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Form 8-K BIRNER DENTAL MANAGEMENT For: Mar 30

March 30, 2016 8:32 AM EDT

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Date of report (Date of earliest event reported) March 30, 2016

 

Birner Dental Management Services, Inc.

 

(Exact Name of Registrant as Specified in Its Charter)

 

Colorado

 

(State or Other Jurisdiction of Incorporation)

 

0-23367 84-1307044
   
(Commission File Number) (IRS Employer Identification No.)

 

1777 S. Harrison Street, Suite 1400, Denver, CO 80210

 

(Address of Principal Executive Offices) (Zip Code)

 

(303) 691-0680

 

(Registrant's Telephone Number, Including Area Code)

 

 

(Former Name or Former Address, if Changed Since Last Report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

qWritten communications pursuant to Rule 425 under the Securities Act (17 DFR 230.425)

 

qSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

qPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

qPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02 Results of Operations and Financial Condition..

 

On March 30, 2016, Birner Dental Management Services, Inc. issued the attached press release reporting its financial results for the quarter and year ended December 31, 2015. The press release is attached as Exhibit 99.1.

 

Item 9.01 Financial Statements and Exhibits

 

Exhibit No.   Description
     
99.1   Press Release of Birner Dental Management Services, Inc. dated March 30, 2016.

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

 

 

  BIRNER DENTAL MANAGEMENT SERVICES, INC.
  a Colorado corporation
   
     
Date:  March 30, 2016 By: /s/ Dennis N. Genty
  Name: Dennis N. Genty
  Title: Chief Financial Officer, Secretary, and Treasurer
    (Principal Financial and Accounting Officer)

 

 

 

EXHIBIT INDEX

  

 

Exhibit No. Description
   
99.1    Press Release of Birner Dental Management Services, Inc. dated March 30, 2016.

 

 

Exhibit 99.1

Birner Dental Management Services, Inc. Announces Results For Fourth Quarter And Year Ended 2015

DENVER, March 30, 2016 /PRNewswire/ -- Birner Dental Management Services, Inc. (NASDAQ Capital Market: BDMS), business services provider of PERFECT TEETH® dental practices, announced results for the quarter and year ended December 31, 2015. For the year ended December 31, 2015 compared to 2014, revenue decreased $1.3 million, or 2.0%, to $63.8 million. The Company's earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, severance compensation expense, office consolidation expense and change in fair value of contingent liabilities ("Adjusted EBITDA") decreased $293,000, or 7.3%, to $3.7 million for the year ended December 31, 2015 compared to 2014. Net loss for the year ended December 31, 2015 decreased $219,000 to $(705,000) compared to $(924,000) for the year ended December 31, 2014. Loss per share decreased to $(0.38) for the year ended December 31, 2015 compared to $(0.50) for the year ended December 31, 2014.

For the quarter ended December 31, 2015 compared to the same period in 2014, revenue decreased $293,000, or 1.9%, to $15.0 million. The Company's Adjusted EBITDA decreased $99,000, or 14.1%, to $600,000 for the quarter ended December 31, 2015 compared to the same period in 2014. Net loss for the quarter ended December 31, 2015 decreased $136,000 to $(375,000) compared to $(511,000) for the same period of 2014. Net loss per share decreased to $(0.20) for the quarter ended December 31, 2015 compared to $(0.27) for the quarter ended December 31, 2014.

Significantly contributing to the decrease in Adjusted EBITDA during both 2015 periods was negative Adjusted EBITDA from the Company's two most recently opened de novo offices. The Company's de novo offices typically take a period of time after opening before they generate positive Adjusted EDITDA. These two offices had negative Adjusted EBITDA of $413,000 and $140,000 for the year and quarter ended December 31, 2015 respectively. The Company opened a de novo office in Commerce City, Colorado in January 2016, but as previously announced, the Company does not intend to open any additional de novo offices for the balance of the year. Instead, the Company will focus on gaining profitability in its most recently opened offices and its existing facilities, filling excess capacity in its offices, and paying down bank debt.

On March 29, 2016, the Company entered into a new credit agreement with Guaranty Bank and Trust Company (the "Credit Facility). The Credit Facility consists of a $2.0 million revolving line of credit and a $10.0 million reducing revolving loan. The revolving line of credit matures on March 31, 2018. The reducing revolving loan matures on March 31, 2021 and requires mandatory reductions of $500,000 per calendar quarter. Interest varies between LIBOR plus 2.90% and LIBOR plus 2.25% depending on the Company's funded debt-to- EBITDA ratio. There is no commitment fee or origination fee on the Credit Facility. Through the remainder of 2016, dividends are prohibited under the Credit Facility; however, beginning in 2017 dividends are permitted so long as the pro forma fixed charge coverage ratio is greater than 1.20 to 1.00 after giving effect to the dividend.

Fred Birner, Chief Executive Officer of the Company, stated "We have made significant investments in de novo offices and other aspects of our business over the past three years, with $11.9 million spent on eight de novo offices, remodels or relocations and other enhancements, including conversion to digital radiography. We are now focused on realizing on these investments. We believe our new Credit Facility fits well with our overall near-term strategic objectives of returning to profitability while filling the current physical capacity in our offices, reducing capital expenditures and paying down bank debt that has extended maturities. Our Company has a strong history of providing significant returns to our shareholders. In fact, since we started paying a dividend in 2004, the Company has returned in excess of $38.0 million to its shareholders through dividends and common stock repurchases – on total equity invested of approximately $18.0 million. Our objective is to strengthen our operating performance such that we can resume paying dividends and otherwise enhance shareholder value."

Since the beginning of the fourth quarter of 2012, the Company has opened eight de novo offices: in Tucson, Arizona and in Erie, Colorado in the fourth quarter of 2012; in Loveland, Colorado in July 2013; in Monument, Colorado in December 2013; in Fort Collins, Colorado in May 2014; in Scottsdale, Arizona in October 2014; in Albuquerque, New Mexico in September 2015; and in Commerce City, Colorado in January 2016.

During 2015, the Company paid approximately $1.6 million in dividends to its shareholders, had capital expenditures of approximately $2.2 million and increased total bank debt outstanding by approximately $374,000.

Birner Dental Management Services, Inc. acquires, develops, and manages geographically dense dental practice networks in select markets in Colorado, New Mexico, and Arizona. The Company currently manages 69 dental offices, of which 36 were acquired and 33 were de novo developments. As of December 31, 2015, the Company had 116 dentists. The Company operates its dental offices under the PERFECT TEETH® name.

The Company previously announced it would conduct a conference call to review results for the year and quarter ended December 31, 2015 on Wednesday, March 30, 2016 at 9:00 a.m. MT. In addition to current operating results, the teleconference may include discussion of management's expectations of future financial and operating results. To participate in this conference call, dial in to 1-866-249-5224 and refer to Confirmation Code 9848271 approximately five minutes prior to the scheduled time. If you are unable to join the conference call on March 30, 2016, the rebroadcast number is 1-888-203-1112 with the pass code of 9848271. This rebroadcast will be available through April 13, 2016.

Non-GAAP Disclosures

This press release includes a non-GAAP financial measure with respect to Adjusted EBITDA. Please see below for more information regarding Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss).

Forward-Looking Statements

Certain of the matters discussed herein may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These include statements regarding the Company's prospects and performance in future periods, including the payment of dividends. These statements involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These and other risks and uncertainties are set forth in the reports filed by the Company with the Securities and Exchange Commission. The Company disclaims any obligation to update these forward-looking statements.

For Further Information Contact:
Birner Dental Management Services, Inc.
Dennis Genty
Chief Financial Officer
(303) 691-0680


BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS














Quarters Ended


Years Ended




December 31,


December 31,




2014


2015


2014


2015












REVENUE:










Dental practice revenue

$   14,056,483


$   13,892,620


$   59,924,198


$   59,134,356



Capitation revenue

1,285,352


1,156,308


5,201,402


4,709,481




15,341,835


15,048,928


65,125,600


63,843,837












DIRECT EXPENSES:










Clinical salaries and benefits

9,169,973


9,054,636


38,641,198


38,209,674



Dental supplies

747,839


703,245


2,977,962


2,965,182



Laboratory fees

804,938


771,576


3,298,723


3,288,426



Occupancy

1,470,449


1,521,718


5,900,176


5,948,384



Advertising and marketing

286,892


154,737


965,202


862,397



Depreciation and amortization

1,131,839


1,027,783


4,229,253


4,283,291



General and administrative

1,312,073


1,461,894


5,441,126


5,387,988




14,924,003


14,695,589


61,453,640


60,945,342













Contribution from dental offices

417,832


353,339


3,671,960


2,898,495












CORPORATE EXPENSES:










General and administrative 

982,591

(1)

840,622

(1)

4,659,610

(2)

3,677,547

(2)


Depreciation and amortization

55,592


67,064


223,019


241,588












OPERATING INCOME (LOSS)

(620,351)


(554,347)


(1,210,669)


(1,020,640)












OTHER INCOME (EXPENSE):










Change in fair value of contingent liabilities

-


100,000


-


100,000



Interest (expense), net

(29,679)


(30,362)


(115,750)


(105,062)












INCOME (LOSS) BEFORE INCOME TAXES

(650,030)


(484,709)


(1,326,419)


(1,025,702)



Income tax expense (benefit)

(138,994)


(110,044)


(402,785)


(321,032)












NET INCOME (LOSS)

$       (511,036)


$     (374,665)


$     (923,634)


$     (704,670)












Net income (loss) per share of Common Stock - Basic

$             (0.27)


$            (0.20)


$            (0.50)


$            (0.38)












Net income (loss) per share of Common Stock - Diluted

$             (0.27)


$            (0.20)


$            (0.50)


$            (0.38)












Cash dividends per share of Common Stock

$              0.22


$              0.22


$              0.88


$              0.88












Weighted average number of shares of Common Stock and dilutive securities: 


















Basic

1,859,893


1,861,106


1,858,650


1,860,246













Diluted

1,859,893


1,861,106


1,858,650


1,860,246












(1)

Corporate expense - general and administrative includes $132,080 of stock-based compensation expense pursuant to ASC Topic 718 for the quarter ended December 31, 2014 and $59,755 of stock-based compensation expense pursuant to ASC Topic 718 for the quarter ended December 31, 2015.



(2)

Corporate expense - general and administrative includes $364,880 of stock-based compensation expense pursuant to ASC Topic 718 and $338,861 of severance compensation expense for the year ended December 31, 2014 and $229,093 of stock-based compensation expense pursuant to ASC Topic 718 for the year ended December 31, 2015.

BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS








December 31, 

ASSETS

2014


2015






CURRENT ASSETS:





Cash

$        310,229


$        258,801


Accounts receivable, net of allowance for doubtful

accounts of approximately $420,000 and $390,000, respectively





3,185,136


3,043,655


Notes receivable

34,195


34,195


Deferred tax asset

614,944


275,907


Income tax receivable

-


73,878


Prepaid expenses and other assets

520,187


575,770







Total current assets

4,664,691


4,262,206






PROPERTY AND EQUIPMENT, net

11,258,025


9,808,014






OTHER NONCURRENT ASSETS:





Intangible assets, net

8,410,535


7,565,648


Deferred charges and other assets

160,853


155,741


Notes receivable

82,929


55,002







Total assets

$   24,577,033


$   21,846,611






LIABILITIES AND SHAREHOLDERS' EQUITY









CURRENT LIABILITIES:





Accounts payable 

$     2,912,162


$     2,920,998


Accrued expenses

1,557,811


1,547,915


Accrued payroll and related expenses

2,511,953


2,330,398


Income taxes payable

6,638


-


Current maturities of long-term debt

-


1,500,000







Total current liabilities

6,988,564


8,299,311






LONG-TERM LIABILITIES:





Deferred tax liability, net

2,951,321


2,242,800


Long-term debt

9,833,453


8,707,578


Other long-term obligations

1,046,633


949,554







Total liabilities

20,819,971


20,199,243






COMMITMENTS AND CONTINGENCIES






SHAREHOLDERS' EQUITY:





Preferred Stock, no par value, 10,000,000 shares

authorized; none outstanding





-


-


Common Stock, no par value, 20,000,000 shares

authorized; 1,859,689 and 1,861,106 shares issued and

outstanding, respectively









1,214,056


1,446,182


Retained earnings

2,543,006


201,186







Total shareholders' equity

3,757,062


1,647,368







Total liabilities and shareholders' equity

$   24,577,033


$   21,846,611

Reconciliation of Adjusted EBITDA

Adjusted EBITDA is not a U.S. generally accepted accounting principle ("GAAP") measure of performance or liquidity. However, the Company believes that it may be useful to an investor in evaluating the Company's ability to meet future debt service, capital expenditures and working capital requirements, and the Company uses Adjusted EBITDA for this purpose. Investors should not consider Adjusted EBITDA in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. In addition, because Adjusted EBITDA is not calculated in accordance with GAAP, it may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of Adjusted EBITDA to net income (loss) can be made by adding depreciation and amortization expense - Offices, depreciation and amortization expense – Corporate, stock-based compensation expense, interest expense, net, income tax expense (benefit), severance compensation expense and office consolidation expense to net income (loss) and subtracting change in fair value of contingent liabilities as in the table below.





Quarters Ended


Years Ended



December 31,


December 31,



2014


2015


2014


2015

RECONCILIATION OF ADJUSTED EBITDA:









Net income (loss)

($511,036)


($374,665)


($923,634)


($704,670)


Add back:










Depreciation and amortization - Offices

1,131,839


1,027,783


4,229,253


4,283,291



Depreciation and amortization - Corporate

55,592


67,064


223,019


241,588



Stock-based compensation expense

132,080


59,755


364,880


229,093



Interest expense, net

29,678


30,362


115,750


105,062



Income tax expense (benefit)

(138,994)


(110,045)


(402,785)


(321,032)



Severance compensation expense

-


-


338,861


-



Office consolidation expense

-


-


80,560


-


Less:










Change in fair value of contingent liabilities

-


(100,000)


-


(100,000)










Adjusted EBITDA

$699,159


$600,254


$4,025,904


$3,733,332





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