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, 2004
--------------
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 (IRS Employer
or organization) 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 an accelerated filer (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 11, 2004
- ------------------------------- --------------------------------------
Common Stock, without par value 1,188,260
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, 2003
and March 31, 2004 3
Unaudited Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 2003 and 2004 4
Unaudited Condensed Statement of Shareholders' Equity as of March 31, 2004 5
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2003 and 2004 6
Unaudited Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, March 31,
ASSETS 2003 2004
------------- -------------
** (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,110,786 $ 932,773
Accounts receivable, net of allowance for doubtful accounts
of $215,838 and $208,010, respectively 2,673,041 3,051,749
Deferred tax asset 121,475 121,475
Prepaid expenses and other assets 736,424 651,455
------------- -------------
Total current assets 4,641,726 4,757,452
PROPERTY AND EQUIPMENT, net 2,680,169 2,458,145
OTHER NONCURRENT ASSETS:
Intangible assets, net 14,732,349 14,542,270
Deferred charges and other assets 155,461 154,613
------------- -------------
Total assets $ 22,209,705 $ 21,912,480
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 3,990,467 $ 4,702,347
Income taxes payable 190,883 285,294
Current maturities of long-term debt 351,847 358,578
------------- -------------
Total current liabilities 4,533,197 5,346,219
LONG-TERM LIABILITIES:
Deferred tax liability, net 349,801 349,801
Long-term debt, net of current maturities 2,735,576 1,743,394
Other long-term obligations 179,884 179,266
------------- -------------
Total liabilities 7,798,458 7,618,680
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value, 10,000,000 shares
authorized; none outstanding - -
Common Stock, no par value, 20,000,000 shares
authorized; 1,203,511 and 1,185,010 shares issued and
outstanding, respectively 12,428,363 11,970,776
Retained earnings 1,982,884 2,323,024
------------- -------------
Total shareholders' equity 14,411,247 14,293,800
Total liabilities and shareholders' equity $ 22,209,705 $ 21,912,480
============= ============
** Derived from the Company's audited consolidated balance sheet
at December 31, 2003
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
3
BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarters Ended
March 31,
-----------------------------
2003 2004
----------- -----------
NET REVENUE $ 7,728,758 $ 8,092,359
DIRECT EXPENSES:
Clinical salaries and benefits 3,010,839 3,052,005
Dental supplies 444,597 464,135
Laboratory fees 599,502 630,196
Occupancy 863,708 887,558
Advertising and marketing 97,939 146,950
Depreciation and amortization 582,027 472,344
General and administrative 751,240 823,134
--------- ---------
6,349,852 6,476,322
--------- ---------
Contribution from dental offices 1,378,906 1,616,037
CORPORATE EXPENSES:
General and administrative 799,838 818,089
Depreciation and amortization 79,982 56,597
--------- ---------
Operating income 499,086 741,351
Interest expense, net 52,803 26,324
--------- ---------
Income before income taxes 446,283 715,027
Income tax expense 169,586 286,011
--------- ---------
Net income $ 276,697 $ 429,016
========= =========
Net income per share of Common Stock:
Basic $ .20 $ .36
========= =========
Diluted $ .18 $ .33
========= =========
Weighted average number of shares of Common Stock and dilutive securities:
Basic 1,407,292 1,188,651
========= =========
Diluted 1,534,001 1,296,610
========= =========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
Common Stock Total
------------------------------ Retained Shareholders'
Shares Amount Earnings Equity
--------- ------------ ---------- -------------
BALANCES, December 31, 2003 1,203,511 $ 12,428,363 $1,982,884 $14,411,247
Common Stock options exercised 22,999 87,843 - 87,843
Purchase and retirement of Common Stock (41,500) (545,430) - (545,430)
Dividends declared on Common Stock - - (88,876) (88,876)
Net Income - - 429,016 429,016
--------- ------------ ---------- -----------
BALANCES, March 31, 2004 1,185,010 $ 11,970,776 $2,323,024 $14,293,800
========= ============ ========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
Page 1 of 2
BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
--------------------------------
2003 2004
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 276,697 $ 429,016
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 662,009 528,941
Gain on disposition of property (199) -
Provision for doubtful accounts (5,042) (7,828)
Amortization of debt issuance costs 12,707 848
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable (243,593) (370,880)
Prepaid expenses and other assets 124,225 84,969
Accounts payable and accrued expenses 6,713 623,004
Dividends payable - 88,876
Income taxes payable 119,586 94,411
Other long-term obligations 6,392 (618)
------------ -----------
Net cash provided by operating activities 959,495 1,470,739
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (96,219) (116,838)
------------ -----------
Net cash used in investing activities (96,219) (116,838)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances - line of credit 1,925,000 4,200,000
Repayments - line of credit (1,275,000) (5,100,000)
Repayments - term-loan (320,000) -
Repayment of long-term debt (84,960) (85,451)
Proceeds from exercise of Common Stock options 99,797 87,843
Purchase and retirement of Common Stock (1,240,675) (545,430)
Common Stock Cash Dividends - (88,876)
------------ -----------
Net cash used in financing activities (895,838) (1,531,914)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (32,562) (178,013)
CASH AND CASH EQUIVALENTS, beginning of period 1,072,757 1,110,786
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,040,195 $ 932,773
============ ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
Page 2 of 2
BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
--------------------------------
2003 2004
------------ -----------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period for interest $ 52,953 $ 43,660
============ ===========
Cash paid during the period for income taxes $ 50,000 $ 191,600
============= ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
(1) UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The 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, 2003.
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, 2004 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 three months ended
March 31, 2004 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
Stock Options
The Company accounts for stock options using the intrinsic value method wherein
compensation expense is recognized on stock options granted only for the excess
of the market price of our common stock over the option exercise price on the
date of grant. All options of the Company are granted at amounts equal to or
higher than the fair-value of our stock so no compensation expense is recorded.
Some companies also recognize compensation expense for the fair value of the
option right itself. The Company has elected not to adopt this accounting method
because it requires the use of subjective valuation models which the Company
believes are not representative of the real value of the option to either the
Company or the optionees. However, we are required to disclose the pro forma
effect of accounting for stock options using such a valuation for all options
granted. The fair value of the options was estimated at the date of grant using
a Black-Scholes option-pricing model with the following weighted average
assumptions:
Three Months Ended
March 31,
------------------------
2003 2004
--------- ---------
Risk-free interest rate 2.39% 2.06%
Expected dividend yield 0% 1.9%
Expected lives 3.4 years 3.4 years
Expected volatility 57% 27%
To estimate lives of options for this valuation, it was assumed options would be
exercised one year after becoming fully vested. All options are initially
assumed to vest. Cumulative compensation cost recognized in pro forma net income
or loss with respect to options that are forfeited prior to vesting is adjusted
as a reduction of pro forma compensation expense in the period of forfeiture.
Fair value computations are highly sensitive to the volatility factor assumed;
the greater the volatility, the higher the computed fair value of options
granted.
The total fair value of options and warrants granted was computed to be
approximately $469,000 and $14,000 for the three months ended March 31, 2003 and
2004, respectively. These amounts are amortized ratably over the vesting periods
of the options or recognized at the date of grant if no vesting period is
required. Pro forma stock-based compensation, net of the effect of forfeitures,
was $404,000 and ($12,000) for the quarters ended March 31, 2003 and 2004,
respectively.
8
If the Company had accounted for its stock-based compensation plans in
accordance with SFAS No. 123, the Company's net income and net income per common
share would have been reported as follows:
Three Months Ended
March 31,
-------------------------
2003 2004
--------- ----------
Net income, as reported $ 276,697 $ 429,016
Stock based compensation included in net income - -
Fair value of stock based compensation, net of income taxes (274,592) 7,540
--------- ----------
Pro forma net income $ 2,105 $ 436,556
========= ==========
Net income per share, basic:
As reported $ .20 $ .36
Stock based compensation included in net income - -
Fair value of stock based compensation, net of income taxes (.20) .01
--------- ----------
Pro forma $ - $ .37
========= ==========
Net income per share, diluted:
As reported $ .18 $ .33
Stock based compensation included in net income - -
Fair value of stock based compensation, net of income taxes (.18) .01
--------- ----------
Pro forma $ - $ .34
========= ==========
Weighted average shares used to calculate pro forma net income per share were
determined as described in Note 3, except in applying the treasury stock method
to outstanding options, net proceeds assumed received upon exercise were
increased by the amount of compensation cost attributable to future service
periods and not yet recognized as pro forma expense.
(3) EARNINGS PER SHARE
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share".
Quarters Ended March 31,
--------------------------------------------------------------------------
2003 2004
----------------------------------- ----------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
--------- ---------- --------- --------- ---------- ---------
Basic EPS:
Net income available to
shares of Common Stock $ 276,697 1,407,292 $ .20 $ 429,016 1,188,651 $ .36
Effect of dilutive shares of
Common Stock from stock options
and warrants - 126,709 (.02) - 107,959 (.03)
--------- --------- ----- ---------- --------- -----
Diluted EPS:
Net income available to
shares of Common Stock $ 276,697 1,534,001 $ .18 $ 429,016 1,296,610 $ .33
========= ========= ===== ========== ========= =====
The difference in weighted average shares outstanding between basic earnings per
share and diluted earnings per share for the quarters ended March 31, 2003 and
2004 relates to the effect of 126,709 and 107,959, respectively, of dilutive
shares of Common Stock from stock options and warrants which are included in
total shares for the diluted calculation.
9
(4) LINE OF CREDIT
On August 7, 2003 the Company's current Credit Facility Agreement was amended.
The new Credit Facility allows the Company to borrow, on a revolving basis, an
aggregate principal amount not to exceed $4.0 million at either, or a
combination of, the Lender's Base Rate plus a Base Rate Margin or at a LIBOR
rate 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" plus a Base Rate
Margin of one-half percent (0.5%) or the Federal Funds Rate plus one-half
percent (0.5%), plus a Base Rate Margin of 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 2.0%. A commitment fee of 0.25% on the
average daily unused amount of the Revolving Loan commitment during the
preceding quarter will also be 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 will be responsible
for any loss or cost incurred by the Lender in liquidating or employing deposits
required to fund or maintain the LIBOR rate Loan. The amended Credit Facility
expires on May 31, 2005. At March 31, 2004, the Company had $1.1 million
outstanding and $2.9 million available for borrowing under the revolving loan.
This consisted of $100,000 outstanding under the Base Rate Option and $1.0
million outstanding under the LIBOR Rate option. The Credit Facility requires
the Company to maintain certain financial ratios on an ongoing basis. At March
31, 2004 the Company was in full compliance with all of its covenants under this
agreement.
(5) RECENT ACCOUNTING PROUNCEMENTS
In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity ("SFAS 150").
SFAS 150 requires that three classes of freestanding financial statements that
embody obligations for entities be classified as liabilities. Generally, SFAS
150 is effective for financial instruments entered into or modified after May
31, 2003 and is otherwise effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS 150 did not have a material
impact on the Company's financial position or results of operations.
The FASB issued Interpretation ("FIN") No. 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, in November 2002 and FIN No. 46, Consolidation of
Variable Interest Entities, in January 2003. FIN No. 45 is applicable on a
prospective basis for initial recognition and measurement provisions to
guarantees issued after December 2002; however, disclosure requirements are
effective immediately. FIN No. 45 requires a guarantor to recognize, at the
inception of a guarantee, a liability for the fair value of the obligations
undertaken in issuing the guarantee and expands the required disclosures to be
made by the guarantor about its obligation under certain guarantees that it has
issued. The adoption of FIN No. 45 did not have a material impact on the
Company's financial position or results of operations. FIN No. 46 requires that
a company that controls another entity through interest other than voting
interest should consolidate such controlled entity in all cases for interim
periods beginning after June 15, 2003. The adoption of FIN No. 46 did not have a
material impact on the Company's financial position or results of operations.
(6) INCOME TAXES
The Company accounts for income taxes through recognition of deferred tax assets
and liabilities for the expected future income tax consequences of events, which
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company is aware of the risk that the
recorded deferred tax assets may not be realizable. However, management believes
that it will obtain the full benefit of the deferred tax assets on the basis of
its evaluation of the Company's anticipated profitability over the period of
years that the temporary differences are expected to become tax deductions. The
Company believes that sufficient book and taxable income will be generated to
realize the benefit of these tax assets.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The statements contained in this Form 10-Q ("Quarterly Report") of the Company,
which are not historical in nature, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include statements in this Item 2., "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
in Part II, Item 1., "Legal Proceedings", regarding intent, belief or current
expectations of the Company or its officers with respect to the development 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, cash outlays for income taxes and outcome of
pending legal proceedings.
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 the "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Risk Factors" section of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (as filed
with the Securities Exchange Commission on March 30, 2004), the "Management's
Discussion and Analysis of Financial Condition and Results of Operations -Year
2004" of this Quarterly 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, which have affected the results of
operations and financial condition of the Company for the quarters ended March
31, 2003 and 2004. This information should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and related Notes thereto
included elsewhere in this Quarterly Report.
Overview
The Company was formed in May 1995, and as of March 31, 2004 managed 54 Offices
in Colorado, New Mexico and Arizona staffed by 82 general dentists and 18
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 acquires a new practice or develops a de novo Office,
which are set forth in a Management Agreement, as described below. The Company
expects to expand in existing markets primarily by enhancing the operating
performance of its existing Offices, by acquiring dental practices and by
developing de novo Offices. The Company has historically expanded in existing
markets by acquiring solo and group dental practices and may do so in the future
if an economically feasible opportunity presents itself.
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 selective acquisitions and development of de novo
Offices. The following table sets forth the increase in the number of Offices
affiliated with and managed by the Company from 2000 through March 31, 2004,
including the number of de novo Offices and acquired Offices in each such
period.
2000 2001 2002 2003 2004 (1)
---- ---- ---- ---- --------
Offices at beginning of the period 54 56 54 54 54
De novo Offices 2 0 0 0 0
Acquired Offices 0 0 0 0 0
Consolidation of Offices 0 (2) 0 0 0
--- --- --- --- ---
Offices at end of the period 56 54 54 54 54
=== === === === ===
- ------------
(1) From January 1, 2004 through March 31, 2004.
11
At March 31, 2004, the Company's total assets of approximately $21.9 million
included approximately $14.5 million of identifiable intangible assets related
to Management Agreements. At that date, the Company had total shareholders'
equity of approximately $14.3 million. The Company reviews the recorded amount
of intangible assets and other long-lived assets for impairment for each Office
whenever events or changes in circumstances indicate the carrying amount of the
assets may not be recoverable. If this review indicates that the carrying amount
of the assets may not be recoverable as determined based on the undiscounted
cash flows of each Office, whether acquired or developed, the carrying value of
the asset is reduced to fair value. Among the factors that the Company will
continually evaluate are unfavorable changes in each Office, relative market
share and local market competitive environment, current period and forecasted
operating results, cash flow levels of Offices and the impact on the net revenue
earned by the Company, and the legal and regulatory factors governing the
practice of dentistry. As of March 31, 2004 a review by the Company determined
that there was no permanent impairment of any long-lived or intangible asset at
any Office.
Components of Revenue and Expenses
Total dental group practice revenue ("Revenue") represents the revenue of the
Offices reported at estimated realizable amounts, received from third-party
payors and patients for dental services rendered at the Offices. Net revenue
represents Revenue less amounts retained by the Offices. The amounts retained by
the Offices represent amounts paid as salary to employed dentists and
hygienists. The Company's net revenue is dependent on the Revenue of the
Offices. Management service fee revenue represents the net revenue earned by the
Company for the Offices for which the Company has management agreements, but
does not have control. 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, 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 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 managed care organizations. 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, (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, other than the compensation and benefits 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.
12
The Company's Revenue is derived principally from fee-for-service revenue and
revenue from capitated managed dental care plans. Fee-for-service revenue
consists of P.C. 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 P.C. 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. Under the Management Agreements,
the Company negotiates and administers these 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 and benefits 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.
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 new 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 contractual 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 three months ended March 31, 2004, Revenue increased $803,000, or 7.4%,
to $11.7 million compared to $10.9 million for the three months ended March 31,
2003. This increase is attributable to higher revenues in our Colorado Springs
market due to increased advertising, higher revenues due to an increased
emphasis in specialty dentistry and because the total number of dentists working
in the first quarter of 2004 was 100 compared to 91 during the corresponding
period in 2003. The Company is actively exploring ways to increase revenue
growth, including; increased marketing, acquisitions of group or individual
practices, and de novo practice development.
13
The following table sets forth the percentages of net revenue represented by
certain items reflected in the Company's Condensed Consolidated Statements of
Operations. The information contained in the 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 Quarterly Report.
Quarters Ended March 31,
---------------------------
2003 2004
------- -------
Net revenue 100.0 % 100.0 %
Direct expenses:
Clinical salaries and benefits 39.0 % 37.7 %
Dental supplies 5.7 % 5.7 %
Laboratory fees 7.8 % 7.8 %
Occupancy 11.2 % 11.0 %
Advertising and marketing 1.3 % 1.8 %
Depreciation and amortization 7.5 % 5.8 %
General and administrative 9.7 % 10.2 %
------ ------
82.2 % 80.0 %
------ ------
Contribution from dental offices 17.8 % 20.0 %
Corporate expenses:
General and administrative 10.3 % 10.1 %
Depreciation and amortization 1.0 % 0.7 %
------ ------
Operating income 6.5 % 9.2 %
Interest expense, net 0.7 % 0.4 %
------ ------
Income before income taxes 5.8 % 8.8 %
Income tax expense 2.2 % 3.5 %
------ ------
Net income 3.6 % 5.3 %
====== ======
Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003:
Net revenue. For the three months ended March 31, 2004 net revenue, or total
dental group practice revenue less amounts retained by group practices for
compensation to employed dentists and hygienists, increased $364,000, or 4.7% to
$8.1 million compared to $7.7 million for the three months ended March 31, 2003.
This increase is attributable to higher revenues in our Colorado Springs market
due to increased advertising, higher revenues due to an increased emphasis in
specialty dentistry and because the total number of dentists working in the
first quarter of 2004 was 100 compared to 91 during the corresponding period in
2003.
Clinical salaries and benefits. For the three months ended March 31, 2004
clinical salaries and benefits increased $41,000, or 1.4% to $3.1 million
compared to $3.0 million for the three months ended March 31, 2003. This
increase was due to higher wages due to annual wage increases effective February
1, 2004 and higher medical insurance premiums effective January 1, 2004. As a
percentage of net revenue, clinical salaries and benefits decreased to 37.7% for
the three months ended March 31, 2004 compared to 39.0% for the three months
ended March 31, 2003.
Dental supplies. For the three months ended March 31, 2004 dental supplies
increased to $464,000 compared to $445,000 for the three months ended March 31,
2003, an increase of $19,000 or 4.4%. This increase is attributable to the
higher number of dentists working. As a percentage of net revenue, dental
supplies remained constant at 5.7% for the three months ended March 31, 2004
compared to the three months ended March 31, 2003.
Laboratory fees. For the three months ended March 31, 2004 laboratory fees
increased to $630,000 compared to $600,000 for the three months ended March 31,
2003, an increase of $30,000 or 5.1%. This increase was due to the higher number
of dentists working which results in more procedures requiring outside
laboratory procedures. As a percentage of net revenue, laboratory fees remained
constant at 7.8% for the three months ended March 31, 2004 compared to the three
months ended March 31, 2003.
14
Occupancy. For the three months ended March 31, 2004 occupancy expense increased
to $888,000 compared to $864,000 for the three months ended March 31, 2003, an
increase of $24,000 or 2.8%. 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 the 2003 period. As a percentage of
net revenue, occupancy expense decreased to 11.0% for the three months ended
March 31, 2004 compared to 11.2% for the three months ended March 31, 2003.
Advertising and marketing. For the three months ended March 31, 2004 advertising
and marketing increased to $147,000 compared to $98,000 for the three months
ended March 31, 2003, an increase of $49,000 or 50.0%. This was attributable to
enhanced advertising in the Colorado Springs, Colorado market area. As a
percentage of net revenue, advertising and marketing increased to 1.8% for the
three months ended March 31, 2004 compared to 1.3% for the three months ended
March 31, 2003.
Depreciation and amortization. For the three months ended March 31, 2004
depreciation and amortization, which consists of depreciation and amortization
expense incurred at the Offices, decreased to $472,000 compared to $582,000 for
the three months ended March 31, 2003, a decrease of $110,000 or 18.8%. The
decrease in the Company's depreciable asset base is a result of fewer Office
acquisitions and no de novo Offices developed over the past three years as well
as existing assets becoming fully depreciated. As a percentage of net revenue,
depreciation and amortization decreased to 5.8% for the three months ended March
31, 2004 compared to 7.5% for the three months ended March 31, 2003.
General and administrative. For the three months ended March 31, 2004 general
and administrative, which is attributable to the Offices, increased to $823,000
compared to $751,000 for the three months ended March 31, 2003, an increase of
$72,000 or 9.6%. This was attributable to higher dentist recruitment costs,
higher office supplies expense, higher credit card fees incurred to be compliant
with new State laws and higher professional liability insurance costs due to the
increased number of dentists working. As a percentage of net revenue, general
and administrative expenses increased to 10.2% for the three months ended March
31, 2004 compared to 9.7% during the three months ended March 31, 2003.
Contribution from dental offices. As a result of the above, contribution from
dental offices increased $237,000, or 17.2% to $1.6 million for the three months
ended March 31, 2004 compared to the three months ended March 31, 2003. As a
percentage of net revenue, contribution from dental offices increased to 20.0%
for the three months ended March 31, 2004 compared to 17.8% for the three months
ended March 31, 2003.
Corporate expenses - general and administrative. For the three months ended
March 31, 2004 corporate expenses - general and administrative increased to
$818,000 compared to $800,000 for the three months ended March 31, 2003, an
increase of $18,000 or 2.3%. As a percentage of net revenue, corporate expense -
general and administrative decreased to 10.1% for the three months ended March
31, 2004 compared to 10.3% during the three months ended March 31, 2003.
Corporate expenses - depreciation and amortization. For the three months ended
March 31, 2004 corporate expenses - depreciation and amortization decreased to
$57,000 compared to $80,000 for the three months ended March 31, 2003, a
decrease of $23,000 or 29.2%. This 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 0.7% for the three months
ended March 31, 2004 compared to 1.0% for the three months ended March 31, 2003.
Operating income. As a result of the matters discussed above, the Company
generated operating income of $741,000 for the three months ended March 31, 2004
compared to operating income of $499,000 for the three months ended March 31,
2003, an increase of $242,000 or 48.5%. As a percentage of net revenue,
operating income increased to 9.2% for the three months ended March 31, 2004
compared to 6.5% for the three months ended March 31, 2003.
Interest expense, net. For the three months ended March 31, 2004 interest
expense, net decreased to $26,000 compared to $53,000 for the three months ended
March 31, 2003, a decrease of $27,000 or 50.1%. This decrease in interest
expense is attributable to lower average outstanding debt balances, lower
interest rates and lower amortization of debt acquisition costs. As a percentage
of net revenue, interest expense decreased to 0.4% for the three months ended
March 31, 2004 compared to 0.7% for the three months ended March 31, 2003.
15
Net income. As a result of the above, the Company reported net income of
$429,000 for the three months ended March 31, 2004 compared to net income of
$277,000 for the three months ended March 31, 2003, an increase of $152,000 or
55.0%. Net income for the quarter ended March 31, 2004 was net of income tax
expense of $286,000 while net income for the quarter ended March 31, 2003 was
net of income tax expense of $170,000. As a percentage of net revenue, net
income increased to 5.3% for the three months ended March 31, 2004 compared to
3.6% for the three months ended March 31, 2003.
Liquidity and Capital Resources
The Company finances its operations and growth through a combination of cash
provided by operating activities, a bank line of credit (the "Credit Facility")
and, from time to time, seller notes.
Net cash provided by operating activities was approximately $959,000 and $1.5
million for the three months ended March 31, 2003 and 2004, respectively. During
2004, 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 $623,000 (primarily due
to higher dentist and staff compensation, bonuses and higher vendor balances
payable as the result of higher production), an increase in income taxes payable
of approximately $94,000, an increase in dividends payable of approximately
$89,000 and a decrease in prepaid expenses and other assets of approximately
$85,000, partially offset by an increase in accounts receivable of approximately
$371,000 (primarily due to higher production). During the 2003 period, excluding
net income and after adding back non-cash items, the Company's cash provided by
operating activities consisted primarily of a decrease in prepaid expenses and
other assets of approximately $124,000, an increase in income taxes payable of
approximately $120,000 and an increase in accounts payable and accrued expenses
of approximately $7,000, partially offset by an increase in accounts receivable
of approximately $244,000.
Net cash used in investing activities was approximately $96,000 and $117,000 for
the three months ended March 31, 2003 and 2004, respectively. For the three
months ended March 31, 2004, approximately $117,000 was invested in the purchase
of additional property and equipment. For the three months ended March 31, 2003,
approximately $96,000 was invested in the purchase of additional property and
equipment.
Net cash used in financing activities was approximately $896,000 and $1.5
million for the nine months ended March 31, 2003 and 2004, respectively. During
the three months ended March 31, 2004, net cash used in financing activities was
comprised of approximately $5.1 million used to pay down on the Company's bank
line of credit, approximately $545,000 used in the purchase and retirement of
Common Stock approximately $89,000 for the payment of dividends and
approximately $85,000 for the repayment of long-term debt, partially offset by
approximately $4.2 million in additional funds drawn on the Company's bank line
of credit and approximately $88,000 in proceeds from the exercise of Common
Stock options. During the three months ended March 31, 2003, net cash used in
financing activities was comprised of approximately $1.3 million used to pay
down on the Company's bank line of credit, approximately $1.2 million used in
the purchase and retirement of Common Stock, approximately $320,000 used to
reduce the amount outstanding on the Company's term-loan with its bank and
approximately $85,000 for the repayment of long-term debt. This was partially
offset by $1.9 million drawn from the Company's bank line of credit and
approximately $100,000 of proceeds from the exercise of Common Stock options.
On August 7, 2003 the Company's current Credit Facility Agreement was amended.
The new Credit Facility allows the Company to borrow, on a revolving basis, an
aggregate principal amount not to exceed $4.0 million at either, or a
combination of, the Lender's Base Rate plus a Base Rate Margin or at a LIBOR
rate 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" plus a Base Rate
Margin of one-half percent (0.5%) or the Federal Funds Rate plus one-half
percent (0.5%), plus a Base Rate Margin of 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 2.0%. A commitment fee of 0.25% on the
average daily unused amount of the Revolving Loan commitment during the
preceding quarter will also be 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 will be responsible
for any loss or cost incurred by the Lender in liquidating or employing deposits
required to fund or maintain the LIBOR rate Loan. The amended Credit Facility
expires on May 31, 2005. At March 31. 2004, the Company had $1.1 million
outstanding and $2.9 million available for borrowing under the revolving loan.
This consisted of $100,000 outstanding under the Base Rate Option and $1.0
million outstanding under the LIBOR Rate option. The Credit Facility requires
the Company to maintain certain financial ratios on an ongoing basis. At March
31, 2004 the Company was in full compliance with all of its covenants under this
agreement.
16
At March 31, 2004, the Company had outstanding indebtedness of approximately
$1.0 million represented by notes issued in connection with various dental
practice acquisitions, all of which bear interest at 8.0%. At March 31, 2004,
the Company had approximately $400,000 in capital commitments, which includes
the development of two de novo offices. The Company's retained earnings as of
March 31, 2004 was approximately $2.3 million and the Company had a working
capital deficit on that date of approximately $589,000. The Company's earnings
before interest, taxes, depreciation and amortization ("EBITDA") increased
approximately $109,000 to $1.3 million for the three months ended March 31, 2004
compared to $1.2 million for the corresponding three-month period in 2003.
Although EBITDA is not a generally accepted accounting principles measure of
performance or liquidity, the Company believes that it may be useful to an
investor in evaluating its performance. However, investors should not consider
this measure 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
generally accepted accounting principles. In addition, because EBITDA is not
calculated in accordance with generally accepted accounting principles, it may
not necessarily be comparable to similarly titled measures employed by other
companies. A reconciliation of EBITDA can be made by adding Depreciation and
Amortization Expense, Depreciation and Amortization Expense - Corporate,
Interest Expense, Net and Income Tax Expense to Net Income as in the table
below.
Quarters Ended March 31,
---------------------------------------------
2003 2004
------------- --------------
RECONCILIATION OF EBITDA:
Net Income $ 276,697 $ 429,016
Depreciation and Amortization 582,027 472,344
Depreciation and Amortization - Corporate 79,982 56,597
Interest Expense, Net 52,803 26,324
Income Tax Expense 169,586 286,011
------------- -------------
EBITDA $ 1,161,095 $ 1,270,292
============= =============
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 future acquisitions for at least the next 12
months. In the event the Company is not able to successfully negotiate a new
Credit Facility at the end of its term, the Company's current sources of
liquidity may not be adequate. In addition, 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 raise 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.
The Company from time to time may purchase its Common Stock on the open market
for treasury stock. On May 8, 2002 the Company's Board of Directors unanimously
approved the purchase of shares of the Company's Common Stock on the open market
up to $1.0 million. On October 24, 2002 the Company's Board of Directors
unanimously approved an incremental increase of $500,000 in the amount that
could be used to purchase shares of the Company's Common Stock on the open
market to $1.5 million. On February 19, 2003 the Company's Board of Directors
unanimously approved an increase, to $2.4 million from $1.5 million, in the
amount that could be used to purchase shares of the Company's Common Stock on
the open market. On May 6, 2003 the Company's Board of Directors unanimously
approved an incremental increase of $1.0 million in the amount that could be
used to purchase shares of the Company's Common Stock on the open market at
prices up to $14.00 per share. On July 15, 2003, the Company's Board of
Directors approved the purchase of 83,975 shares of the Company's Common Stock
from a private shareholder of the Company, at an aggregate cost of $1,154,656.
As a condition of this purchase, the Company and the private shareholder have
entered into a stock repurchase agreement whereby the private shareholder and
his affiliated companies, among other items, agree that for a period of two
years from July 16, 2003 will not: 1) acquire, directly or indirectly, any
voting securities of the Company; 2) solicit proxies with respect to the
Company's voting securities under any circumstances; and 3) take any action or
assist in any manner, directly or indirectly, to influence or affect control of
the Company. During 2002, the Company, in 93 separate transactions, purchased
117,236 shares of its Common Stock for total consideration of approximately $1.2
million at prices ranging from $7.35 to $11.25 per share, of which approximately
$60,000 was recorded as compensation expense in accordance with Financial
Accounting Standards Board Interpretation Number 44. During 2003, the Company,
in 84 separate transactions, purchased 296,195 shares of its Common Stock for
total consideration of approximately $3.9 million at prices ranging from $9.54
to $14.20 per share. During the three month period ended March 31, 2004, the
Company, in four separate transactions, purchased 41,500 shares of its Common
Stock for total consideration of approximately $545,000 at prices ranging from
$12.65 to $13.30 per share. A table describing such repurchases of Common Stock
by the Company is provided in "Changes in Securities and Use of Proceeds".
17
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. The Company is exposed to
market risk in the area of changes in United States interest rates. Historically
and as of March 31, 2004, the Company has not used derivative instruments or
engaged in hedging activities.
Interest Rate Risk. The interest payable on the Company's line-of-credit is
variable based upon the prime rate and the LIBOR rate and, therefore, is
affected by changes in market interest rates. At March 31, 2004, $100,000 was
outstanding with an interest rate of 4.50% (Prime plus 0.5%) and $1.0 million
was outstanding with an interest rate of 3.09% (LIBOR 30 day rate plus 2.0%).
The Company does not believe that reasonably possible near-term changes in
interest rates will result in a material effect on future earnings, fair values
or cash flows of the Company. Based on calculations performed by the Company, a
1.0% increase in the Company's interest rate would result in additional interest
expense of approximately $4,000 for the three months ended March 31, 2004.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon that evaluation, the Company's
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified by Securities and Exchange Commission
rules.
Changes in internal controls.
There were no significant changes in our internal controls and no other factors
that could significantly affect these controls subsequent to the Evaluation
Date. The Company did not need to implement any corrective actions with regard
to any significant deficiency or material weakness in its internal controls.
18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company is subject to litigation incidental to its
business. The Company is not presently a party to any material litigation. Such
claims, if successful, could result in damage awards exceeding, perhaps
substantially, applicable insurance coverage.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The following chart provides information regarding Common Stock repurchases by
the Company during the period January 1, 2004 through March 31, 2004.
Issuer Purchases of Equity Securities
Maximum
Total Number Number
Of Shares Of Shares That
Purchased as May Yet Be
Average Part of Publicly Purchased
Total Number Price Announced Under the
Of Shares Paid per Plans or Plans or
Period Purchased Share Programs Programs
------ ------------ --------- ---------------- --------------
January 1, 2004 through January 31, 2004 17,000 $ 12.85 17,000 24,500
February 1, 2004 through February 29, 2004 24,500 $ 13.35 24,500 -
March 1, 2004 through March 31, 2004 - $ - - -
------ ------
Total 41,500 $ 13.14 41,500 -
19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Document
- ----------- -----------------------
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 Certification.
(b) Reports on Form 8-K
On March 9, 2004 the Company filed a report on Form 8-K related to
reporting of financial results for the fourth quarter of 2003 as
well as the announcement of the declaration of a quarterly dividend
of $.075 per common share payable April 14, 2004 to shareholders of
record March 31, 2004.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BIRNER DENTAL MANAGEMENT SERVICES, INC.
a Colorado corporation
Date: May 11, 2004 By: /s/ Frederic W.J. Birner
---------------------------------------
Name: Frederic W.J. Birner
Title: Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
Date: May 11, 2004 By: /s/ Dennis N. Genty
---------------------------------------
Name: Dennis N. Genty
Title: Chief Financial Officer, Secretary,
Treasurer and Director
(Principal Financial and Accounting Officer)
21