6% for the quarter ended
September 30, 2007.
Advertising and marketing.
For the quarter ended September 30, 2008, advertising and marketing expense
decreased to $105,000 compared to $143,000 for the quarter ended September 30,
2007, a decrease of $38,000 or 26.4%. This decrease is attributable
to the Company’s television advertising campaign in the Denver, Colorado market
in the quarter ending September 30, 2007 that was not conducted in the quarter
ended September 30, 2008. As a percentage of net revenue, advertising and
marketing expense decreased to 1.2% for the quarter ended September 30, 2008
compared to 1.7% for the quarter ended September 30, 2007.
Depreciation and
amortization-Offices. For the quarter ended September 30, 2008,
depreciation and amortization expenses attributable to the Offices increased to
$623,000 compared to $609,000 for the quarter ended September 30, 2007, an
increase of $14,000 or 2.3%. The increase in the Company’s depreciable asset
base is a result of purchasing tenant improvements and new equipment for one
de novo Office and the
purchase of a new time collection system for payroll. As a percentage of net
revenue, depreciation and amortization expenses attributable to the Offices
remained constant at 7.1% for the quarter ended September 30, 2008 and
2007.
General and
administrative-Offices. For the quarter ended September 30, 2008, general
and administrative expenses attributable to the Offices increased to $1.2
million compared to $1.1 million for the quarter ended September 30, 2007, an
increase of $66,000 or 5.9%. This increase is primarily related to
increased bad debt expense, office supplies, professional fees and maintenance
along with expenses from the de novo Office that opened in
May 2008. As a percentage of net revenue, general and administrative
expenses increased to 13.6% for the quarter ended September 30, 2008 compared to
13.0% for the quarter ended September 30, 2007.
Contribution from dental
Offices. As a result of the above, contribution from
dental Offices decreased $120,000, or 5.8%, to $2.0 million for the quarter
ended September 30, 2008 compared to $2.1 million for the quarter ended
September 30, 2007. As a percentage of net revenue, contribution from dental
Offices decreased to 22.3% for the quarter ended September 30, 2008 compared to
24.0% for the quarter ended September 30, 2007.
Corporate expenses - general and
administrative. For the quarter ended September 30, 2008, corporate
expenses – general and administrative increased to $976,000 compared to $894,000
for the quarter ended September 30, 2007, an increase of $82,000 or
9.1%. This increase is primarily related to an increase of $120,000
in executive bonuses offset by a decrease in professional fees of $32,000. As a
percentage of net revenue, corporate expenses - general and administrative
increased to 11.1% for the quarter ended September 30, 2008 compared to 10.3%
for the quarter ended September 30, 2007.
Corporate expenses - depreciation
and amortization. For the quarter ended September 30, 2008, corporate
expenses - depreciation and amortization decreased to $26,000 compared to
$27,000 for the quarter ended September 30, 2007, a decrease of $1,000 or 4.7%.
The decrease is related to the decrease in the Company’s depreciable asset base.
As a percentage of net revenue, corporate expenses – depreciation and
amortization remained constant at 0.3% for the quarters ended September 30, 2008
and 2007.
Operating
income. As a result of the matters discussed above, the
Company’s operating income decreased by $201,000, or 17.3% to $957,000 for the
quarter ended September 30, 2008 compared to $1.2 million for the quarter ended
September 30, 2007. As a percentage of net revenue, operating income
decreased to 10.9% for the quarter ended September 30, 2008 compared to 13.4%
for the quarter ended September 30, 2007.
Interest expense. For the
quarter ended September 30, 2008, interest expense decreased to $64,000 compared
to $91,000 for the quarter ended September 30, 2007, a decrease of $27,000 or
29.7%. This decrease in interest expense is attributable to a reduction in the
principal amount of the Term Loan combined with reduced interest rates. As a
percentage of net revenue, interest expense decreased to 0.7% for the quarter
ended September 30, 2008 compared to 1.1% for the quarter ended September 30,
2007.
Net
income. As a result of the above, the Company reported
net income of $500,000 for the quarter ended September 30, 2008 compared to net
income of $635,000 for the quarter ended September 30, 2007, a decrease of
$135,000 or 21.3%. Net income for the quarter ended September 30, 2008 was net
of income tax expense of $393,000, while net income for the quarter ended
September 30, 2007 was net of income tax expense of $431,000. As a percentage of
net revenue, net income decreased to 5.7% for the quarter ended September 30,
2008 compared to 7.3% for the quarter ended September 30, 2007.
Nine
Months Ended September 30, 2008 Compared to Nine Months Ended September 30,
2007:
Net revenue. For the nine
months ended September 30, 2008, net revenue decreased $614,000, or 2.3%, to
$26.5 million compared to $27.1 million for the nine months ended September 30,
2007. This decrease is attributable to a decrease in same store net revenue from
general dentistry of $1.0 million offset by an increase in same store net
revenue from specialty dentistry of $375,000. A de novo Office that opened in
May 2008 contributed $37,000 of additional net revenue.
Clinical salaries and
benefits. For the nine months ended September 30, 2008, clinical salaries
and benefits increased $403,000, or 5.7%, to $7.5 million compared to $7.1
million for the nine months ended September 30, 2007. This increase was
primarily related to increased costs related to employee benefits including
accrued vacation, health insurance premiums and Company contribution to the
401(k) employee savings plan. Wages for support staff also increased,
partially due to annual wage increases that became effective February 1, 2008
along with the additional costs related to the de novo Office that opened in
May 2008 . As a percentage of net revenue, clinical salaries and benefits
increased to 28.3% for the nine months ended September 30, 2008 compared to
26.2% for the nine months ended September 30, 2007.
Dental supplies. For the nine
months ended September 30, 2008 and 2007, dental supplies remained constant at
$1.8 million. As a percentage of net revenue, dental supplies
increased to 7.0% for the nine months ended September 30, 2008 compared to 6.5%
for the nine months ended September 30, 2007.
Laboratory fees. For the nine
months ended September 30, 2008, laboratory fees increased $87,000 or 4.4% to
$2.1 million compared to $2.0 million for the nine months ended September 30,
2007. This increase is primarily related to overall increased
material cost for crowns and bridges and an increased number of implant
procedures, which carry an increased laboratory fee. As a
percentage of net revenue, laboratory fees increased to 7.9% for the nine months
ended September 30, 2008 compared to 7.4% for the nine months ended September
30, 2007.
Occupancy. For the nine
months ended September 30, 2008, occupancy expense increased $153,000 or 4.5% to
$3.6 million compared to $3.4 million for the nine months ended September 30,
2007. This increase was primarily related to the de novo Office that opened
May 2008 and increased rental payments resulting from the renewal of Office
leases at current market rates for Offices whose leases expired subsequent to
September 30, 2007. As a percentage of net revenue, occupancy expense
increased to 13.6% for the nine months ended September 30, 2008 compared to
12.7% for the nine months ended September 30, 2007.
Advertising and marketing.
For the nine months ended September 30, 2008, advertising and marketing expense
decreased to $332,000 compared to $559,000 for the nine months ended September
30, 2007, a decrease of $227,000 or 40.7%. This decrease is
attributable to the Company’s television advertising campaign in the Denver,
Colorado market in the nine months ending September 30, 2007 that was not
conducted in the nine months ending September 30, 2008. As a percentage of net
revenue, advertising and marketing expense decreased to 1.3% for the nine months
ended September 30, 2008 compared to 2.1% for the nine months ended September
30, 2007.
Depreciation and
amortization-Offices. For the nine months ended September 30, 2008 and
2007, depreciation and amortization expenses attributable to the Offices
remained constant at $1.8 million. As a percentage of net revenue,
depreciation and amortization expenses attributable to the Offices increased to
6.9% for the nine months ended September 30, 2008 compared to 6.8% for the nine
months ended September 30, 2007.
General and
administrative-Offices. For the nine months ended September 30, 2008,
general and administrative expenses attributable to the Offices increased to
$3.6 million compared to $3.4 million for the nine months ended September 30,
2007, an increase of $208,000 or 6.1%. This increase is primarily related to
increased bad dept expense, office supplies, equipment maintenance, professional
fees and travel along with the expenses related to the de novo Office opened in May
2008 partially offset by decreased malpractice insurance and recruiting
costs. As a percentage of net revenue, general and administrative
expenses attributable to the Offices increased to 13.7% for the nine months
ended September 30, 2008 compared to 12.6% for the nine months ended September
30, 2007.
Contribution from dental
Offices. As a result of the above, contribution from
dental Offices decreased $1.3 million, or 18.8%, to $5.7 million for the nine
months ended September 30, 2008 compared to $7.0 million for the nine months
ended September 30, 2007. As a percentage of net revenue, contribution from
dental Offices decreased to 21.4% for the nine months ended September 30, 2008
compared to 25.8% for the nine months ended September 30, 2007.
Corporate expenses - general and
administrative. For the nine months ended September 30, 2008, corporate
expenses – general and administrative decreased to $2.8 million compared to $3.2
million for the nine months ended September 30, 2007, a decrease of $389,000 or
12.2%. This decrease is primarily related to a decrease of $372,000
in executive bonuses. As a percentage of net revenue, corporate
expenses - general and administrative decreased to 10.6% for the nine months
ended September 30, 2008 compared to 11.8% for the nine months ended September
30, 2007.
Corporate expenses - depreciation
and amortization. For the nine months ended September 30, 2008, corporate
expenses - depreciation and amortization decreased to $72,000 compared to
$85,000 for the nine months ended September 30, 2007, a decrease of $13,000 or
15.0%. The decrease is related to the decrease in the Company’s depreciable
asset base. As a percentage of net revenue, corporate expenses – depreciation
and amortization remained constant at 0.3% for the nine months ended September
30, 2008 and 2007.
Operating
income. As a result of the matters discussed above, the
Company’s operating income decreased to $2.8 million for the nine months ended
September 30, 2008 compared to $3.7 million for the nine months ended September
30, 2007, a decrease of $914,000 or 24.6%. As a percentage of net revenue,
operating income decreased to 10.5% for the nine months ended September 30, 2008
compared to 13.7% for the nine months ended September 30, 2007.
Interest expense. For the
nine months ended September 30, 2008, interest expense decreased to $200,000
compared to $286,000 for the nine months ended September 30, 2007, a decrease of
$86,000, or 30.2%. This decrease in interest expense is attributable to the
reduction in the principal amount of the Term Loan combined with reduced
interest rates. As a percentage of net revenue, interest expense decreased to
0.8% for the nine months ended September 30, 2008 compared to 1.1% for the nine
months ended September 30, 2007.
Net
income. As a result of the above, the Company reported
net income of $1.5 million for the nine months ended September 30, 2008 compared
to net income of $2.0 million for the nine months ended September 30, 2007, a
decrease of $562,000 or 27.7%. Net income for the nine months ended
September 30, 2008 was net of income tax expense of $1.1 million, while net
income for the nine months ended September 30, 2007 was net of income tax
expense of $1.4 million. As a percentage of net revenue, net income decreased to
5.5% for the nine months ended September 30, 2008 compared to 7.5% for the nine
months ended September 30, 2007.
Liquidity
and Capital Resources
The
Company finances its operations and growth through a combination of cash
provided by operating activities and the Credit Facility. As of
September 30, 2008, the Company had a working capital deficit of approximately
$1.6 million and retained earnings of $7.0 million.
Net cash
provided by operating activities was approximately $4.5 million and $4.9 million
for the nine months ended September 30, 2008 and 2007,
respectively. During the nine months ended September 30, 2008,
excluding net income and after adding back non-cash items, the Company’s cash
provided by operating activities consisted primarily of an increase in accounts
payable and accrued expenses of approximately $306,000 and an increase in income
taxes payable of approximately $430,000, offset by an increase in accounts
receivable of $822,000 and a decrease in prepaid expenses and other assets of
approximately $79,000. During the 2007 period, excluding net income
and after adding back non-cash items, the Company’s cash provided by operating
activities consisted primarily of an increase in accounts payable and accrued
expenses of approximately $261,000, an increase in income taxes payable of
approximately $473,000 and a decrease of prepaid expenses and other assets of
approximately $92,000, offset by an increase in accounts receivable of
approximately $860,000.
Net cash
used in investing activities was approximately $1.0 million and $528,000 for the
nine months ended September 30, 2008 and 2007, respectively. During the nine
months ended September 30, 2008, the Company invested approximately $1.0 million
in capital expenditures, which includes $163,000 to upgrade the Company’s
payroll time collection system, $157,000 to remodel an Office and $368,000 in
the development of a de
novo Office. For the nine months ended September 30, 2007, the Company
invested approximately $528,000 in the purchase of additional
equipment.
Net cash
used in financing activities was approximately $3.8 million
for the nine months ended September 30, 2008 and $4.5 million for the nine
months ended September 30, 2007. During the nine months ended September 30,
2008, net cash used in financing activities was comprised of approximately $3.9
million used in the purchase and retirement of Common Stock, approximately $1.0
million for the payment of dividends and approximately $690,000 for the
repayment of the Term Loan, partially offset by an increase of approximately
$1.6 million on the Credit Facility and approximately $294,000 in proceeds from
the exercise of Common Stock options. During the nine months ended
September 30, 2007, net cash used in financing activities was comprised of
approximately $2.8 million used in the purchase and retirement of Common Stock,
approximately $912,000 for the payment of dividends, approximately $665,000 used
to pay down the Credit Facility and approximately $494,000 for the repayment of
long-term debt, partially offset by approximately $257,000 in proceeds from the
exercise of Common Stock options and $100,000 in tax benefit of Common Stock
options exercised.
On April
22, 2008, the Company amended the Credit Facility. The amended Credit
Facility extends the expiration of the credit agreement from May 31, 2009 to May
31, 2010. The Credit Facility allows the Company to borrow, on a revolving
basis, an aggregate principal amount not to exceed $7.0 million at either, or a
combination of, the lender’s Base Rate or at LIBOR plus a LIBOR rate margin, at
the Company’s option. The lender’s Base Rate computes interest at the higher of
the lender’s “prime rate” or the Federal Funds Rate plus one-half percent
(0.5%). The LIBOR option computes interest at the LIBOR rate as of
the date such LIBOR Rate loan was made plus a LIBOR rate margin of
1.25%. A commitment fee of 0.25% on the average daily unused amount
of the revolving loan commitment during the preceding quarter is also assessed.
The Company may prepay any Base Rate loan at any time and any LIBOR rate loan
upon not less than three business days prior written notice given to the lender,
but the Company is responsible for any loss or cost incurred by the lender in
liquidating or employing deposits required to fund or maintain the LIBOR rate
loan. At September 30, 2008, the Company had $3.8
million outstanding and $3.2 million available for borrowing under the
Credit Facility. This consisted of $3.0 million outstanding under the LIBOR rate
option and $814,000 outstanding under the Base Rate option. As of September 30,
2008, the LIBOR rate was 3.74% and the Base Rate was 5%. As of
October 31, 2008, the LIBOR rate was 5.34%. The Credit Facility
requires the Company to comply with certain covenants and financial ratios. At
September 30, 2008, the Company was in full compliance with all of its covenants
under the Credit Facility.
On
October 5, 2006, the Company entered into a $4.6 million Term Loan to finance a
“dutch auction” tender offer for shares of its Common Stock. Under the Term
Loan, $2.3 million is borrowed at a fixed interest rate of 7.05% and the
remaining $2.3 million is borrowed at a floating interest rate of LIBOR plus
1.5%. The $2.3 million borrowed at a fixed rate was achieved by the Company by
entering into a fixed for floating interest rate swap and the Company designates
such swap as a cash
flow hedge under SFAS No. 133. The principal amount borrowed will be paid
quarterly in 20 equal payments of approximately $230,000 plus interest beginning
December 31, 2007. The Term Loan expires September 30, 2011. The Term Loan requires the
Company to comply with certain covenants and financial ratios. At September 30,
2008, the Company was in full compliance with all of its covenants under the
Term Loan.
As of
September 30, 2008, the Company had the following debt and lease
obligations:
|
|
|
|
|
|
Payments
due by Period
|
|
|
|
|
Total
|
|
|
Less
than 1 year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
More
than 5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt obligations
|
|
$ |
6,574,158 |
|
|
$ |
920,000 |
|
|
$ |
5,654,158 |
|
|
$ |
- |
|
|
$ |
- |
|
|
Operating
lease obligations
|
|
|
9,312,627 |
|
|
|
3,110,533 |
|
|
|
4,424,425 |
|
|
|
1,733,235 |
|
|
|
44,434 |
|
|
Total
|
|
$ |
15,886,785 |
|
|
$ |
4,030,533 |
|
|
$ |
10,078,583 |
|
|
$ |
1,733,235 |
|
|
$ |
44,434 |
|
The
Company from time to time may purchase its Common Stock on the open market or in
negotiated transactions. During the quarter ended September 30, 2008, the
Company, in five separate transactions, purchased 218,080 shares of its Common
Stock for total consideration of approximately $3.2 million at prices ranging
from $13.53 to $15.78. On January 23, 2008, the Company announced
that the Board of Directors had approved an increase in the authorized amount up
to $1 million of stock repurchases. On May 1, 2008, the Company’s
Board of Directors approved up to $2 million of stock repurchases. On
July 30, 2008, the Board of Directors approved an additional $1 million of stock
repurchases. On August 12, 2008, the Board of Directors approved an
increase in the authorized amount of up to $2 million of stock
repurchases. The remaining authorized amount available for stock
repurchases is approximately $1.4 million as of September 30,
2008. There is no expiration date on these plans. Such purchases may
be made from time to time as the Company’s management deems
appropriate.
The
Company believes that cash generated from operations and borrowings under its
Credit Facility will be sufficient to fund its anticipated working capital
needs, capital expenditures and dividend payments for at least the next 12
months. In order to meet its long-term liquidity needs, the Company may issue
additional equity and debt securities, subject to market and other conditions.
There can be no assurance that such additional financing will be available on
terms acceptable to the Company. The failure to obtain the funds necessary to
finance its future cash requirements could adversely affect the Company’s
ability to pursue its strategy and could negatively affect its operations in
future periods.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market
risk represents the risk of loss that may impact the financial position, results
of operations or cash flows of the Company due to adverse changes in financial
and commodity market prices and rates. Historically, the Company has not used
derivative instruments or engaged in hedging activities. On October 12, 2006,
the Company entered into a fixed-for-floating interest rate swap transaction on
the Term Loan and designated it as a cash flow hedge under SFAS No.
133. In September 2008, the Company recognized, on its balance sheet,
approximately $5,000 of other comprehensive income to mark up the value of the
cash flow hedge net of taxes. As required by SFAS 157, the Company
calculated the value of the cash flow hedge using Level II inputs.
Interest Rate
Risk. The interest payable on the Credit Facility and a
portion of the Term Loan is variable based on floating interest rates (either
LIBOR or Base Rate) and, therefore, is affected by changes in market interest
rates. At September 30, 2008, the variable portion outstanding under the Term
Loan was $1.4 million (at a LIBOR rate of 4.3%) and $3.8 million was outstanding
under the Credit Facility with either LIBOR (3.74%) or Base Rate
(5.0%). The Company may repay the Credit Facility and Term Loan
balances in full at any time without penalty. The Company does not
believe that any reasonably possible near-term changes in interest rates would
result in a material effect on future earnings, fair values or cash flows of the
Company. The Company estimates that a 1.0% increase in the interest
rate on the Credit Facility and Term Loan would have resulted in additional
interest expense of approximately $30,000 for the nine months ended September
30, 2008.
ITEM 4. CONTROLS
AND PROCEDURES
Under the
supervision and with the participation of the Company’s management, including
the Chief Executive Officer and Chief Financial Officer, the Company evaluated
the design and operation of its disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the
“Exchange Act”) as of September 30, 2008. On the basis of this
review, the Company’s management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company’s disclosure controls and
procedures are designed, and are effective, to give reasonable assurance that
the information required to be disclosed by the Company in reports that it files
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and Exchange
Commission and to ensure that information required to be disclosed in the
reports filed or submitted under the Exchange Act is accumulated and
communicated to our management, including the Chief Executive Officer and Chief
Financial Officer, in a manner that allows timely decisions regarding
required disclosure.
There
were no changes in the Company’s internal controls over financial reporting that
occurred in the quarter ended September 30, 2008 that materially affected, or
were reasonably likely to materially affect, its internal control over financial reporting.
PART II. OTHER
INFORMATION
ITEM 1A. Risk
Factors
As of the
date of this filing, other than as set forth below, there have been no material
changes from the risk factors previously disclosed in “Risk Factors” in Item 1A
of the Annual Report on Form 10-K for the year ended December 31,
2007. An investment in the Company’s Common Stock involves various
risks. When considering an investment in the Company, investors
should carefully consider all of the risk factors described in the 2007 form
10-K and the risk factors below. There may be additional matters
about which the Company is currently unaware or that the Company currently
considers immaterial. All of these could adversely affect the
Company’s business, financial condition, results of operations and cash flows
and, thus, the value of an investment in the Company.
The
Company is reliant on a single bank for its line of credit.
The
Company’s $7.0 million Credit Facility is with a single
bank. Although the Company has utilized this bank for its financing
needs for over ten years, there can be no assurances that due to the current
environment this bank will not change the terms of the Credit Facility or cease
to continue to extend credit to the Company.
Various
factors outside of the Company’s control may affect the Company’s stock price
and results of operations.
The
market price of the Common Stock could be subject to wide fluctuations in
response to quarterly variations in operating results of the Company or its
competitors, changes in earnings estimates by analysts, developments in the
industry or changes in general economic conditions. In addition, the
recent turmoil in the financial markets may have an adverse effect on consumer
spending patterns. A recessionary economic cycle, higher levels of
unemployment, higher consumer debt levels, higher tax rates and other changes in
tax laws or other economic factors could adversely affect consumer demand for
the Company's services and in particular discretionary or elective dental
services, which could adversely affect the Company’s results of
operations. In addition, current or worsening economic conditions
could adversely affect the Company’s collection of accounts
receivable.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
The
following chart provides information regarding Common Stock purchased by the
Company during the period July 1, 2008 through September 30, 2008.
|
Issuer
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total
Number Of Shares Purchased
|
|
|
Average
Price Paid per Share
|
|
|
Total
Number Of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
|
|
Approximate
Dollar Value Of Shares That May Yet Be Purchased Under the Plans or
Programs
|
|
|
July
1, 2008 through July 31, 2008
|
|
|
89,201 |
|
|
$ |
15.78 |
|
|
|
89,201 |
|
|
$ |
525,524 |
|
|
August
1, 2008 through August 31, 2008
|
|
|
82,473 |
|
|
|
14.50 |
|
|
|
82,473 |
|
|
$ |
329,666 |
|
|
September
1, 2008 through September 30, 2008
|
|
|
46,406 |
|
|
|
13.54 |
|
|
|
46,406 |
|
|
$ |
1,371,541 |
|
|
Total
|
|
|
218,080 |
|
|
$ |
14.82 |
|
|
|
218,080 |
|
|
|
|
|
All
purchases were made pursuant to plans that were approved by the Board of
Directors. Except for the purchase of 82,473 shares in August 2008, which was a
private transaction, all purchases were made on the open
market. On January 23, 2008, the
Board of Directors authorized the Company to make available open market
purchases of its Common Stock of up to $1 million. On May 1, 2008, the
Company’s Board of Directors approved up to $2 million of stock
repurchases. On July 30, 2008, the Board of Directors approved
an additional $1 million of stock repurchases. On August 12, 2008,
the Board of Directors approved up to $2 million of stock
repurchases. There is no expiration date on these plans. Purchases
under these plans may be made from time to time, as the Company’s management
deems appropriate.
ITEM
6. EXHIBITS
|
Exhibit
Number
|
Description of
Document
|
|
3.1
|
Amended
and Restated Articles of Incorporation, incorporated herein by reference
to Exhibit 3.1 and 3.2 to the Company’s Registration Statement of Form S-1
(SEC File No. 333-36391), as filed with the Securities and Exchange
Commission on September 25, 1997.
|
|
3.2
|
Amended
and Restated Bylaws, incorporated herein by reference to Exhibit 3.3 to
the Company’s Registration Statement on Form S-1 (SEC File No. 333-36391),
as filed with the Securities and Exchange Commission on September 25,
1997.
|
|
4.1
|
Reference
is made to Exhibits 3.1 and 3.2.
|
|
4.2
|
Specimen
Stock Certificate, incorporated herein by reference to Exhibit 4.2 to the
Company’s Registration Statement on Form S-1 (SEC File No. 333-36391), as
filed with the Securities and Exchange Commission on November 25,
1997.
|
|
3.11
|
Rule 13a-14(a) Certification of the Chief Executive
Officer. |
|
3.12
|
Rule 13a-14(a) Certification of the Chief Financial
Officer. |
|
3.12
|
Section 1350 Certifications of the Chief Executive
Officer and the Chief Financial Officer. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| |
BIRNER
DENTAL MANAGEMENT SERVICES, INC |
|
| |
|
|
|
|
Date:
November 13, 2008
|
By:
|
/s/ Frederic
W.J. Birner |
|
| |
Name:
|
Frederic
W.J. Birner |
|
| |
Title:
|
Chairman
of the Board and Chief Executive Officer
(Principal
Executive Officer)
|
|
| |
|
|
|
| |
|
|
| |
|
|
|
|
Date:
November 13, 2008
|
By:
|
/s/ Dennis
N. Genty |
|
| |
Name:
|
Dennis
N. Genty |
|
| |
Title:
|
Chief
Financial Officer, Secretary, and Treasurer
(Principal Financial and
Accounting Officer)
|
|
| |
|
|
|
- 28
-