HOUSTON, April 26 /PRNewswire/ -- Castle Dental Centers (Nasdaq: CASLE),
one of the largest dental management companies in the U.S., today reported
that revenues for the fourth quarter ended December 31, 1999 increased
26 percent to $25.8 million compared with $20.4 million the same quarter a
year ago. Revenues for the year were $102.7 million, up 37 percent from
revenues of $74.8 million for 1998.
The company, however, will take a net charge of $1.65 million, or
$0.14 per share, related to an increase in the company's allowance for
doubtful accounts, of which approximately $650,000 will be charged to the
third quarter of 1999 and $1.0 million will be charged to the fourth quarter.
As a result of this charge and other non-recurring expenses, the company will
recognize a net loss of $420,000, or a $0.06 loss per share (diluted), for the
1999 fourth quarter. Third-quarter 1999 earnings will be restated to reflect
a reduction in income from the $0.13 per share (diluted) previously reported
to $0.07 per share (diluted) based on a reassessment of information previously
available concerning the allowance for doubtful accounts.
For the year ended December 31, 1999 the company posted net income of
$1.2 million, or $0.18 per share (diluted). This compares with net income of
$1.1 million, or $0.17 per share, for the 1998 fourth quarter and net income
of $3.6 million, or $0.54 per share, for the full year ended
December 31, 1998. Net income in 1999 had previously been reduced by a
litigation settlement of $0.12 per share recorded in the second quarter.
In addition to the charges related to the company's accounts receivable,
the company recorded expenses during the 1999 fourth quarter of approximately
$0.05 per share for legal fees incurred in connection with the pending
arbitration in California. Operating income was affected by start-up
expenses, including increased rent and depreciation related to the opening of
"de novo" dental centers and an increase in corporate infrastructure costs to
support the company's 20 new operating locations opened during 1999. Net
income was also affected by an increase in interest expenses relating to
increased borrowings under the company's senior credit facility and higher
effective interest rates.
As a result of these charges, the company is in violation of certain
financial covenants under its senior credit facility and its senior
subordinated credit facility. The company is currently negotiating with its
senior and senior subordinated creditors regarding waivers of these defaults
and restructuring such credit facilities to accommodate the effects of these
charges. The company expects to conclude these negotiations within the next
15 days.
$15 Million Subordinated Debt Financing
The company also announced that it has closed a $15.0 million subordinated
debt financing with Heller Financial and Midwest Mezzanine Fund. This
financing consists of $13.6 million of senior subordinated notes and
$1.4 million of convertible subordinated notes, all due January 31, 2007.
The convertible subordinated notes are convertible into approximately
442,938 shares of common stock of the company at a conversion price of
$3.1125 per share.
The company used the net proceeds from the sale of these notes to acquire
the minority interest in its California operations, to reduce certain accrued
liabilities and accounts payable, and to reduce bank debt.
The company acquired the minority interest owned by the former owners of
the California operations for a total consideration of $5.0 million in cash.
As part of this transaction, the company repurchased its obligation to issue
421,000 shares of common stock to such former owners. These shares will no
longer be included in the company's average outstanding shares.
Strategic Initiatives Under Way
The company announced that it is pursuing strategic alternatives to
increase shareholder value by engaging Raymond James & Associates, Inc. to
assist in evaluating several financing alternatives. Jack H. Castle, Jr.,
chairman and chief executive officer, commented, "We continue to commit
resources to identify and develop additional ways to enhance shareholder
value. Raymond James will help us focus on those opportunities that add value
to the company and offer strategic direction that is critical to our future
growth."
Review of Operations
Commenting on the year-end results, Castle stated, "During 1999, we
standardized our systems, strengthened our regional management teams and
maintained our leadership positions in the markets we serve. During the last
year we opened 20 de novo centers and continued to leverage our regional
infrastructures and advertising dollars.
"Over the next 12 months, we will focus on developing the profit potential
of the de novo centers opened during 1999. This, along with an emphasis on
continuous process improvement, will have a positive effect on operating
income during 2000. We will concentrate on managing operating expenses,
devote resources to train and improve the caliber of Castle associates, and
executing our de novo strategy on a profitable basis."
Castle Dental Centers, Inc. develops, manages and operates integrated
dental networks through contractual affiliations with general, orthodontic and
multi-specialty dental practices in the U.S. The company manages 102 dental
centers with approximately 250 affiliated dentists in Texas, Florida,
Tennessee and California.
Information contained in this press release, other than historical
information, may be considered forward-looking in nature and is subject to
various risks, uncertainties and assumptions. Among the key factors that may
have a direct bearing on the company are fluctuations in the economy, the
degree and nature of competitions and the demand for the company's services,
changes in laws and regulations affecting the company's business, the
company's inability at any time to complete acquisitions and integrate the
operations of acquired businesses, and numerous other factors discussed in the
company's filings with the Securities and Exchange Commission.
For more information regarding Castle Dental Centers, Inc., free of
charge, dial 1-800-PRO-INFO and enter "CASL."
CASTLE DENTAL CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
Three Months Ended Twelve Months Ended
December 31, December 31,
1999 1998 1999 1998
Net patient revenues $25,781 $20,427 $102,701 $74,823
Expenses:
Dentist salaries
and other
professional costs 6,597 5,069 26,984 18,516
Clinical salaries 5,313 4,581 21,408 16,612
Dental supplies and
laboratory fees 2,821 1,918 9,641 7,197
Rent and lease
expense 1,675 1,231 6,203 4,091
Advertising and
marketing 752 789 3,650 2,763
Depreciation and
amortization 1,645 982 5,941 3,615
Other operating
expenses 3,456 1,780 10,314 6,976
General and
administrative 3,108 1,931 10,909 8,145
Total expenses 25,367 18,281 95,050 67,915
Operating income 414 2,146 7,651 6,908
Litigation settlement -- -- 1,366 --
Interest expense 1,065 711 4,220 1,889
Other expense
(income), net (7) (7) 34 (57)
Income (loss)
before income taxes (644) 1,442 2,031 5,076
Provision (benefit)
for income taxes (223) 320 835 1,490
Net income (loss) $(421) $1,122 $1,196 $3,586
Income (loss) per
common share:
Basic and diluted $(0.06) $0.17 $0.18 $0.54
Weighted average number
of common and common
equivalent shares
outstanding
Basic 6,825 6,742 6,825 6,586
Diluted 6,861 6,754 6,850 6,608
SOURCE Castle Dental Centers
 back to top
Related links:
http://www.frbinc.com
CONTACT:
John M. Slack, Chief Financial Officer of
Castle Dental Centers, 713-479-8264; or Analyst Inquiries, Doug
Broderick, 312-274-2266, or General Inquiries, Marilyn Windsor,
312-640-6692, both of The Financial Relations Board-BSMG
Worldwide
|
