birner10qqtr33108_572008.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
|
March
31, 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 May 9, 2008
|
Common
Stock, without par value
|
|
2,106,631
|
BIRNER
DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
INDEX
TO FORM 10-Q
PART I - FINANCIAL
INFORMATION
|
|
|
Item
1. |
Financial
Statements |
Page
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Balance Sheets as of December 31,
2007
|
3
|
|
|
and
March 31, 2008
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Income for the
Quarters
|
4
|
|
|
Ended March 31, 2007 and 2008
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Shareholders’ Equity
and
|
5
|
|
|
Comprehensive
Income as of March 31, 2008
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the
Quarters
|
6
|
|
|
Ended
March 31, 2007 and 2008
|
|
|
|
|
|
|
|
Unaudited
Notes to Condensed Consolidated Financial Statements
|
8
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition
|
14
|
|
|
and Results of Operations
|
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
22
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
22
|
|
|
|
|
|
|
|
|
|
PART II - OTHER
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
23
|
|
|
|
|
|
Item
6.
|
Exhibits
|
23
|
|
|
|
|
|
Signatures
|
|
24
|
|
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
BIRNER
DENTAL MANAGEMENT SERVICES, INC AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
December
31,
|
|
|
March
31,
|
|
ASSETS
|
|
2007
|
|
|
2008
|
|
|
|
|
**
|
|
|
(Unaudited)
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
964,150 |
|
|
$ |
754,002 |
|
Accounts
receivable, net of allowance for doubtful
|
|
|
|
|
|
|
|
|
accounts
of $291,827 and $275,750, respectively
|
|
|
3,008,550 |
|
|
|
3,473,766 |
|
Deferred
tax asset
|
|
|
178,591 |
|
|
|
223,786 |
|
Income
taxes receivable
|
|
|
26,817 |
|
|
|
- |
|
Prepaid
expenses and other assets
|
|
|
620,365 |
|
|
|
1,014,652 |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
4,798,473 |
|
|
|
5,466,206 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
4,533,531 |
|
|
|
4,547,002 |
|
|
|
|
|
|
|
|
|
|
OTHER
NONCURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
|
11,393,590 |
|
|
|
11,206,964 |
|
Deferred
charges and other assets
|
|
|
171,687 |
|
|
|
161,433 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
20,897,281 |
|
|
$ |
21,381,605 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
1,945,420 |
|
|
$ |
1,890,656 |
|
Accrued
expenses
|
|
|
1,334,785 |
|
|
|
1,279,811 |
|
Accrued
payroll and related expenses
|
|
|
1,456,477 |
|
|
|
2,097,829 |
|
Income
taxes payable
|
|
|
- |
|
|
|
448,916 |
|
Current
maturities of long-term debt
|
|
|
920,000 |
|
|
|
920,000 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
5,656,682 |
|
|
|
6,637,212 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
|
Deferred
tax liability, net
|
|
|
633,667 |
|
|
|
588,014 |
|
Long-term
debt, net of current maturities
|
|
|
4,784,511 |
|
|
|
4,383,787 |
|
Other
long-term obligations
|
|
|
291,266 |
|
|
|
288,418 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
11,366,126 |
|
|
|
11,897,431 |
|
|
|
|
|
|
|
|
|
|
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
2,108,805 shares issued and outstanding, respectively
|
|
|
3,028,515 |
|
|
|
2,841,319 |
|
Retained
earnings
|
|
|
6,536,796 |
|
|
|
6,695,855 |
|
Accumulated
other comprehensive loss
|
|
|
(34,156 |
) |
|
|
(53,000 |
) |
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
9,531,155 |
|
|
|
9,484,174 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$ |
20,897,281 |
|
|
$ |
21,381,605 |
|
|
|
|
|
|
|
|
|
|
**
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
|
|
|
|
March
31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
NET
REVENUE:
|
|
$ |
10,838,407 |
|
|
$ |
10,389,364 |
|
|
|
|
|
|
|
|
|
|
DIRECT
EXPENSES:
|
|
|
|
|
|
|
|
|
Clinical salaries and benefits
|
|
|
3,840,292 |
|
|
|
4,110,342 |
|
Dental supplies
|
|
|
560,926 |
|
|
|
594,185 |
|
Laboratory fees
|
|
|
680,206 |
|
|
|
652,713 |
|
Occupancy
|
|
|
1,133,052 |
|
|
|
1,185,680 |
|
Advertising and marketing
|
|
|
148,760 |
|
|
|
107,449 |
|
Depreciation and amortization
|
|
|
610,552 |
|
|
|
601,014 |
|
General and administrative
|
|
|
1,176,496 |
|
|
|
1,170,015 |
|
|
|
|
8,150,284 |
|
|
|
8,421,398 |
|
|
|
|
|
|
|
|
|
|
Contribution from dental offices
|
|
|
2,688,123 |
|
|
|
1,967,966 |
|
|
|
|
|
|
|
|
|
|
CORPORATE
EXPENSES:
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,246,526 |
(1) |
|
|
941,104 |
(1) |
Depreciation and amortization
|
|
|
30,828 |
|
|
|
23,469 |
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,410,769 |
|
|
|
1,003,393 |
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
106,153 |
|
|
|
77,628 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,304,616 |
|
|
|
925,765 |
|
Income tax expense
|
|
|
521,847 |
|
|
|
408,208 |
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
782,769 |
|
|
$ |
517,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share of Common Stock - Basic
|
|
$ |
0.37 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
Net income per share of Common Stock - Diluted
|
|
$ |
0.34 |
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
Cash dividends per share of Common Stock
|
|
$ |
0.15 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of
|
|
|
|
|
|
|
|
|
Common Stock and dilutive securities:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,126,376 |
|
|
|
2,111,085 |
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
2,306,908 |
|
|
|
2,200,230 |
|
|
|
|
|
|
|
|
|
|
_____________________
(1)
Corporate expense - general and administrative includes $81,030
of equity compensation for a stock award and $90,064 related to
stock-based compensation expense in the three months ended March 31, 2007,
and $173,413 related to stock-based compensation expense in the three
months ended March 31, 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
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Shareholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Income
|
|
|
Earnings
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES,
December 31, 2007
|
|
|
2,123,440 |
|
|
$ |
3,028,515 |
|
|
$ |
(34,156 |
) |
|
$ |
6,536,796 |
|
|
$ |
9,531,155 |
|
Common
Stock options exercised
|
|
|
10,685 |
|
|
|
138,018 |
|
|
|
|
|
|
|
- |
|
|
|
138,018 |
|
Purchase
and retirement of Common Stock
|
|
|
(25,320 |
) |
|
|
(521,949 |
) |
|
|
|
|
|
|
- |
|
|
|
(521,949 |
) |
Tax
benefit of Common Stock options exercised
|
|
|
- |
|
|
|
23,322 |
|
|
|
|
|
|
|
- |
|
|
|
23,322 |
|
Dividends
declared on Common Stock
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(358,498 |
) |
|
|
(358,498 |
) |
Stock-based
compensation expense
|
|
|
- |
|
|
|
173,413 |
|
|
|
|
|
|
|
- |
|
|
|
173,413 |
|
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
(18,844 |
) |
|
|
|
|
|
|
(18,844 |
) |
Net
income, three months ended March 31, 2008
|
|
|
- |
|
|
|
- |
|
|
|
517,557 |
|
|
|
517,557 |
|
|
|
517,557 |
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
498,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES,
March 31, 2008
|
|
|
2,108,805 |
|
|
$ |
2,841,319 |
|
|
$ |
(53,000 |
) |
|
$ |
6,695,855 |
|
|
$ |
9,484,174 |
|
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)
|
|
Quarters
Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
|
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income
|
|
$ |
782,769 |
|
|
$ |
517,557 |
|
Adjustments
to reconcile net income to net
|
|
|
|
|
|
|
|
|
cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
641,379 |
|
|
|
624,483 |
|
Stock
compensation expense
|
|
|
171,094 |
|
|
|
173,413 |
|
Provision
for doubtful accounts
|
|
|
154,926 |
|
|
|
(201,258 |
) |
Provision
for (benefit from) deferred income taxes
|
|
|
92,012 |
|
|
|
(90,848 |
) |
Changes
in assets and liabilities net of effects
|
|
|
|
|
|
|
|
|
from
acquisitions:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(959,592 |
) |
|
|
(263,958 |
) |
Prepaid
expenses and other assets
|
|
|
(243,483 |
) |
|
|
(394,287 |
) |
Deferred
charges and other assets
|
|
|
8,333 |
|
|
|
10,254 |
|
Accounts
payable
|
|
|
124,914 |
|
|
|
(54,764 |
) |
Accrued
expenses
|
|
|
38,023 |
|
|
|
(114,850 |
) |
Accrued
payroll and related expenses
|
|
|
557,043 |
|
|
|
641,352 |
|
Income
taxes payable
|
|
|
367,128 |
|
|
|
475,733 |
|
Other
long-term obligations
|
|
|
(15,604 |
) |
|
|
(2,848 |
) |
Net
cash provided by operating activities
|
|
|
1,718,942 |
|
|
|
1,319,979 |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(199,227 |
) |
|
|
(419,382 |
) |
Development
of new de novo
offices
|
|
|
- |
|
|
|
(31,946 |
) |
Net
cash used in investing activities
|
|
|
(199,227 |
) |
|
|
(451,328 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Advances
– line of credit
|
|
|
5,871,902 |
|
|
|
5,614,080 |
|
Repayments
– line of credit
|
|
|
(6,973,663 |
) |
|
|
(5,784,804 |
) |
Repayments
– term loan
|
|
|
- |
|
|
|
(230,000 |
) |
Repayment
of long-term debt
|
|
|
(33,559 |
) |
|
|
- |
|
Proceeds
from exercise of Common Stock options
|
|
|
78,049 |
|
|
|
138,018 |
|
Purchase
and retirement of Common Stock
|
|
|
(415,893 |
) |
|
|
(521,949 |
) |
Tax
benefit of Common Stock options exercised
|
|
|
56,406 |
|
|
|
23,322 |
|
Common
Stock cash dividends
|
|
|
(277,878 |
) |
|
|
(317,466 |
) |
Net
cash used in financing activities
|
|
|
(1,694,636 |
) |
|
|
(1,078,799 |
) |
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND
|
|
|
|
|
|
|
|
|
CASH
EQUIVALENTS
|
|
|
(174,921 |
) |
|
|
(210,148 |
) |
CASH
AND CASH EQUIVALENTS, beginning of period
|
|
|
888,186 |
|
|
|
964,150 |
|
CASH
AND CASH EQUIVALENTS, end of period
|
|
$ |
713,265 |
|
|
$ |
754,002 |
|
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)
|
|
Quarters
Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH
|
|
|
|
|
|
|
FLOW
INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the quarter for interest
|
|
$ |
126,062 |
|
|
$ |
94,812 |
|
Cash
paid during the quarter for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these financial
statements
BIRNER DENTAL MANAGEMENT SERVICES,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March
31, 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 March 31, 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 ended March 31, 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.
(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 $194,959 and $194,704 for the quarters ended
March 31, 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 ended March 31, 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
statements of income for the quarters ended March 31, 2008 and 2007 was
approximately $173,000 and $90,000, 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 March 31, 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 March 31, 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 March 31, 2008, the Company had no
unrecognized tax benefits which would affect the effective tax rate if
recognized, and as of March 31, 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 through 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.
(3) EARNINGS PER
SHARE
The
Company calculates earnings per share in accordance with SFAS No. 128, “Earnings
Per Share.”
|
|
Quarters
Ended March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per
Share Amount
|
|
|
Income
|
|
|
Shares
|
|
|
Per
Share Amount
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to shares of Common Stock
|
|
$ |
782,769 |
|
|
|
2,126,376 |
|
|
$ |
0.37 |
|
|
$ |
517,557 |
|
|
|
2,111,085 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive shares of Common Stock from stock options and
warrants
|
|
|
- |
|
|
|
180,532 |
|
|
|
(0.03 |
) |
|
|
- |
|
|
|
89,145 |
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to shares of Common Stock
|
|
$ |
782,769 |
|
|
|
2,306,908 |
|
|
$ |
0.34 |
|
|
$ |
517,557 |
|
|
|
2,200,230 |
|
|
$ |
0.24 |
|
The
difference in weighted average shares outstanding between basic earnings per
share and diluted earnings per share for the quarters ended March 31, 2008 and
2007, relates to the effect of 89,145 and 180,532 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 March 31,
2008 and 2007 options to purchase 75,462 and 3,644 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.
(4) STOCK-BASED COMPENSATION
PLANS
At the
Company’s June 2005 annual meeting of shareholders, the 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 March 31, 2008, there were 69,132 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 March 31, 2008, there were 73,138 vested options, 213,144 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 March 31, 2008, there were 143,000 vested
options outstanding and 25,000 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
|
|
|
|
|
|
March
31,
|
|
|
|
Valuation
Assumptions
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
life
|
|
|
4.5 |
(1) |
|
|
4.1 |
(2) |
|
|
Risk-free
interest rate (3)
|
|
|
4.75 |
% |
|
|
2.30 |
% |
|
|
Expected
volatility (4)
|
|
|
58 |
% |
|
|
58 |
% |
|
|
Expected
dividend yield
|
|
|
3.07 |
% |
|
|
3.28 |
% |
|
|
Expected
Forteiture (5)
|
|
|
5.32 |
% |
|
|
2.00 |
% |
|
_____________________________
(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.
A summary
of option activity as of March 31, 2008, and changes during the quarter 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
|
|
|
98,000 |
|
|
$ |
20.69 |
|
|
$ |
19.40
- $21.00 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(10,685 |
) |
|
$ |
12.92 |
|
|
$ |
9.66
- $19.54 |
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(10,166 |
) |
|
$ |
16.55 |
|
|
$ |
12.50
- $19.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2008
|
|
|
454,282 |
|
|
$ |
15.71 |
|
|
$ |
5.50
- $21.85 |
|
|
|
4.1 |
|
|
$ |
2,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at March 31, 2008
|
|
|
216,138 |
|
|
$ |
12.41 |
|
|
$ |
5.50
- $21.85 |
|
|
|
2.57 |
|
|
$ |
1,650 |
|
The
weighted average grant date fair values of options granted were $7.76 per option
and $9.16 per option during the quarters ended March 31, 2008 and 2007,
respectively. Net cash proceeds from the exercise of stock options
during the quarters ended March 31, 2008 and 2007 were $138,018 and $78,049,
respectively. The associated income tax benefit from stock options exercised
during the quarters ended March 31, 2008 and 2007 was $23,322 and $56,406,
respectively. As of the date of exercise, the total intrinsic values of options
exercised during the quarters ended March 31, 2008 and 2007 were $80,886 and
$166,936, respectively. As of March 31, 2008, there was $1.6 million of total
unrecognized compensation expense related to non-vested stock options, which is
expected to be recognized over a weighted average period of 1.2
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 and 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 has 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 related to this grant to Common Stock.
A summary
of the vesting status of the shares of restricted stock as of March 31, 2008,
and the changes during the quarter then ended, is presented below:
|
|
|
Quarters
Ended
|
|
|
|
|
March
31, 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 March 31, 2008
|
|
|
- |
|
|
$ |
13.51 |
|
(6) DIVIDENDS
Since
March 9, 2004, the Company has declared the following increasing quarterly cash
dividends.
|
Divdend
Declaration
Date
|
|
Quarterly
Dividend
Declared
per Share
|
|
|
|
|
|
|
|
March
9, 2004
|
|
0.0375
|
|
|
February
10, 2005
|
|
0.10
|
|
|
January
10, 2006
|
|
0.13
|
|
|
January
19, 2007
|
|
0.15
|
|
|
January
17, 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 March 31, 2008, the Company had $2.1
million outstanding and $4.9 million available for borrowing under the
Credit Facility. This consisted of $1.7 million outstanding under the LIBOR rate
option and $384,000 outstanding under the Base Rate option. The Credit Facility
requires the Company to comply with certain covenants and financial ratios. At
March 31, 2008, the Company was in full compliance with all of its covenants
under the Credit Facility.
(8)
CAPITAL
COMMITMENTS
At March
31, 2008, the Company had budgeted capital commitments for the next 12 months of
approximately $300,000, which includes the funding of one dental practice that
the Company expects to develop internally. The Company anticipates
that these capital expenditures will be funded by cash on hand, cash generated
by operations, or borrowings under the Credit Facility. The Company’s
retained earnings as of March 31, 2008 were approximately $6.7 million, and the
Company had a working capital deficit on that date of approximately $1.2
million. During the quarter ended March 31, 2008, the Company had capital
expenditures of approximately $451,000 and purchased approximately $522,000 of
Common Stock while decreasing total debt by approximately $401,000.
(9)
DUTCH AUCTION TENDER
OFFER AND TERM LOAN
On
October 5, 2006, the Company accepted for payment, at a purchase price of $21.75
per share, 212,396 shares of its Common Stock that were properly tendered and
not withdrawn pursuant to the Company’s “dutch auction” tender offer (the
“Tender Offer”). The 212,396 shares purchased were comprised of the 175,000
shares the Company offered to purchase and 37,396 shares that were purchased
pursuant to the Company's right to purchase up to an additional 2% of the
outstanding shares as of August 31, 2006, without extending the Tender Offer in
accordance with applicable securities laws. These shares represented
approximately 9.2% of the shares of Common Stock of the Company outstanding as
of September 30, 2006. The Tender Offer was funded from a $4.6 million term loan
(“Term Loan”). 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 March 31, 2007, the rate was 4.49%. 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 March 31, 2008, $1.6 million was outstanding at the
fixed rate of 7.05% and $1.6 million was outstanding at the LIBOR plus 1.5%
floating rate. The Term Loan requires the
Company to comply with certain covenants and financial ratios. At March
31, 2008, the Company was in full compliance with all of its covenants under the
Term Loan.
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 the
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 ended March
31, 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 60 Offices in Colorado, New
Mexico and Arizona staffed by 79 general dentists and 32 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
In
June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes—An
Interpretation of FASB Statement No. 109,” which prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. The
Company adopted the provisions of FIN 48 on January 1, 2007 and has
analyzed filing positions in its federal and state jurisdictions where the
Company is required to file income tax returns, as well as for all open tax
years in these jurisdictions. The Company believes its income tax filing
positions and deductions will be sustained under audit and believes it does not
have significant uncertain tax positions that, in the event of adjustment, will
result in a material effect on its results of operations or financial position.
See Note 2 to Condensed Consolidated Financial Statements, “Significant
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. 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
dentists and hygienists. 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 and hygienists, dental supplies, dental laboratory
fees, occupancy costs, advertising and marketing, depreciation and amortization
and general and administrative (including office supplies, equipment leases,
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 and dental hygienists, (ii) complying with all laws,
rules and regulations relating to dentists and dental hygienists, and (iii)
maintaining proper patient records. The Company has made, and intends
to make in the future, loans to P.C.s in Colorado, New Mexico and Arizona to
fund their acquisition of dental assets from third parties in order to comply
with the laws of such states.
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 and dental hygienists 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 dentist and hygienist 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 assets of the Company used at the Office, 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, lease
expenses and dentist recruitment expenses, (vii) personal property and other
taxes assessed against the Company’s or 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 and hygienists 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 and hygienists), 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 March 31, 2008, Revenue decreased $479,000, or 3.0% to $15.3
million compared to $15.7 million for the quarter ended March 31,
2007. For the quarter ended March 31, 2008, net revenue decreased
$449,000, or 4.1% to $10.4 million compared to $10.8 million for quarter ended
March 31, 2007. This decrease is attributable to a decrease in net
revenue from general dentistry of $638,000 offset by an increase in net revenue
from special dentistry of $189,000. The Company attributes the
decrease to two fewer general dentists as of March 31, 2008 and 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
quarter ended March 31, 2008, net income decreased 34.0% to $518,000, or $.24
per share compared to $783,000, or $.34 per share for the quarter ended March
31, 2007.
The
Company continues to generate strong cash flow from
operations. During the quarter ended March 31, 2008, the Company
purchased $522,000 of its outstanding Common Stock, invested $451,000 in capital
expenditures, paid $317,000 in dividends, and repaid $230,000 of the Term
Loan while decreasing borrowings under its Credit Facility by
$171,000.
The
Company’s earnings before interest, taxes, depreciation, amortization and non
cash expense associated with stock-based compensation (“Adjusted EBITDA”)
decreased $422,000, or 19% to $1.8 million for the quarter ended March 31, 2008
compared to $2.2 million for the quarter ended March 31, 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
|
|
|
|
|
|
Ended
March 31,
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
RECONCILIATION
OF ADJUSTED EBITDA:
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
782,769 |
|
|
$ |
517,557 |
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization - Offices
|
|
|
610,552 |
|
|
|
601,014 |
|
|
|
Depreciation and amortization -
Corporate
|
|
|
30,828 |
|
|
|
23,469 |
|
|
|
Stock-based compensation expense
|
|
|
171,094 |
|
|
|
173,413 |
|
|
|
Interest expense, net
|
|
|
106,153 |
|
|
|
77,628 |
|
|
|
Income tax expense
|
|
|
521,847 |
|
|
|
408,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$ |
2,223,243 |
|
|
$ |
1,801,289 |
|
|
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 and hygienists 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
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
dental group practice revenue
|
|
$ |
15,733,695 |
|
|
$ |
15,254,252 |
|
|
|
Less
- amounts retained by dental Offices
|
|
|
(4,895,288 |
) |
|
|
(4,864,888 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$ |
10,838,407 |
|
|
$ |
10,389,364 |
|
|
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
|
|
|
|
March
31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
NET
REVENUE:
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
DIRECT
EXPENSES:
|
|
|
|
|
|
|
|
|
Clinical
salaries and benefits
|
|
|
35.4 |
% |
|
|
39.6 |
% |
Dental
supplies
|
|
|
5.2 |
% |
|
|
5.7 |
% |
Laboratory
fees
|
|
|
6.3 |
% |
|
|
6.3 |
% |
Occupancy
|
|
|
10.5 |
% |
|
|
11.4 |
% |
Advertising
and marketing
|
|
|
1.4 |
% |
|
|
1.0 |
% |
Depreciation
and amortization
|
|
|
5.6 |
% |
|
|
5.8 |
% |
General
and administrative
|
|
|
10.9 |
% |
|
|
11.3 |
% |
|
|
|
75.2 |
% |
|
|
81.1 |
% |
|
|
|
|
|
|
|
|
|
Contribution
from dental offices
|
|
|
24.8 |
% |
|
|
18.9 |
% |
|
|
|
|
|
|
|
|
|
CORPORATE
EXPENSES:
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
11.5 |
% |
|
|
9.1 |
% |
Depreciation
and amortization
|
|
|
0.3 |
% |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
13.0 |
% |
|
|
9.7 |
% |
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
1.0 |
% |
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
12.0 |
% |
|
|
8.9 |
% |
Income
tax expense
|
|
|
4.8 |
% |
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
7.2 |
% |
|
|
5.0 |
% |
Quarter
Ended March 31, 2008 Compared to Quarter Ended March 31, 2007:
Net revenue. For the quarter
ended March 31, 2008, net revenue decreased $449,000, or 4.1%, to $10.4 million
compared to $10.8 million for the quarter ended March 31, 2007. This decrease is
attributable to a decrease in net revenue from general dentistry of $638,000
offset by an increase in net revenue from specialty dentistry of
$189,000. The Company attributes the decrease to two fewer general
dentists as of March 31, 2008 and 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.
Clinical salaries and
benefits. For the quarter ended March 31, 2008, clinical salaries and
benefits increased $270,000, or 7.0%, to $4.1 million compared to $3.8
million for the quarter ended March 31, 2007. This increase was primarily due 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 contract hygienists increased and support wages for oral surgery and
pediatric dentistry increased on increased revenues within those two specialty
disciplines. Annual wage increases that became effective February 1,
2008 contributed to the remainder of the increase. As a percentage of net
revenue, clinical salaries and benefits increased to 39.6% for the quarter ended
March 31, 2008 compared to 35.4% for the quarter ended March 31,
2007. The increase in salaries and benefits as a percentage of net
revenue reflects the lower net revenue as well as the higher salaries and
benefits for the quarter ended March 31, 2008.
Dental supplies. For the
quarter ended March 31, 2008, dental supplies increased to $594,000 compared to
$561,000 for the quarter ended March 31, 2007, an increase of $33,000 or 5.9%.
As a percentage of net revenue, dental supplies increased to 5.7% for the
quarter ended March 31, 2008 compared to 5.2% for the quarter ended March 31,
2007.
Laboratory fees. For the
quarter ended March 31, 2008, laboratory fees decreased to $653,000 compared to
$680,000 for the quarter ended March 31, 2007, a decrease of $27,000 or 4.0%. As
a percentage of net revenue, laboratory fees remained constant at 6.3% for the
quarters ended March 31, 2008 and March 31, 2007.
Occupancy. For the quarter
ended March 31, 2008, occupancy expense increased to $1.2 million compared to
$1.1 million for the quarter ended March 31, 2007, an increase of 53,000 or
4.6%. This increase was primarily due to increased rental
payments resulting from the renewal of Office leases at current market rates for
Offices whose leases expired subsequent to March 31, 2007. As a
percentage of net revenue, occupancy expense increased to 11.4% for the quarter
ended March 31, 2008 compared to 10.5% for the quarter ended March 31,
2007.
Advertising and marketing.
For the quarter ended March 31, 2008, advertising and marketing expense
decreased to $107,000 compared to $149,000 for the quarter ended March 31, 2007,
a decrease of $41,000 or 27.8%. This decrease is attributable to the
Company’s television advertising campaign in the Denver, Colorado market in the
quarter ended March 31, 2007, which the Company did not conduct in the quarter
ended March 31, 2008. As a percentage of net revenue, advertising and marketing
expense decreased to 1.0% for the quarter ended March 31, 2008 compared to 1.4%
for the quarter ended March 31, 2007.
Depreciation and
amortization-Offices. For the quarter ended March 31, 2008, depreciation
and amortization expenses attributable to the Offices decreased to $601,000
compared to $611,000 for the quarter ended March 31, 2007, a decrease of $10,000
or 1.6%. The decrease in the Company’s depreciable asset base is a result of
some assets becoming fully depreciated. As a percentage of net revenue,
depreciation and amortization increased to 5.8% for the quarter ended March 31,
2008 compared to 5.6% for the quarter ended March 31, 2007.
General and
administrative-Offices. For the quarters ended March 31, 2008 and 2007,
general and administrative expenses attributable to the Offices remained
constant at $1.2 million. As a percentage of net revenue, general and
administrative expenses increased to 11.3% for the quarter ended March 31, 2008
compared to 10.9% for the quarter ended March 31, 2007.
Contribution from dental
Offices. As a result of the above, contribution from
dental Offices decreased $720,000, or 26.8%, to $2.0 million for the quarter
ended March 31, 2008 compared to $2.7 million for the quarter ended March 31,
2007. As a percentage of net revenue, contribution from dental Offices decreased
to 18.9% for the quarter ended March 31, 2008 compared to 24.8% for the quarter
ended March 31, 2007.
Corporate expenses - general and
administrative. For the quarter ended March 31, 2008, corporate expenses
– general and administrative decreased to $941,000 compared to $1.2 million for
the quarter ended March 31, 2007, a decrease of $305,000 or
24.5%. This decrease is primarily related to a decrease of $325,000
in executive bonuses. As a percentage of net revenue, corporate
expenses - general and administrative decreased to 9.1% for the quarter ended
March 31, 2008 compared to 11.5% for the quarter ended March 31,
2007.
Corporate expenses - depreciation
and amortization. For the quarter ended March 31, 2008, corporate
expenses - depreciation and amortization decreased to $23,000 compared to
$31,000 for the quarter ended March 31, 2007, a decrease of $7,000 or 23.9%. 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
decreased to 0.2% for the quarter ended March 31, 2008 compared to 0.3% for the
quarter ended March 31, 2007.
Operating
income. As a result of the matters discussed above, the
Company’s operating income decreased by $407,000, or 28.9% to $1.0 million for
the quarter ended March 31, 2008 compared to $1.4 million for the quarter ended
March 31, 2007. As a percentage of net revenue, operating income
decreased to 9.7% for the quarter ended March 31, 2008 compared to 13.0% for the
quarter ended March 31, 2007.
Interest expense. For the
quarter ended March 31, 2008, interest expense decreased to $78,000 compared to
$106,000 for the quarter ended March 31, 2007, a decrease of $29,000 or 26.9%.
This decrease in interest expense is attributable to paying down the Term Loan
that was used to finance the dutch auction tender offer completed in October
2006, reduced borrowings on the Credit Facility and reduced interest rates. As a
percentage of net revenue, interest expense decreased to 0.8% for the quarter
ended March 31, 2008 compared to 1.0% for the quarter ended March 31,
2007.
Net
income. As a result of the above, the Company reported
net income of $518,000 for the quarter ended March 31, 2008 compared to net
income of $783,000 for the quarter ended March 31, 2007, a decrease of $265,000
or 33.9%. Net income for the quarter ended March 31, 2008 was net of income tax
expense of $408,000, while net income for the quarter ended March 31, 2007 was
net of income tax expense of $522,000. The effective tax rate was 44.1% for the
quarter ended March 31, 2008 compared to 40.0% for the quarter ended March 31,
2007. The increase in the effective tax rate is due to stock-based
compensation expense, which is not a deduction for tax purposes, increasing to
$173,000 for the quarter ended March 31, 2008 from $90,000 for the quarter ended
March 31, 2007. As a percentage of net revenue, net income decreased
to 5.0% for the quarter ended March 31, 2008 compared to 7.2% for the quarter
ended March 31, 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 March
31, 2008, the Company had a working capital deficit of approximately $1.2
million and retained earnings of $6.7 million.
Net cash
provided by operating activities was approximately $1.3 million and $1.7 million
for the quarters ended March 31, 2008 and 2007, respectively. During
the 2008 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 $472,000 and
an increase in income taxes payable of approximately $476,000 offset by an
increase in prepaid expenses and other assets of approximately $394,000 and an
increase in accounts receivable of approximately $264,000. 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 $720,000 and
an increase in income taxes payable of approximately $367,000 offset by an
increase in accounts receivable of approximately $960,000 (primarily due to
higher Revenue) and an increase in prepaid expenses and other assets of
approximately $243,000.
Net cash
used in investing activities was approximately $451,000 and $199,000 for
the quarters ended March 31, 2008 and 2007, respectively. For the quarter ended
March 31, 2008, the Company invested $419,000 in the purchase of additional
equipment, which includes $156,000 to upgrade the Company’s payroll time
collection system, and $32,000 in the development of a de novo Office. For the
quarter ended March 31, 2007, the Company invested $199,000 in the purchase of
additional property and equipment.
Net cash
used in financing activities was approximately $1.1 million for the quarter
ended March 31, 2008 and $1.7 million for the quarter ended March 31, 2007.
During the quarter ended March 31, 2008, net cash used in financing activities
was comprised of approximately $522,000 used in the purchase and retirement of
Common Stock, approximately $317,000 for the payment of dividends, approximately
$171,000 used to pay down the Credit Facility and approximately $230,000 for the
repayment of the Term Loan, partially offset by approximately $138,000 in
proceeds from the exercise of Common Stock options and $23,000 in tax benefit of
Common Stock options exercised. During the quarter ended March 31,
2007, net cash used in financing activities was comprised of approximately $1.1
million used to pay down the Credit Facility, approximately $416,000 used in the
purchase and retirement of Common Stock, approximately $34,000 used in the
repayment of long-term debt and approximately $278,000 for the
payment of dividends, partially offset by approximately $78,000 in proceeds from
the exercise of Common Stock options and $56,000 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 March 31, 2008, the Company had $2.1
million outstanding and $4.9 million available for borrowing under the
Credit Facility. This consisted of $1.7 million outstanding under the LIBOR rate
option and $384,000 outstanding under the Base Rate option. The Credit Facility
requires the Company to comply with certain covenants and financial ratios. At
March 31, 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
its Dutch Auction tender offer. 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 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 Company designates this
fixed-for-floating interest rate swap as a cash flow hedge under SFAS No. 133.
The Term Loan requires the Company to comply with certain covenants and
financial ratios. At March 31, 2008, the Company was in full compliance with all
of its covenants under the Term Loan.
As of
March 31, 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
|
|
$ |
5,303,787 |
|
|
$ |
920,000 |
|
|
$ |
3,923,787 |
|
|
$ |
460,000 |
|
|
$ |
- |
|
Operating
lease obligations
|
|
|
8,733,743 |
|
|
|
2,905,846 |
|
|
|
4,222,465 |
|
|
|
1,546,597 |
|
|
|
58,835 |
|
Total
|
|
$ |
14,037,530 |
|
|
$ |
3,825,846 |
|
|
$ |
8,146,252 |
|
|
$ |
2,006,597 |
|
|
$ |
58,835 |
|
The Company from time to
time may purchase its Common Stock on the open market. During the quarter
ended March 31, 2008, the Company, in six separate transactions, purchased
25,320 shares of its Common Stock for total consideration of approximately
$522,000 at prices ranging from $19.62 to $21.00. 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. As of
March 31, 2008, approximately $627,000 of the previously authorized amount was
available for open market purchases. On May 1, 2008, the Company’s Board of
Directors approved up to $2 million of stock repurchases. 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 March 2008, the Company recognized, on its balance sheet,
approximately $19,000 of other comprehensive loss to mark down 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 March 31, 2008, the variable portion outstanding under the Term Loan
was $1.6 million (at a LIBOR rate of 4.49%) and $2.1 million was outstanding
under the Credit Facility with either LIBOR (4.31%) or Base Rate (5.25%). 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
$9,000 for the quarter ended March 31, 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 March 31, 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 March 31, 2008 that materially affected, or were
reasonably likely to materially affect, its internal control over financial
reporting.
PART II. OTHER
INFORMATION
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
The
following chart provides information regarding Common Stock purchases by the
Company during the period January 1, 2008 through March 31, 2008.
|
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
|
|
|
|
January
1, 2008 through January 31, 2008
|
|
|
15,568 |
|
|
$ |
20.52 |
|
|
|
15,568 |
|
|
$ |
829,339 |
|
|
|
February
1, 2008 through February 29, 2008
|
|
|
3,210 |
|
|
|
21.00 |
|
|
|
3,210 |
|
|
$ |
761,929 |
|
|
|
March
1, 2008 through March 31, 2008
|
|
|
6,542 |
|
|
|
20.65 |
|
|
|
6,542 |
|
|
$ |
626,817 |
|
|
|
Total
|
|
|
25,320 |
|
|
$ |
20.61 |
|
|
|
25,320 |
|
|
|
|
|
|
All
purchases were made on the open market pursuant to plans that were approved by
the Board of Directors. On January 23, 2008, the
Board of Directors authorized the Company to make available open market
purchases of its Common Stock up to $1 million. As of March 31, 2008,
there was approximately $627,000 available for the purchase of the Company’s
Common Stock under such plans that have been approved by the Board of Directors.
On May 1, 2008, the Company’s 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 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 September 25,
1997.
|
|
|
10.1
|
Sixth
Amendment of Second Amended and Restated Credit Agreement dated April 22,
2008 between the Registrant and Key Bank of Colorado.*
|
|
|
31.1
|
Rule
13a-14(a) Certification of the Chief Executive
Officer.*
|
|
|
31.2
|
Rule
13a-14(a) Certification of the Chief Financial
Officer.*
|
|
|
32.1
|
Section
1350 Certifications of the Chief Executive Officer and the Chief Financial
Officer.*
|
___________
* Filed
herewith
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: May
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: May
13, 2008 |
|
|
|
By: |
/s/ Dennis N. Genty
|
|
Name:
|
Dennis N. Genty |
|
Title:
|
Chief Financial Officer, Secretary, and
Treasurer
(Principal Financial and
Accounting Officer)
|
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