In
the table below, we provide you with our selected financial and
operating data. We have prepared the statement of income and balance
sheet data using our consolidated financial statements for the five
years ended December 31, 2001. When you read this selected financial
and operating data, it is important that you read along with it
the historical financial statements and related notes included elsewhere
in this Report, as well as the section of this Report captioned
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”
|
|
|
Year
Ended December 31, |
| (in
thousands, except percentage and per share data) |
|
2001(1) |
|
2000 |
|
|
1999 |
|
1998 |
|
1997 |
 |
| Statement
of Income Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fee
revenue |
|
$ |
350,954 |
|
|
$ |
268,836 |
|
|
$ |
226,290 |
|
|
$ |
171,298 |
|
|
$ |
117,326 |
|
| Direct
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Employee
costs |
|
|
101,105 |
|
|
|
78,051 |
|
|
|
61,224 |
|
|
|
46,878 |
|
|
|
33,429 |
|
| Orthodontic
supplies |
|
|
29,366 |
|
|
|
21,274 |
|
|
|
17,136 |
|
|
|
13,287 |
|
|
|
8,789 |
|
| Rent |
|
|
30,868 |
|
|
|
23,973 |
|
|
|
18,624 |
|
|
|
14,128 |
|
|
|
10,299 |
|
| Marketing
and advertising |
|
|
26,453 |
|
|
|
22,001 |
|
|
|
16,874 |
|
|
|
15,491 |
|
|
|
9,855 |
|
|
| Total
direct expenses |
|
|
187,792 |
|
|
|
145,299 |
|
|
|
113,858 |
|
|
|
89,784 |
|
|
|
62,372 |
|
| General
and administrative |
|
|
39,372 |
|
|
|
28,360 |
|
|
|
23,270 |
|
|
|
18,104 |
|
|
|
13,356 |
|
| Depreciation
and amortization |
|
|
19,825 |
|
|
|
15,175 |
|
|
|
12,238 |
|
|
|
9,124 |
|
|
|
5,640 |
|
|
| Operating
profit |
|
|
103,965 |
|
|
|
80,002 |
|
|
|
76,924 |
|
|
|
54,286 |
|
|
|
35,958 |
|
| Interest
(expense) income, net |
|
|
(5,702 |
) |
|
|
(3,731 |
) |
|
|
(2,204 |
) |
|
|
280 |
|
|
|
1,143 |
|
| Non-controlling
interest in subsidiary(2) |
|
|
(56 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
| Income
before income taxes |
|
|
98,207 |
|
|
|
76,271 |
|
|
|
74,720 |
|
|
|
54,566 |
|
|
|
37,101 |
|
| Provision
for income taxes |
|
|
37,073 |
|
|
|
28,549 |
|
|
|
28,206 |
|
|
|
20,753 |
|
|
|
14,469 |
|
|
| Income
before cumulative effect of changes in accounting principles |
|
|
61,134 |
|
|
|
47,722 |
|
|
|
46,514 |
|
|
|
33,813 |
|
|
|
22,632 |
|
| Cumulative
effect of changes in accounting principles, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net
of income tax benefit(3)(4) |
|
|
— |
|
|
|
(50,576 |
) |
|
|
(678 |
) |
|
|
— |
|
|
|
— |
|
|
| Net
income (loss) |
|
$ |
61,134 |
|
|
$ |
(2,854 |
) |
|
$ |
45,836 |
|
|
$ |
33,813 |
|
|
$ |
22,632 |
|
|
| Income
per share before cumulative effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| of
changes in accounting principles(5) |
|
$ |
1.21 |
|
|
$ |
0.96 |
|
|
$ |
0.96 |
|
|
$ |
0.70 |
|
|
$ |
0.50 |
|
| Cumulative
effect of changes in accounting principles, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net
of income tax benefit, per share(3)(4) |
|
|
— |
|
|
|
(1.02 |
) |
|
|
(0.02 |
) |
|
|
— |
|
|
|
— |
|
|
| Net
income (loss) per share(5) |
|
$ |
1.21 |
|
|
$ |
(0.06 |
) |
|
$ |
0.94 |
|
|
$ |
0.70 |
|
|
$ |
0.50 |
|
|
| Weighted
average shares outstanding(5) |
|
|
50,438 |
|
|
|
49,845 |
|
|
|
48,643 |
|
|
|
48,502 |
|
|
|
45,414 |
|
| Pro
forma net income for change in accounting principle |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| adopted
effective January 1, 2000(4)(6) |
|
|
N/A |
|
|
|
N/A |
|
|
$ |
32,326 |
|
|
$ |
22,276 |
|
|
$ |
12,013 |
|
| Pro
forma net income per share for change in accounting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| principle
adopted effective January 1, 2000(4)(6) |
|
|
N/A |
|
|
|
N/A |
|
|
$ |
0.66 |
|
|
$ |
0.46 |
|
|
$ |
0.26 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number
of affiliated centers(7)(8) |
|
|
879 |
|
|
|
592 |
|
|
|
537 |
|
|
|
469 |
|
|
|
360 |
|
| Comparable
center fee revenue growth(9) |
|
|
22.1 |
% |
|
|
22.6 |
%(10) |
|
|
20.1 |
% |
|
|
19.2 |
% |
|
|
20.0 |
% |
| Total
case starts(8) |
|
|
200,281 |
|
|
|
160,639 |
|
|
|
126,307 |
|
|
|
95,377 |
|
|
|
70,611 |
|
| |
|
|
| |
|
|
|
|
As
of December 31, |
| (in
thousands) |
|
2001 |
|
|
2000 |
|
|
1999 |
|
|
1998 |
|
|
1997 |
|
|
| Balance
sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Working
capital |
|
$ |
51,947 |
|
|
$ |
39,573 |
|
|
$ |
102,276 |
|
|
$ |
59,634 |
|
|
$ |
68,243 |
|
| Total
assets(11) |
|
$ |
580,466 |
|
|
$ |
367,947 |
|
|
$ |
362,816 |
|
|
$ |
292,472 |
|
|
$ |
224,805 |
|
| Total
debt, net of current portion(12) |
|
$ |
130,564 |
|
|
$ |
58,575 |
|
|
$ |
52,773 |
|
|
$ |
22,659 |
|
|
$ |
6,492 |
|
| Total
equity |
|
$ |
389,452 |
|
|
$ |
287,196 |
|
|
$ |
278,527 |
|
|
$ |
231,159 |
|
|
$ |
190,740 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Amounts
for 2001 include operating results of OrthAlliance, Inc. subsequent
to November 9, 2001, the date that our newly-formed subsidiary
merged with and into OrthAlliance, but do not include any
operating results for certain practices that are subject to
service, management service or consulting agreements with
OrthAlliance but are engaged in litigation with OrthAlliance
and have ceased paying service fees to OrthAlliance (the “Excluded
OrthAlliance Affiliated Practices”). |
| (2) |
In
the first quarter of 2001, we finalized an arrangement with
our affiliated practitioners in Japan, whereby the affiliated
practitioners acquired a 16% ownership interest in our Japanese
subsidiary. |
| (3) |
See
Note 2 to our Consolidated Financial Statements included elsewhere
in this Report for information regarding the cumulative effect
of a change in accounting principle effective January 1, 1999
related to Statement of Position 98-5, “Reporting on the Costs
of Start-Up Activities.” |
| (4) |
See
Note 2 to our Consolidated Financial Statements included elsewhere
in this Report for information regarding 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”). |
| (5) |
These
amounts represent the full dilutive effect of the exercise
of common equivalent shares (stock options) outstanding during
the year. See Note 9 to our Consolidated Financial Statements
included elsewhere in this Report. |
| (6) |
Pro
forma amounts were calculated assuming our change in revenue
recognition effective January 1, 2000 pursuant to SAB 101
had been in effect for all periods presented. |
| (7) |
These
amounts are presented as of the end of the period. |
| (8) |
Amounts
for 2001 do not include the Excluded OrthAlliance Affiliated
Practices. |
| (9) |
These
amounts represent the growth in fee revenue in the indicated
period relative to the comparable prior-year period by centers
that were affiliated with us throughout each of the two periods
being compared. There were 73 of these comparable affiliated
centers in 1997, 227 in 1998, 332 in 1999, 469 in 2000, and
532 in 2001. The amount of that growth has been significantly
affected by the number of newly-opened affiliated centers
included in the computation, because newly-opened affiliated
centers have experienced significant growth during their first
26 months of operations. The average term of an orthodontic
patient contract is about 26 months. Our affiliated centers
have typically reached maturity as patients are added during
the first 26 months of operations. |
| (10) |
This
amount represents the growth in fee revenue in 2000 for affiliated
centers open throughout 1999 and 2000, compared to pro forma
fee revenue for these centers in 1999, calculated as if our
change in accounting principle pursuant to SAB 101 effective
January 1, 2000 had been in effect throughout 1999 and 2000.
See “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Revenue Recognition.” |
| (11) |
To
conform to the balance sheet presentation as of December 31,
2001 and 2000, amounts reported as of December 31, 1997, 1998
and 1999 as patient prepayments (previously reported as a
liability) have been reclassified as a reduction of service
fees receivable. |
| (12) |
Includes
notes payable to affiliated practices, excluding current portion. |
|
|
