American Dental Partners Reports First Quarter 2008 Financial Results and Provides Detail on Litigation Settlement Accounting

WAKEFIELD, MA -- (MARKET WIRE) -- 04/28/08 -- American Dental Partners, Inc. (NASDAQ: ADPI) announced financial results today for the quarter ended March 31, 2008.

The Company's financial results reflect income and expenses, including non-cash items, required by generally accepted accounting principles as a result of the previously announced settlement of litigation among PDG, P.A. ("PDG"), PDHC, Ltd., one of the Company's subsidiaries, and the Company effective February 29, 2008. In addition to its actual results, the Company has provided a pro forma financial presentation that excludes the operating results of 25 dental facilities transferred to PDG and the accounting impact associated with the litigation settlement from both periods of comparison (see "PDG Litigation Settlement Accounting" and "Supplemental Operating Data" tables).

Comparing actual results and pro forma results for the first quarter of 2008 with the first quarter of 2007:

-- Net revenue was $79,811,000 as compared to $65,458,000. Pro forma net revenue was $70,055,000 as compared to $52,748,000. -- Earnings from operations were $37,880,000 as compared to $7,223,000. Pro forma earnings from operations were $5,454,000 as compared to $4,958,000. -- Net earnings were $21,525,000 as compared to $3,879,000. Pro forma net earnings were $1,744,000 as compared to $2,515,000. -- Diluted net earnings per share were $1.65 as compared to $0.30. Pro forma diluted net earnings per share were $0.13 as compared to $0.19. -- Diluted cash net earnings per share were $1.75 as compared to $0.36. Pro forma diluted cash net earnings per share were $0.24 as compared to $0.26.

PDG Litigation Settlement Accounting

As previously reported, the Company completed the settlement of the litigation with PDG effective February 29, 2008. As part of this settlement, the Company transferred the operating assets of 25 dental facilities to PDG. Pursuant to Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long Lived Assets, the Company recognized a non-cash gain of $30,127,000 which represents the fair market value of the assets transferred to PDG of $39,968,000 less the book value of the net assets transferred of $9,205,000 and litigation expenses of approximately $636,000.

Prior to the transfer of the 25 facilities to PDG, the Company recognized as net revenue expense reimbursement of $6,423,000 from PDG for the operating expenses of these facilities through February 29, 2008, along with operating expenses of the PDG dentists who remain, on a temporary basis, in the dental facilities retained by the Company.

As part of the settlement of the litigation with PDG, the Company entered into a transition services agreement with PDG in which PDG will pay the Company $19,000,000 for continuing interim management services through September 30, 2008. PDG is obligated to pay this transition management services fee in 12 equal monthly installments in 2008 irrespective of whether it utilizes such services. The Company will recognize $10,000,000 of this amount as net revenue from January to September 2008, and the remainder, which was deemed to be in excess of fair market value for providing such management services, was recognized in the fourth quarter of 2007 as an offset to the non-cash litigation settlement expense.

Operating Results

Patient revenue of the Company's affiliated dental group practices increased 9% to $107,374,000 for the quarter, which includes $101,252,000 from dental group practices which are affiliated with the Company by means of service agreements and $6,122,000 from Arizona's Tooth Doctor for Kids. Same market patient revenue growth was 9.8% for the quarter and 2.3% excluding in-market affiliations.

Cash flow from operations was $971,000 for the quarter. Capital expenditures were $3,929,000 for the quarter. The Company completed two de novo facilities and expanded and/or relocated three dental facilities during the quarter. Amounts paid for acquisitions and affiliations, including affiliation costs and deferred and contingent payments, were $2,376,000 for the quarter. During the quarter, the Company completed one affiliation which generates approximately $1,700,000 of patient revenue on an annualized basis.

Cash net earnings and pro forma adjustments related to disposed assets are non-GAAP financial measures. In accordance with the requirement of SEC Regulation G, please see the attached financial tables for a presentation of the most comparable GAAP measures and the reconciliation to the nearest GAAP measure and all additional reconciliations required by Regulation G. Management believes these non-GAAP financial measures are useful to an investor in assessing the Company's on-going operations.

For further discussion of these events and a comprehensive review of the first quarter ended March 31, 2008, the Company will host its previously announced conference call on Tuesday, April 29, 2008 at 10:00 a.m. EDT, which will be broadcast live over the Internet at www.amdpi.com. The call will be hosted by Gregory A. Serrao, Chairman, President and Chief Executive Officer. To access the webcast, participants should visit the Investor Relations section of the website at least fifteen minutes prior to the start of the conference call to download and install any necessary audio software. A replay of the webcast will be available at www.amdpi.com approximately two hours after the call through 6:00 p.m. EDT Tuesday, May 6, 2008.

American Dental Partners is one of the nation's leading business partners to dental group practices. The Company is affiliated with 27 dental group practices which have 244 dental facilities with approximately 2,099 operatories located in 18 states.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of the historical information contained in this news release, the matters described herein contain "forward-looking" statements that involve risk and uncertainties that may individually or collectively impact the matters herein described, including but not limited to the possibility that we may not realize the benefits expected from our acquisition and affiliation strategy, economic, regulatory and/or other factors outside the control of the Company, which are detailed from time to time in the "Risk Factors" section of the Company's SEC reports, including the annual report on Form 10-K for the year ended December 31, 2007.

AMERICAN DENTAL PARTNERS, INC.

FINANCIAL HIGHLIGHTS (in thousands, except per share amounts) (unaudited)

Three Months Ended March 31, ------------------------ 2008 2007 ----------- ------------ Net revenue $ 79,811 $ 65,458 Operating expenses: Salaries and benefits 35,501 27,971 Lab fees and dental supplies 11,981 10,174 Office occupancy expenses 9,013 7,136 Other operating expenses 6,772 5,501 General corporate expenses 3,630 3,381 Depreciation expense 2,774 2,104 Amortization of intangible assets 2,387 1,442 Litigation settlement (gain) expense (30,127) 526 ----------- ------------ Total operating expenses 41,931 58,235 ----------- ------------Earnings from operations 37,880 7,223 Interest expense, net 2,455 625 Minority interest 140 157 ----------- ------------Earnings before income taxes 35,285 6,441 Income taxes 13,760 2,562 ----------- ------------Net earnings $ 21,525 $ 3,879 =========== =========== Net earnings per common share: Basic $ 1.68 $ 0.31 =========== =========== Diluted $ 1.65 $ 0.30 =========== ===========Weighted average common shares outstanding: Basic 12,839 12,456 =========== =========== Diluted 13,084 13,145 =========== =========== AMERICAN DENTAL PARTNERS, INC.

FINANCIAL HIGHLIGHTS (in thousands) (unaudited)

March 31, December 31, 2008 2007 ------------ ------------ASSETS Current assets: Cash and cash equivalents $ 6,118 $ 6,376 Accounts receivable, net 39,419 32,621 Other current assets 7,978 25,261 ------------ ------------ Total current assets 53,515 64,258 ------------ ------------ Property and equipment, net 52,313 60,445 ------------ ------------Other non-current assets: Goodwill 70,622 70,602 Intangible assets, net 179,774 179,969 Other assets 2,863 2,232 ------------ ------------ Total non-current assets 253,259 252,803 ------------ ------------ Total assets $ 359,087 $ 377,506 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 37,868 $ 40,524 Accrued litigation expense - 39,968 Other current liabilities - 3,475 Current maturities of debt 190 188 ------------ ------------ Total current liabilities 38,058 84,155 ------------ ------------Non-current liabilities: Long-term debt 146,302 140,986 Other liabilities 37,759 36,568 ------------ ------------ Total non-current liabilities 184,061 177,554 ------------ ------------ Total liabilities 222,119 261,709 ------------ ------------ Minority Interest 541 894

Commitments and contingencies Stockholders' equity 136,427 114,903 ------------ ------------ Total liabilities and stockholders' equity $ 359,087 $ 377,506 ============ =========== AMERICAN DENTAL PARTNERS, INC.

SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts) (unaudited)

Pro forma consolidated statement of income for the three months ended March 31, 2008

Three Months Ended March 31, 2008 Pro Forma Adjustments ----------------------- Settlement Management Pro Forma 2008 Assets(a) Services(b) 2008 -------- --------- ---------- --------- Net revenue $ 79,811 $ 6,423 $ 3,333 $ 70,055 Operating expenses Salaries and benefits 35,501 3,755 852 30,894 Lab fees and dental supplies 11,981 1,301 - 10,680 Office occupancy expenses 9,013 863 60 8,090 Other operating expenses 6,772 252 108 6,412 General corporate expenses 3,630 - - 3,630 Litigation expenses (30,127) (30,127)(c) - - -------- --------- ---------- ---------EBITDA 43,041 30,379 2,313 10,349 Depreciation 2,774 252 14 2,508 Amortization 2,387 - - 2,387 -------- --------- ---------- ---------Earnings from operations 37,880 30,127 2,299 5,454 Interest expense, net 2,455 - - 2,455 Minority interest 140 - - 140 -------- --------- ---------- ---------Earnings before income taxes 35,285 30,127 2,299 2,859 Income taxes 13,760 1,115 -------- ---------Net earnings 21,525 1,744 Amortization of service agreements, net of tax 1,351 1,351 -------- ---------Cash net earnings (d) $ 22,876 $ 3,095 ======== ======== Diluted net earnings per common share $ 1.65 $ 0.13 ======== ========Diluted cash net earnings per common share (d) $ 1.75 $ 0.24 ======== ======== (a) Includes expense reimbursement associated with (i) 25 dental facilities transferred to PDG as part of the litigation settlement and (ii) PDG doctors currently practicing in six dental facilities retained by the Company. (b) The Company has agreed to provide interim management services to PDG through September 30, 2008. Includes interim management fee revenue, expenses associated with providing such services, and salaries and benefits expense, including severance, of management staff who have been terminated as a result of realigning the Company's Minnesota-based management team. (c) Includes gain on disposal of assets of $30,763,000 and professional fees associated with PDG litigation of $636,000. (d) Cash net earnings and diluted cash net earnings per share are not measures of financial performance under GAAP. Cash net earnings excludes amortization expense related to intangible assets, net of tax. The Company incurs significant amortization expense related to its service agreements while many companies, both in the same industry and other industries, no longer amortize a significant portion of their intangible assets pursuant to Statement of Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets. The Company believes that cash net earnings and diluted cash net earnings per share are important financial measures for understanding its relative financial performance.

AMERICAN DENTAL PARTNERS, INC.

SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts) (unaudited)

Pro forma consolidated statement of income for the three months ended March 31, 2007

Three Months Ended March 31, 2007 Pro Forma Adjustments ----------------------- Settlement Management Pro Forma 2007 Assets(e) Services(f) 2007 -------- --------- ---------- --------- Net revenue $ 65,458 $ 9,220 $ 3,490 $ 52,748 Operating expenses Salaries and benefits 27,971 5,154 520 22,297 Lab fees and dental supplies 10,174 1,805 - 8,369 Office occupancy expenses 7,136 1,135 49 5,952 Other operating expenses 5,501 781 113 4,607 General corporate expenses 3,381 - - 3,381 Litigation expenses 526 526 (g) - - --------- --------- ---------- ---------EBITDA 10,769 (181) 2,808 8,142 Depreciation 2,104 345 17 1,742 Amortization 1,442 - - 1,442 --------- --------- ---------- ---------Earnings from operations 7,223 (526) 2,791 4,958 Interest expense, net 625 - - 625 Minority interest 157 - - 157 --------- --------- ---------- ---------Earnings before income taxes 6,441 (526) 2,791 4,176 Income taxes 2,562 1,661 --------- ---------Net earnings 3,879 2,515 Amortization of service agreements, net of tax 867 867 --------- ---------Cash net earnings (h) $ 4,746 $ 3,382 ========= ======== Diluted net earnings per common share $ 0.30 $ 0.19 ========= ========Diluted cash net earnings per common share (h) $ 0.36 $ 0.26 ========= ======== (e) Includes expense reimbursement associated with 25 dental facilities transferred to PDG as part of litigation settlement. (f) The Company provided management services pursuant to a Service Agreement with PDG through December 31, 2007. Includes estimated proportion of service fee revenue and associated expenses for 25 of the 31 dental facilities transferred to PDG. (g) Includes professional fees associated with PDG litigation. (h) Cash net earnings and diluted cash net earnings per share are not measures of financial performance under GAAP. Cash net earnings excludes amortization expense related to intangible assets, net of tax. The Company incurs significant amortization expense related to its service agreements while many companies, both in the same industry and other industries, no longer amortize a significant portion of their intangible assets pursuant to Statement of Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets. The Company believes that cash net earnings and diluted cash net earnings per share are important financial measures for understanding its relative financial performance.

AMERICAN DENTAL PARTNERS, INC.

SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts) (unaudited)

Pro forma consolidated statement of income for the three months ended March 31, 2008 and 2007

Change in Pro Forma Pro Forma Pro Forma 2008 2007 Results ---------- ---------- --------- Net revenue $ 70,055 $ 52,748 33% Operating expenses Salaries and benefits 30,894 22,297 39% Lab fees and dental supplies 10,680 8,369 28% Office occupancy expenses 8,090 5,952 36% Other operating expenses 6,412 4,607 39% General corporate expenses 3,630 3,381 7% ---------- ---------- ---------EBITDA 10,349 8,142 27% Depreciation 2,508 1,742 44% Amortization 2,387 1,442 66% ---------- ---------- ---------Earnings from operations 5,454 4,958 10% Interest expense, net 2,455 625 293% Minority interest 140 157 -11% ---------- ---------- ---------Earnings before income taxes 2,859 4,176 -32% Income taxes 1,115 1,661 -33% ---------- ---------- ---------Net earnings 1,744 2,515 -31% Amortization of service agreements, net of tax 1,351 867 56% ---------- ---------- ---------Cash net earnings $ 3,095 $ 3,382 -8% ========== ========== ======== Diluted net earnings per common share $ 0.13 $ 0.19 -32% ========== ========== ========Diluted cash net earnings per common share $ 0.24 $ 0.26 -8% ========== ========== ======== AMERICAN DENTAL PARTNERS, INC.

SUPPLEMENTAL OPERATING DATA (in thousands, except selected statistical data)

(unaudited)

Selected statistical data

March 31, December 31, 2008 2007 ------------ ------------ Number of dental facilities 244 266 Number of operatories (i) 2,099 2,357 Number of affiliated dentists (j) 550 611

(i) An operatory is an area where dental care is performed and generally contains a dental chair, a hand piece delivery system and other essential equipment.

(j) Includes full-time equivalent general or specialty dentists employed by or contracted with the affiliated practices, including Arizona's Tooth Doctor for Kids.

Patient revenue and same market patient revenue growth (k)

Three Months Ended March 31, --------------------- % 2008 2007 Change ---------- ---------- ---------Patient revenue of affiliated practices: Platform dental group practices affiliated with us in both periods of comparison $ 83,082 $ 75,640 9.8% Platform dental group practices that affiliated with us during periods of comparison (l) 24,292 22,899 6.1% ---------- ---------- ---------Total patient revenue 107,374 98,539 9.0% Patient revenue of Arizona's Tooth Doctor for Kids 6,122 5,803 5.5% ---------- ---------- ---------Patient revenue of platform dental group practices affiliated with us by means of service agreements 101,252 92,736 9.2% Amounts due to us under service agreements 62,795 58,480 7.4% ---------- ---------- ---------Amounts retained by platform dental group practices affiliated with us by means of service agreements $ 38,457 $ 34,256 12.3% ========== ========== ======== (k) Includes patient revenue of affiliated dental group practices which are not consolidated with the Company's financial results and patient revenue of Arizona's Tooth Doctor for Kids which is consolidated with the Company's financial results.

(l) In addition to platform affiliations completed since January 1, 2007, also includes patient revenue of the 31 dental facilities comprising Park Dental for the three months ended March 31, 2007 and the six dental facilities retained by the Company for the three months ended March 31, 2008.

Contacts: Gregory A. Serrao Chairman, President and Chief Executive Officer 781-224-0880

Breht T. Feigh Executive Vice President, Chief Financial Officer and Treasurer 781-224-0880

American Dental Partners, Inc. 401 Edgewater Place, Suite 430 Wakefield, MA 01880 Phone: 781/224-0880 Fax: 781/224-4216

2008-04-28 18:56:39 0347028 MARKETWIRE