American Dental Partners Reports Fourth Quarter and Year End 2004 Fina

American Dental Partners Reports Fourth Quarter and Year End 2004 Financial Results and Announces Amended Credit Facility

    Business Editors/Health Editors

    WAKEFIELD, Mass.--(BUSINESS WIRE)--Feb. 23, 2005--American Dental Partners, Inc. (NASDAQ:ADPI) announced financial results today for the quarter and the year ended December 31, 2004 and details of its amended credit facility.
    Comparing the fourth quarter of 2004 with the fourth quarter of 2003:

--	Net revenue was $44,806,000, as compared to $42,004,000, an increase of 7%.
--	Earnings from operations were $3,929,000 as compared to $3,846,000, an increase of 2%.
--	Net earnings were $2,143,000 as compared to $1,810,000, an increase of 18%.
--	Diluted net earnings per share were $0.26 as compared to $0.24, an increase of 8%.
--	Diluted cash net earnings per share were $0.34 as compared to $0.32, an increase of 6%.

    Comparing the twelve months of 2004 with the same period in 2003:

    -- Net revenue was $178,554,000 as compared to $163,707,000, an
    increase of 9%.

    -- Earnings from operations were $15,702,000 as compared to
    $12,988,000, an increase of 21%.

    -- Net earnings were $8,519,000 as compared to $6,181,000, an
    increase of 38%.

    -- Diluted net earnings per share were $1.06 as compared to
    $0.82, an increase of 29%.

    -- Diluted cash net earnings per share were $1.39 as compared to
    $1.15, an increase of 21%.

    Patient revenue of the Company's affiliated dental group practices, which is not consolidated with the Company's financial results and is a non-GAAP measure, was $67,874,000 for the fourth quarter as compared to $62,869,000 for the prior year's same quarter, an increase of 8%. For the quarter, same market revenue growth for the Company's affiliated dental group practices as measured by patient revenue was also 8% as the Company had no platform affiliations in either period of comparison. For the year, patient revenue of the Company's affiliated dental group practices was $272,369,000 as compared to $245,609,000 for the prior year, an increase of 11%. Same market revenue growth for the Company's affiliated dental group practices as measured by patient revenue was 10% for the year.
    The Company reported cash flow from operations of $4,748,000 for the quarter and $25,405,000 for the year. Capital expenditures were $4,949,000 for the quarter and $9,657,000 for the year. Amounts paid for affiliations and acquisitions were $656,000 for the quarter and $3,488,000 for the year. For the year, the Company reduced indebtedness by $15,185,000 and the Company's debt to total capitalization stood at 25% at December 31, 2004 as compared to 37% at December 31, 2003.
    The Company relocated one dental facility and expanded two dental facilities during the fourth quarter, and during the year the Company opened one de novo facility, relocated four dental facilities and expanded fifteen dental facilities.
    On February 22, 2005 the Company successfully renegotiated its revolving credit facility. The amended credit facility was arranged by KeyBank and other participating banks include Banknorth and Citizens Bank. The Company chose to renegotiate its credit facility as a result of the Company's improved financial position and to take advantage of the currently favorable credit markets. The renegotiated facility matures in February 2008, has a $70 million capacity, and includes an additional lower leverage tier allowing for a reduced borrowing rate spread over LIBOR.
    Mr. Gregory A. Serrao, Chairman, President and CEO commented, "The year 2004 was a year of accomplishments on many fronts. Our affiliated dental group practices' same market growth rate of 8% in the quarter was the fifth consecutive quarter in which we met or exceeded our 8% to 10% target. We generated record cash flow from operations which allowed us to improve our debt to total capitalization to 25% which is less than our long term target of 40%. We were able to continue to reinvest in our business completing twenty facility investment projects and five in-market affiliations to expand our affiliated dental groups. Finally, we were pleased to be able to grow our net income by 38% for the year in the face of more than $1 million of additional costs for compliance with Section 404 of the Sarbanes-Oxley Act of 2002."
    Cash net earnings per share, patient revenue, total revenue and same-market revenue growth 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 measures and all additional reconciliations required by Regulation G.
    For further discussion of these events and a comprehensive review of the fourth quarter ended December 31, 2004, the Company will host its previously announced conference call on Thursday, February 24, 2005 at 10:00 a.m. EST, 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 and www.streetevents.com approximately two hours after the call through 5:00 p.m. EST Thursday, March 3, 2005.

    American Dental Partners is one of the nation's leading business partners to dental groups. The Company is affiliated with 20 dental groups which have 182 dental facilities with approximately 1,636 operatories located in 18 states.

    Note: Some of the information in this press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "project,'' and similar expressions, among others, identify forward-looking statements. Forward-looking statements speak only as of the date the statement was made. Such forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied. Certain factors that might cause such a difference include, among others, the Company's risks associated with overall or regional economic conditions, contracts its affiliated dental group practices have with third party payors and the impact of any terminations or potential terminations of such contracts, the cost of and access to capital, the fluctuations in labor markets, the Company's acquisition and affiliation strategy, management of rapid growth, dependence upon affiliated dental group practices, dependence upon service agreements and government regulation of the dental industry. Additional risks, uncertainties and other factors are set forth in the "Risk Factors" section of the Company's Registration Statement on Form S-4 (File No. 333-56941).

AMERICAN DENTAL PARTNERS, INC. FINANCIAL HIGHLIGHTS (in thousands, except per share amounts)

Three Months Ended Twelve Months Ended December 31, December 31, --------------------- ------------------- 2004 2003 2004 2003 ---------- ---------- --------- ---------

Net revenue $44,806 $42,004 $178,554 $163,707 Operating expenses: Salaries and benefits 19,583 18,593 77,489 72,557 Lab fees and dental supplies 7,081 6,904 28,566 27,047 Office occupancy expenses 5,324 5,005 20,956 19,999 Other operating expenses 4,041 3,622 16,643 14,638 General corporate expenses 2,198 1,598 8,856 6,871 Depreciation expense 1,534 1,375 5,934 5,378 Amortization of intangible assets 1,116 1,061 4,408 4,229 ---------- ---------- --------- --------- Total operating expenses 40,877 38,158 162,852 150,719 ---------- ---------- --------- --------- Earnings from operations 3,929 3,846 15,702 12,988 Interest expense, net 349 703 1,592 2,592 ---------- ---------- --------- --------- Earnings before income taxes 3,580 3,143 14,110 10,396 Income taxes 1,437 1,333 5,591 4,215 ---------- ---------- --------- --------- Net earnings $2,143 $1,810 $8,519 $6,181 ========== ========== ========= =========

Net earnings per common share: Basic $0.28 $0.25 $1.12 $0.84 ========== ========== ========= ========= Diluted $0.26 $0.24 $1.06 $0.82 ========== ========== ========= ========= Weighted average common shares outstanding: Basic 7,760 7,352 7,581 7,319 ========== ========== ========= ========= Diluted 8,207 7,660 8,068 7,572 ========== ========== ========= =========

AMERICAN DENTAL PARTNERS, INC. FINANCIAL HIGHLIGHTS (in thousands)

December 31, December 31, 2004 2003 ------------- -------------- ASSETS Current assets: Cash and cash equivalents $1,378 $1,895 Receivables due from affiliated dental group practices 13,539 16,611 Other current assets 6,657 5,376 ------------- -------------- Total current assets 21,574 23,882

Property and equipment, net 39,252 35,216 ------------- -------------- Other non-current assets: Goodwill 5,095 5,095 Intangible assets, net 87,425 83,843 Other assets 801 1,036 ------------- -------------- Total non-current assets 93,321 89,974 ------------- -------------- Total assets $154,147 $149,072 ============= ==============

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $23,353 $18,559 Current maturities of debt 527 1,407 ------------- -------------- Total current liabilities 23,880 19,966 ------------- -------------- Non-current liabilities: Long-term debt and other long-term liabilities 28,220 42,522 Other liabilities 14,840 12,692 ------------- -------------- Total non-current liabilities 43,060 55,214 ------------- -------------- Total liabilities 66,940 75,180 Commitments and contingencies Stockholders' equity 87,207 73,892 ------------- -------------- Total liabilities and stockholders' equity $154,147 $149,072 ============= ==============

AMERICAN DENTAL PARTNERS, INC. Supplemental Operating Data (in thousands)

Comparable GAAP Presentation and Reconciliation of Non-GAAP Financial Measures

Three Months Ended December 31, ---------------------- 2004 2003 % Change ----------- ---------- ---------- Reconciliation of total revenue to net revenue and patient revenue same market growth (1) Patient revenue: Dental group practices affiliated with the Company in both periods of comparison (2) $67,874 $62,869 8% Other revenue 1,227 1,423 -14% ----------- ---------- ---------- Total revenue 69,101 64,292 7% Amounts retained by affiliated dental group practices 24,295 22,288 9% ----------- ---------- ---------- Net revenue $44,806 $42,004 7% =========== ========== ==========

Three Months Ended Three Months Ended December 31, 2004 December 31, 2003 -------------------------------------------------- % of % of % of Net Total % of Net Total Revenue Revenue Revenue Revenue Amount (1) (1) Amount (1) (1) -------- ------------------------ ----------------

Patient revenue $67,874 98.2% $62,869 97.8% Other revenue 1,227 1.8 1,423 2.2 -------- ------- -------- -------- Total revenue 69,101 100.0 64,292 100.0 Amounts retained by affiliated dental group practices 24,295 35.2 22,288 34.7 -------- ------- -------- -------- Net revenue 44,806 100.0% 64.8 42,004 100.0% 65.3 Salaries and benefits 19,583 43.7 28.3 18,593 44.3 28.9 Lab fees and dental supplies 7,081 15.8 10.2 6,904 16.4 10.7 Office occupancy expenses 5,324 11.9 7.7 5,005 11.9 7.8 Other operating expenses 4,041 9.0 5.8 3,622 8.6 5.6 General corporate expenses 2,198 4.9 3.2 1,598 3.8 2.5 Depreciation expense 1,534 3.4 2.2 1,375 3.3 2.1 Amortization of intangible assets 1,116 2.5 1.6 1,061 2.5 1.7 -------- ------- ------- -------- ------- -------- Total operating expenses 40,877 91.2 59.2 38,158 90.8 59.4 -------- ------- ------- -------- ------- -------- Earnings from operations 3,929 8.8 5.7 3,846 9.2 6.0 Interest expense, net 349 0.8 0.5 703 1.7 1.1 -------- ------- ------- -------- ------- -------- Earnings before income taxes 3,580 8.0 5.2 3,143 7.5 4.9 Income taxes 1,437 3.2 2.1 1,333 3.2 2.1 -------- ------- ------- -------- ------- -------- Net earnings $2,143 4.8% 3.1% $1,810 4.3% 2.8% ======== ======= ======= ======== ======= ========

AMERICAN DENTAL PARTNERS, INC. Supplemental Operating Data (in thousands)

Comparable GAAP Presentation and Reconciliation of Non-GAAP Financial Measures

Twelve Months Ended December 31, ------------------- 2004 2003 % Change --------- --------- --------- Reconciliation of total revenue to net revenue and patient revenue same market growth (1) Patient revenue: Dental group practices affiliated with the Company in both periods of comparison(2) $261,294 $238,018 10% Dental group practices that completed affiliations with the Company during periods of comparison 11,075 7,591 46% --------- --------- --------- Total 272,369 245,609 11% Other revenue 5,094 6,449 -21% --------- --------- --------- Total revenue 277,463 252,058 10% Amounts retained by affiliated dental group practices 98,909 88,351 12% --------- --------- --------- Net revenue $178,554 $163,707 9% ========= ========= =========

Twelve Months Ended Twelve Months Ended December 31, 2004 December 31, 2003 ---------------------------------------------------- % of % of % of Net Total % of Net Total Revenue Revenue Revenue Revenue Amount (1) (1) Amount (1) (1) --------- ------------------------- ----------------

Patient revenue $272,369 98.2% $245,609 97.4% Other revenue 5,094 1.8 6,449 2.6 --------- ------ --------- -------- Total revenue 277,463 100.0 252,058 100.0 Amounts retained by affiliated dental group practices 98,909 35.6 88,351 35.1 --------- ------ --------- -------- Net revenue 178,554 100.0% 64.4 163,707 100.0% 64.9 Salaries and benefits 77,489 43.4 27.9 72,557 44.3 28.8 Lab fees and dental supplies 28,566 16.0 10.3 27,047 16.5 10.7 Office occupancy expenses 20,956 11.7 7.6 19,999 12.2 7.9 Other operating expenses 16,643 9.3 6.0 14,638 8.9 5.8 General corporate expenses 8,856 5.0 3.2 6,871 4.2 2.7 Depreciation expense 5,934 3.3 2.1 5,378 3.3 2.1 Amortization of intangible assets 4,408 2.5 1.6 4,229 2.6 1.7 --------- ------ ------ --------- ------ -------- Total operating expenses 162,852 91.2 58.7 150,719 92.1 59.8 --------- ------ ------ --------- ------ -------- Earnings from operations 15,702 8.8 5.7 12,988 7.9 5.2 Interest expense, net 1,592 0.9 0.6 2,592 1.6 1.0 --------- ------ ------ --------- ------ -------- Earnings before income taxes 14,110 7.9 5.1 10,396 6.4 4.1 Income taxes 5,591 3.1 2.0 4,215 2.6 1.7 --------- ------ ------ --------- ------ -------- Net earnings $8,519 4.8% 3.1% $6,181 3.8% 2.5% ========= ====== ====== ========= ====== ========

AMERICAN DENTAL PARTNERS, INC. Supplemental Operating Data (in thousands, except per share amounts)

Comparable GAAP Presentation and Reconciliation of Non-GAAP Financial Measures

Three Months Ended Twelve Months Ended December 31, December 31, -------------------- ------------------- 2004 2003 2004 2003 --------- ---------- --------- --------- Reconciliation of net earnings, as reported, to cash net earnings: (3) Net earnings (as reported) $2,143 $1,810 $8,519 $6,181 Add: Amortization of intangible assets, net of tax 668 611 2,662 2,516 --------- ---------- --------- --------- Cash net earnings $2,811 $2,421 $11,181 $8,697 ========= ========== ========= =========

Weighted average common shares outstanding 8,207 7,660 8,068 7,572 ========= ========== ========= ========= Diluted net earnings per share $0.26 $0.24 $1.06 $0.82 ========= ========== ========= ========= Diluted cash net earnings per share (3) $0.34 $0.32 $1.39 $1.15 ========= ========== ========= =========

(1) Patient and total revenue are not measures of financial performance under GAAP. Total revenue includes patient revenue of the Company's affiliated dental group practices, for which their results of operations are not consolidated into the Company's financial statements. The Company uses these and other non-GAAP financial measures to analyze operating trends and to help manage its business. The Company believes that total revenue and patient revenue and the expense ratios derived from total revenue are useful measures to analyze operating trends.

(2) Patient revenue is comprised of revenue of the Company's affiliated dental group practices, which are not consolidated into the Company's financial statements. The Company believes that patient revenue growth is important for understanding its financial performance.

(3) Diluted cash net earnings and diluted cash net earnings per share are not measures of financial performance under GAAP. Diluted 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 significant portion of their intangible assets pursuant to Statement of Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets. The Company believes that diluted cash net earnings and diluted cash net earnings per share are important financial measures for understanding its relative financial performance.

--30--GK/bo*

CONTACT: American Dental Partners, Inc. Chairman, President and Chief Executive Officer Gregory A. Serrao, 781-224-0880 or Executive Vice President, Chief Financial Officer and Treasurer Breht T. Feigh, 781-224-0880

KEYWORD: MASSACHUSETTS INDUSTRY KEYWORD: BANKING MEDICAL EARNINGS CONFERENCE CALLS SOURCE: American Dental Partners, Inc.

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