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: OrthAlliance, Inc.
Commission File No. 0-22975
THE FOLLOWING IS A PRESS RELEASE ISSUED BY
ORTHODONTIC CENTERS OF AMERICA, INC.
NEWS RELEASE
FOR IMMEDIATE RELEASE
CONTACT: John C. Glover
Chief Financial Officer
(504) 834-4392
ORTHODONTIC CENTERS OF AMERICA, INC. ANNOUNCES
RECORD THIRD QUARTER 2001 RESULTS
METAIRIE, Louisiana (October 25, 2001) - Orthodontic Centers of America, Inc.
(NYSE:OCA) today announced record financial results for the third quarter ended
September 30, 2001. Bart Palmisano, Sr., Chief Executive Officer, President and
Chairman of the Board of OCA, said, "We are extremely pleased with our record
third quarter performance. As our affiliated orthodontists continue to witness
steady, strong demand for orthodontic treatment, we continue to leverage the
significant capacity latent in our network of affiliated orthodontic centers.
OCA's proven ability to add value at the practice continues to translate into
superior growth."
Third Quarter 2001 Financial and Operating Highlights:
o Record earnings per share of $0.30 were up 30.4% compared to third
quarter 2000 earnings per share of $0.23.
o Record fee revenue of $86.8 million increased 24.5%, reflecting strong
results from growth initiatives, compared to $69.7 million in the
third quarter of 2000.
o The dollar amount of new patient contracts, the greatest predictor of
future fee revenue, increased 25.3% to a record $181.9 million,
compared to $145.2 million in the third quarter of 2000.
o Record patient case starts of 56,268 were up 20.5%, compared to 46,698
in the third quarter of 2000.
o Comparable center fee revenue growth was outstanding at 22.0%.
o Patient interval days increased to 45.9 days from 43.9 days in the
third quarter of 2000, reflecting continued improvement in
productivity and scheduling efficiencies.
o Cash flow from operations for the nine months ended September 30, 2001
was robust at $35.9 million.
o Total number of patients under treatment with affiliated orthodontists
increased 22.8% to 401,220 at September 30, 2001, compared to 326,840
at September 30, 2000.
o EBITDA margin continued to be outstanding at 34.5%.
For the third quarter of 2001, fee revenue increased 24.5% to $86.8
million, compared to $69.7 million for the same quarter last year. Net income
totaled $15.2 million for the third quarter of 2001, or 31.1% above the $11.6
million in net income for the third quarter of 2000. The Company earned $0.30
per share for the third quarter of 2001, an increase of 30.4% over the $0.23 net
income per share for the same period in 2000. Diluted weighted average shares of
common stock outstanding for the quarter ended September 30, 2001, were
50,123,000 as compared with 49,967,000 shares for the quarter ended September
30, 2000.
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For the nine months ended September 30, 2001, fee revenue increased
26.5% to $246.6 million, compared to $194.8 million for the same period last
year. Net income totaled $43.8 million for the nine months ended September 30,
2001, or 31.3% above the $33.4 million in net income, before cumulative effect
of a change in accounting principle, for the same period last year. The Company
earned $0.87 per share for the nine months ended September 30, 2001, an increase
of 29.9% over the $0.67 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 nine months ended September
30, 2001, were 50,133,000, as compared with 49,482,000 for the nine months ended
September 30, 2000.
Net income and earnings per share for the nine months ended September
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 ($1.02 per share) taken during the first quarter of 2000.
Fee revenue for existing centers was strong during the third quarter of
2001. Comparable center fee revenue growth during the third quarter of 2001 was
22.0%. Comparable center fee revenue growth is defined as growth in fee revenue
relative to the corresponding prior-year period by centers affiliated with the
Company throughout each of the two periods being compared. Comparable center fee
revenue growth during the third quarter of 2001, including only centers
affiliated with the Company for at least 26 months, was 11.3%.
As previously announced, OCA and OrthAlliance, Inc. 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. As of June 30, 2001,
OrthAlliance was affiliated with 226 orthodontists and pediatric dentists
practicing in 397 centers throughout the United States. The transaction, which
is subject to approval by OrthAlliance stockholders and other conditions, is
currently anticipated to close in early November 2001 and to be accounted for as
a purchase.
Mr. Palmisano said, "Our proposed merger with OrthAlliance presents an
unprecedented strategic opportunity for us. We look forward to welcoming these
highly regarded and exceptionally talented professionals to our organization.
Rest assured, we intend to devote substantial resources to integrating
OrthAlliance's practices efficiently 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."
During the third quarter of 2001, the Company affiliated with ten new
orthodontic professionals, and opened ten new centers. Of the ten new centers
opened during the third quarter of 2001, nine were newly developed centers and
one was an affiliation with an existing practice.
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In closing, Mr. Palmisano said, "Our continued strong results are a
product of focused, intelligent growth, which has long been our operating
philosophy. While patient case starts increased 20.5% over the third quarter of
2000, the dollar amount of those new patient contracts increased by more than
25%. 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, October 25,
2001 at 10:00 a.m. (EDT) to announce its financial results for the third 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: 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 growth, shareholder
value, operating strategy, demand for orthodontic treatment, the proposed merger
with OrthAlliance, the accounting treatment and completion of the proposed
merger, and relationships with OrthAlliance affiliated professionals and
integration of those professionals. 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.
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In connection with the proposed merger with OrthAlliance, OCA filed a
registration statement on Form S-4 with the Securities and Exchange Commission
("SEC"). Investors are urged to read the proxy statement/prospectus that is a
part of the registration statement, because it contains important information
about the merger, OCA and OrthAlliance. The registration statement and the proxy
statement/prospectus are 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., 3850 North Causeway Blvd, Suite 970,
Metairie, LA 70002, 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.
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ORTHODONTIC CENTERS OF AMERICA, INC.
UNAUDITED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PERCENTAGE AND PER SHARE DATA)
Three Months Ended
September 30,
---------------------------
Percent
2001 2000 Change
--------- --------- --------
Fee revenue $ 86,848 $ 69,725 24.5%
Operating income $ 25,454 $ 19,752 28.9%
Net income $ 15,178 $ 11,578 31.1%
Net income per share $ 0.30 $ 0.23 30.4%
Weighted average shares outstanding 50,123 49,967
ORTHODONTIC CENTERS OF AMERICA, INC.
UNAUDITED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PERCENTAGE AND PER SHARE DATA)
Nine Months Ended
September 30,
------------------------------
Percent
2001 2000 Change
---------- ---------- ---------
Fee revenue $ 246,552 $ 194,849 26.5%
Operating income $ 73,803 $ 56,470 30.7%
Net income $ 43,826 $ 33,389(1) 31.3%
Net income per share $ 0.87 $ 0.67(1) 29.9%
Weighted average shares outstanding 50,133 49,482
(1) Excludes the cumulative effect of a change in accounting principle related
to revenue recognition and SAB 101.
ORTHODONTIC CENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2001 2000 2001 2000
---- ---- ---- ----
Fee revenue $ 86,840 $ 69,725 $ 246,552 $ 194,849
--------- --------- --------- ---------
Direct expenses:
Employee costs 25,359 20,623 71,011 57,240
Orthodontic supplies 7,025 5,736 19,718 15,517
Rent 7,709 6,276 21,597 17,471
Marketing and advertising 7,282 6,030 19,980 16,201
--------- --------- --------- ---------
Total direct expenses 47,375 38,665 132,306 106,429
General and administrative expenses 9,521 7,462 26,939 20,894
Depreciation and amortization 4,490 3,846 13,504 11,056
--------- --------- --------- ---------
Operating income 25,454 19,752 73,803 56,470
Interest income (expense) (1,072) (1,153) (3,399) (2,919)
--------- --------- --------- ---------
Income before income taxes 24,382 18,599 70,404 53,551
Provision for income taxes 9,204 7,021 26,578 20,162
--------- --------- --------- ---------
Net income before cumulative effect of change
in accounting principle (SAB 101) 15,178 11,578 43,826 33,389
Cumulative effect of change in accounting
principle, net of income tax benefit -- -- -- (50,576)
--------- --------- --------- ---------
Net income (loss) $ 15,178 $ 11,578 $ 43,826 $ (17,187)
========= ========= ========= =========
Net income per share - before cumulative effect
of a change in accounting principle $ 0.30 $ 0.23 $ 0.87 $ 0.67
Cumulative effect of change in accounting
principle, net of income tax benefit, per share -- -- -- $ (1.02)
--------- --------- --------- ---------
Net income (loss) per share $ 0.30 $ 0.23 $ 0.87 $ (0.35)
========= ========= ========= =========
Weighted average shares outstanding 50,123 49,967 50,133 49,482
In connection with the proposed merger, OCA has filed a registration statement
on Form S-4 with the Securities and Exchange Commission ("SEC"). Investors are
urged to read the proxy statement/prospectus that is a part of the registration
statement, because it contains important information about the merger, OCA and
OrthAlliance. The registration statement and the proxy statement/prospectus is
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.,
3850 N. Causeway Boulevard, Suite 970, Metairie, Louisiana 70002, 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.
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