1
Filed by Orthodontic Centers of America, Inc.
pursuant to Rule 425 under the Securities Act
of 1933 and deemed filed pursuant to Rule
14a-12 under the Securities Exchange Act of
1934.
Subject Company: Orthodontic Centers of
America, Inc. Commission File No.: 1-13457
THE FOLLOWING IS A PRESS RELEASE ISSUED BY
ORTHODONTIC CENTERS OF AMERICA, INC.
NEWS RELEASE
FOR IMMEDIATE RELEASE
CONTACT: John C. Glover
Vice President of Investor Relations
(904) 280-6285
ORTHODONTIC CENTERS OF AMERICA, INC. ANNOUNCES
RECORD SECOND QUARTER 2001 RESULTS
METAIRIE, Louisiana (July 26, 2001) - Orthodontic Centers of America, Inc.
(NYSE:OCA) today announced record financial results for the second quarter ended
June 30, 2001. Bart Palmisano, Sr., Chief Executive Officer, President and
Chairman of the Board of OCA, said, "We are extremely pleased with our
superlative second quarter performance. Our proven ability to add tangible value
to our existing orthodontic centers continues to translate into superior
internal growth. Furthermore, our capacity to build new centers in attractive
markets, and our success in affiliating with orthodontists and integrating
existing orthodontic facilities continue to be additional cornerstones in our
successful strategy."
Second Quarter 2001 Financial and Operating Highlights:
o Record earnings per share of $0.30 were up 25% compared to
second quarter 2000 earnings per share of $0.24.
o Record net revenue of $82.2 million increased 24.9%,
reflecting strong results from growth initiatives, compared to
$65.8 million in the second quarter of 2000.
o The dollar amount of new patient contracts, the greatest
predictor of future net revenue, increased 27.3% to a record
$149.7 million, compared to $117.6 million in the second
quarter of 2000.
o Record patient case starts of 46,840 were up 23.3%, compared
to 38,004 in the second quarter of 2000.
o Comparable center net revenue growth was outstanding at 22.6%.
o Patient interval days increased to 45.64 days from 43.4 days
in the second quarter of 2000, reflecting continued
improvement in productivity and scheduling efficiencies.
o Cash flow from operations for the six months ended June 30,
2001 was robust at $20.9 million.
o Number of patients increased 24.2% to 379,105 at June 30,
2001, compared to 305,146 at June 30, 2000.
o EBITDA margin continued to be outstanding at 36.2%.
2
Additional Second Quarter 2001 Highlights:
o The Company entered into a definitive merger agreement with
OrthAlliance, Inc. (NASDAQ/NM: ORAL) on May 16, 2001.
OrthAlliance is a leading provider of practice management and
consulting services to orthodontic and pediatric dentistry
practices in the United States. As of March 31, 2001,
OrthAlliance was affiliated with 226 orthodontists and
pediatric dentists practicing in 395 centers throughout the
United States. The transaction, which is subject to approval
by OrthAlliance stockholders and other conditions, is
currently anticipated to close in the third quarter of 2001
and to be accounted for as a purchase.
For the second quarter of 2001, net revenue increased 24.9% to $82.2
million, compared to $65.8 million for the same quarter last year. Net income
totaled $14.8 million for the second quarter of 2001, or 25.3% above the $11.8
million in net income for the second quarter of 2000. The Company earned $0.30
per share for the second quarter of 2001, an increase of 25% over the $0.24 net
income per share for the same period in 2000. Diluted weighted average shares of
common stock outstanding for the quarter ended June 30, 2001, were 50,218,000 as
compared with 49,522,000 shares for the quarter ended June 30, 2000.
For the six months ended June 30, 2001, net revenue increased 27.67% to
$159.7 million, compared to $125.1 million for the same period last year. Net
income totaled $28.7 million for the six months ended June 30, 2001, or 31.4%
above the $21.8 million in net income, before cumulative effect of a change in
accounting principle, for the same period last year. The Company earned $0.57
per share for the six months ended June 30, 2001, an increase of 28.7% over the
$0.44 net income per share, before cumulative effect of a change in accounting
principle, for the same period in 2000. Diluted weighted average shares of
common stock outstanding for the six months ended June 30, 2001, were
50,083,000, as compared with 49,238,000 for the six months ended June 30, 2000.
Net income and earnings per share for the six months ended June 30,
2000 referred to above excludes the cumulative effect of a change in accounting
principle effective January 1, 2000, related to revenue recognition and Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101) taken in the first quarter of 2000. The cumulative effect of this change in
accounting principle, net of tax benefit, was a charge of $50.6 million ($1.01
per share) taken during the first quarter of 2000.
Net revenue for existing centers was strong during the second quarter
of 2001. Comparable center net revenue growth during the second quarter of 2001
was 22.6%. Comparable center net revenue growth is defined as growth in net
revenue by centers affiliated with the Company throughout each of the two
periods being compared. Comparable center net revenue growth during the second
quarter of 2001, including only centers affiliated with the Company for at least
26 months, was 11.1%.
As previously announced, OCA and OrthAlliance entered into a definitive
merger agreement on May 16, 2001, whereby a wholly-owned subsidiary of OCA would
merge into OrthAlliance in a stock-for-stock transaction, with OrthAlliance
becoming a wholly-owned subsidiary of OCA. OCA and OrthAlliance also
subsequently announced that OrthAlliance had received signed amendments to the
employment agreements and service or consulting agreements of OrthAlliance
affiliated professionals representing more than the minimum threshold amounts
specified as a condition to OCA's obligation to close the proposed merger with
OrthAlliance.
Bart F. Palmisano, Sr. said, "We focused diligently during the second
quarter on meeting with the majority of OrthAlliance's outstanding affiliated
orthodontists and pediatric dentists, and we continue to be impressed with their
high level of professionalism and commitment to quality. We look forward to
welcoming these highly regarded and exceptionally talented professionals to our
organization."
Bart F. Palmisano, Sr. continued, "Our proposed merger with
OrthAlliance presents an unprecedented strategic opportunity for us. Rest
assured, we intend to continue to devote substantial resources to completing
this merger and building strong relationships with OrthAlliance's affiliated
orthodontists and pediatric dentists. We are excited about our prospects for
growth and our continued ability to build shareholder value."
3
During the second quarter of 2001, the Company affiliated with 2 new
orthodontic professionals, and opened 8 new centers. Of the 8 new centers
opened, all were newly developed centers.
In closing, Bart F. Palmisano, Sr., said, "Our continued strong results
are a product of focused, intelligent growth, which has long been our operating
philosophy. While patient case starts increased 23.3% over the second quarter of
2000, the dollar amount of those new patient contracts increased by more than
27.3%. We are extremely encouraged about all our growth initiatives and remain
confident in our ability to execute our operating strategy soundly. The business
discipline that we have exercised to date will continue to serve us well going
forward in building long-term shareholder value."
The Company has scheduled a conference call on Thursday, July 26, 2001
at 10:00 a.m. (EDT) to announce its financial results for the second quarter of
2001. You may listen to the call through the Internet by logging on to the Vcall
(www.vcall.com) or StreetEvents (www.streetevents.com) websites. An archived
recording of the conference call will be available beginning approximately one
hour after the event through the StreetEvents and Vcall websites, as well as the
On24 Business Network website (www.on24.com) and the Company's website
(www.4braces.com).
Orthodontic Centers of America, Inc., founded in 1985, is the leading
provider of integrated business services to orthodontic practices. For
additional information on Orthodontic Centers of America, Inc., visit the
Company's web site: http://www.4braces.com.
Certain statements contained in this news release may not be based on
historical facts and are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
may be identified by their reference to a future period or periods or by the use
of forward-looking terminology, such as "anticipate," "believe," "estimate,"
"expect," "may," "might," "will," "would," or "intend." These forward-looking
statements include, without limitation, those relating to execution of
amendments by OrthAlliance affiliated professionals and integration of those
professionals, growth, shareholder value, operating strategy, and accounting
treatment and completion of the proposed merger with OrthAlliance. We caution
you not to place undue reliance on the forward-looking statements contained in
this release in that actual results could differ materially from those indicated
in such forward-looking statements, due to a variety of factors. Those factors
include, but are not limited to, failure or delay in obtaining required
stockholder approval, failure to obtain acceptable amendments to the employment
agreements and service or consulting agreements of OrthAlliance affiliated
professionals, the companies' failure to consummate the merger, inability to
successfully integrate the companies after the merger, adverse changes in the
companies' financial results and conditions, changes in general economic
conditions and business conditions, changes in OCA's operating or expansion
strategy, the ability of OCA to attract and retain qualified personnel and
orthodontists, the ability of OCA to effectively market its services and
products, OCA's expectations and estimates concerning future financial
performance, financing plans and the impact of competition, anticipated trends
in OCA's business, existing and future regulations affecting OCA's business,
OCA's dependence on existing sources of funding, and other factors generally
understood to affect the financial results of orthodontic practice management
companies, and other risks detailed from time to time in OCA's releases and
Annual Report on Form 10-K for the year ended December 31, 2000 and other
filings with the Securities and Exchange Commission. We undertake no obligation
to update these forward-looking statements to reflect events or circumstances
that occur after the date on which such statements were made.
In connection with the proposed merger, OCA will file a registration
statement on Form S-4 with the Securities and Exchange Commission ("SEC").
Investors are urged to read the proxy statement/prospectus that will be part of
the registration statement, because it will contain important information about
the merger, OCA and OrthAlliance. After the registration statement is filed with
the SEC, the registration statement and the proxy statement/prospectus will be
available free of charge, both on the SEC's web site (www.sec.gov) and from OCA
and OrthAlliance by directing a request to Orthodontic Centers of America, Inc.,
5000 Sawgrass Village Circle, Suite 30, Ponte Vedra Beach, FL 32082, Attention:
Investor Relations, or to OrthAlliance, Inc., 21535 Hawthorne Boulevard, Suite
200, Torrance, CA 90503, Attention: Investor Relations. OrthAlliance and its
directors and officers may be deemed to be participants in the solicitation of
4
proxies with respect to a shareholder meeting to be held in connection with such
merger. Information about the participants in the solicitation, including their
interests in shares of OrthAlliance's common stock, is set forth in
OrthAlliance's Annual Report on Form 10-K for the year ended December 31, 2000
filed with the SEC. Investors may obtain additional information regarding the
interests of OrthAlliance and its directors and officers by reading the proxy
statement/prospectus when it becomes available.
-###-
ORTHODONTIC CENTERS OF AMERICA, INC.
UNAUDITED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PERCENTAGE AND PER SHARE DATA)
Three Months Ended
June 30,
--------------------- Percent
2001 2000 Change
-------- -------- -------
Net revenue $ 82,228 $ 65,842 24.9%
Operating income $ 25,153 $ 19,897 26.4%
Net income $ 14,826 $ 11,829 25.3%
Net income per share $ 0.30 $ 0.24 25.0%
Weighted average shares outstanding 50,218 49,522
ORTHODONTIC CENTERS OF AMERICA, INC.
UNAUDITED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PERCENTAGE AND PER SHARE DATA)
Six Months Ended
June 30,
--------------------- Percent
2001 2000 Change
-------- -------- -------
Net revenue $159,712 $125,124 27.6%
Operating income $ 48,355 $ 36,718 31.7%
Net income $ 28,654 $ 21,811(1) 31.4%
Net income per share $ 0.57 $ 0.44(1) 28.7%
Weighted average shares outstanding 50,083 49,238
(1) Excludes the cumulative effect of a change in accounting principle related
to revenue recognition and SAB 101.
5
ORTHODONTIC CENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Net revenue $ 82,228 $ 65,842 $ 159,712 $ 125,124
--------- --------- --------- ---------
Direct expenses:
Employee costs 23,309 19,044 45,652 36,617
Orthodontic supplies 6,456 5,236 12,693 9,781
Rent 7,079 5,881 13,888 11,195
Marketing and advertising 6,457 5,306 12,698 10,171
--------- --------- --------- ---------
Total direct expenses 43,301 35,467 84,931 67,764
General and administrative expenses 9,150 6,811 17,412 13,432
Depreciation and amortization 4,624 3,667 9,014 7,210
--------- --------- --------- ---------
Operating income 25,153 19,897 48,355 36,718
Interest income (expense) (1,148) (979) (2,327) (1,765)
--------- --------- --------- ---------
Income before income taxes 23,815 18,918 46,028 34,953
Provision for income taxes 8,989 7,088 17,374 13,141
--------- --------- --------- ---------
Net income before cumulative effect of change
in accounting principle (SAB 101) 14,826 11,829 28,654 21,811
Cumulative effect of change in accounting
principle, net of income tax benefit -- -- -- (50,576)
--------- --------- --------- ---------
Net income (loss) $ 14,826 $ 11,829 $ 28,654 $ (28,765)
--------- --------- --------- ---------
Net income per share - before cumulative effect
of a change in accounting principle $ 0.30 $ 0.24 $ 0.57 $ 0.44
Cumulative effect of change in accounting principle,
net of income tax benefit, per share -- -- -- $ (1.01)
--------- --------- --------- ---------
Net income (loss) per share $ 0.30 $ 0.24 $ 0.57 $ (0.57)
--------- --------- --------- ---------
Weighted average shares outstanding 50,218 49,522 50,083 49,238
-###-
6
In connection with the proposed merger, OCA will file a registration
statement on Form S-4 with the Securities and Exchange Commission ("SEC").
Investors are urged to read the proxy statement/prospectus that will be part of
the registration statement, because it will contain important information about
the merger, OCA and OrthAlliance. After the registration statement is filed with
the SEC, the registration statement and the proxy statement/prospectus will be
available free of charge, both on the SEC's web site (www.sec.gov) and from OCA
and OrthAlliance by directing a request to Orthodontic Centers of America, Inc.,
5000 Sawgrass Village Circle, Suite 30, Ponte Vedra Beach, FL 32082, Attention:
Investor Relations, or to OrthAlliance, Inc., 21535 Hawthorne Boulevard, Suite
200, Torrance, CA 90503, Attention: Investor Relations. OrthAlliance and its
directors and officers may be deemed to be participants in the solicitation of
proxies with respect to a shareholder meeting to be held in connection with such
merger. Information about the participants in the solicitation, including their
interests in shares of OrthAlliance's common stock, is set forth in
OrthAlliance's Annual Report on Form 10-K for the year ended December 31, 2000
filed with the SEC. Investors may obtain additional information regarding the
interests of OrthAlliance and its directors and officers by reading the proxy
statement/prospectus when it becomes available.