American Dental Partners Reports Third Quarter and Nine Months 2009 Financial Results

WAKEFIELD, MA -- (Marketwire) -- 10/26/09 -- American Dental Partners, Inc. (NASDAQ: ADPI) announced financial results today for the quarter and nine months ended September 30, 2009.

Comparing actual and adjusted results for the third quarter of 2009 with actual and pro forma results for the third quarter of 2008 (see "Debt Retirement Accounting" and "Litigation Settlement Accounting" for an explanation and "Supplemental Operating Data" tables for a presentation of the adjusted and pro forma results):

-- Net revenue was $67,986,000 for the third quarter 2009 as compared to $71,548,000 and pro forma $68,215,000 for the third quarter 2008. -- Earnings from operations were $5,673,000 for the third quarter 2009 as compared to $7,958,000 and pro forma $5,046,000 for the third quarter 2008. -- Net earnings were $1,399,000 as compared to $3,310,000. Adjusted net earnings were $2,030,000 as compared to pro forma $1,534,000. -- Diluted net earnings per share were $0.10 as compared to $0.25. Adjusted diluted net earnings per share were $0.14 as compared to pro forma $0.12. -- Diluted cash net earnings per share were $0.19 as compared to $0.35. Adjusted diluted cash net earnings per share were $0.23 as compared to pro forma $0.22.

Comparing actual and adjusted results for the nine months of 2009 with actual and pro forma results for the nine months of 2008 (see "Debt Retirement Accounting" and "Litigation Settlement Accounting" for an explanation and "Supplemental Operating Data" tables for a presentation of the adjusted and pro forma results):

-- Net revenue was $207,749,000 for the nine months 2009 as compared to $225,998,000 and pro forma $208,301,000 for the nine months 2008. -- Earnings from operations were $19,075,000 for the nine months 2009 as compared to $54,920,000 and pro forma $16,097,000 for the nine months 2008. -- Net earnings were $5,831,000 as compared to $28,808,000. Adjusted net earnings were $6,460,000 as compared to pro forma $5,125,000. -- Diluted net earnings per share were $0.43 as compared to $2.19. Adjusted diluted net earnings per share were $0.47 as compared to pro forma $0.39. -- Diluted cash net earnings per share were $0.73 as compared to $2.50. Adjusted diluted cash net earnings per share were $0.77 as compared to pro forma $0.70.

Operating Results

Patient revenue of the Company's affiliated dental group practices was $103,224,000 for the quarter, which includes $96,459,000 from dental group practices which are affiliated with the Company by means of service agreements and $6,765,000 from Arizona's Tooth Doctor for Kids. Same market patient revenue growth was (.7%) for the quarter and (1.3%) excluding in-market affiliations.

Cash flow from operations was $11,452,000 for the quarter and capital expenditures were $1,252,000. The Company completed one de novo facility during the quarter.

The Company recognized $403,000 in stock-based compensation expense, $243,000 net of tax or $0.02 per diluted share, during the quarter as compared to $506,000, $309,000 net of tax or $0.02 per diluted share, for the prior year's same quarter.

Debt Retirement Accounting

As previously announced the Company completed a public offering of common stock and refinanced its indebtedness in August 2009. Net proceeds from the sale of common stock of approximately $29,227,000 were used to retire existing indebtedness, and the Company entered into a new $130,000,000 senior secured credit facility, which includes a $50,000,000 revolving credit facility and an $80,000,000 term loan facility. As a result, included in interest expense, net, for the quarter was $1,043,000 of expenses associated with the retirement of the Company's prior credit facilities, $629,000 net of tax or $0.04 per diluted share. In addition to its 2009 actual results, the Company has provided an adjusted financial presentation to exclude expense items related to the debt retirement.

Litigation Settlement Accounting

The Company's 2008 financial results reflect income and expenses, including non-cash items, required by generally accepted accounting principles associated with the February 29, 2008 settlement of litigation among PDG, P.A. ("PDG"), PDHC, Ltd., one of the Company's subsidiaries, and the Company. In addition to its 2008 actual results, the Company has provided a pro forma financial presentation to exclude the income and expense items related to the litigation settlement.

Cash net earnings, cash earnings from operations, adjusted 2009 financial results and the pro forma 2008 financial results 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 measure and all additional reconciliations required by Regulation G.

For further discussion of these events and a comprehensive review of the third quarter ended September 30, 2009, the Company will host its previously announced conference call on Tuesday, October 27, 2009 at 9:00 a.m. EDT, 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 approximately two hours after the call through 6:00 p.m. EDT, Tuesday, November 3, 2009.

American Dental Partners is one of the nation's leading business partners to dental group practices. The Company is affiliated with 26 dental group practices which have 241 dental facilities with approximately 2,123 operatories located in 18 states.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of the historical information contained in this news release, the matters described herein contain "forward-looking" statements that involve risk and uncertainties that may individually or collectively affect the matters herein described, including but not limited to the Company's risks associated with overall or regional economic conditions, dependence upon affiliated dental practices, contracts its affiliated practices have with third-party payors, government regulation of the dental industry, impact of health care reform, dependence upon service agreements and the impact of any terminations or potential terminations of such contracts, business interruptions, the outcome of pending litigation and the Company's acquisition and affiliation strategy, which are detailed from time to time in the "Risk Factors" section of the Company's filings with the Securities and Exchange Commission, including the annual report on Form 10-K for the year ended December 31, 2008 and quarterly reports on Form 10-Q.

AMERICAN DENTAL PARTNERS, INC.

FINANCIAL HIGHLIGHTS (in thousands, except per share amounts) (unaudited)

Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2009 2008 2009 2008 ---------- --------- ---------- ---------

Net revenue $ 67,986 $ 71,548 $ 207,749 $ 225,998 Operating expenses: Salaries and benefits 28,745 30,491 87,494 97,347 Lab fees and dental supplies 9,527 9,967 30,141 33,091 Office occupancy expenses 8,647 8,291 25,688 25,784 Other operating expenses 6,871 6,726 19,872 20,206 General corporate expenses 3,546 3,055 10,238 10,150 Depreciation expense 2,688 2,658 8,103 8,116 Amortization of intangible assets 2,289 2,409 7,138 7,205 Litigation settlement (gain) expense - (7) - (30,821) ---------- --------- ---------- --------- Total operating expenses 62,313 63,590 188,674 171,078 ---------- --------- ---------- --------- Earnings from operations 5,673 7,958 19,075 54,920 Interest expense, net 2,981 2,390 8,538 7,264 ---------- --------- ---------- --------- Earnings before income taxes 2,692 5,568 10,537 47,656 Income taxes 1,070 2,118 4,182 18,417 ---------- --------- ---------- --------- Consolidated net earnings 1,622 3,450 6,355 29,239 Noncontrolling interest 223 140 524 431 ---------- --------- ---------- --------- Net earnings $ 1,399 $ 3,310 $ 5,831 $ 28,808 ========== ========= ========== =========

Net earnings per common share: Basic $ 0.10 $ 0.26 $ 0.44 $ 2.24 ========== ========= ========== ========= Diluted $ 0.10 $ 0.25 $ 0.43 $ 2.19 ========== ========= ========== ========= Weighted average common shares outstanding: Basic 14,186 12,900 13,361 12,867 ========== ========= ========== ========= Diluted 14,521 13,230 13,666 13,167 ========== ========= ========== =========

AMERICAN DENTAL PARTNERS, INC.

FINANCIAL HIGHLIGHTS (in thousands) (unaudited)

September 30, December 31, 2009 2008 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 7,080 $ 6,626 Accounts receivable, net 20,399 25,875 Other current assets 10,012 12,183 ------------- ------------- Total current assets 37,491 44,684 ------------- -------------

Property and equipment, net 50,866 54,542 ------------- ------------- Other non-current assets: Goodwill 76,122 76,122 Intangible assets, net 168,745 175,527 Other assets 8,049 2,378 ------------- ------------- Total non-current assets 252,916 254,027 ------------- ------------- Total assets $ 341,273 $ 353,253 ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 19,030 $ 21,383 Other current liabilities 11,727 9,517 Current maturities of debt 8,183 196 ------------- ------------- Total current liabilities 38,940 31,096 ------------- ------------- Non-current liabilities: Long-term debt 72,194 131,441 Other liabilities 45,474 43,634 ------------- ------------- Total non-current liabilities 117,668 175,075 ------------- ------------- Total liabilities 156,608 206,171 ------------- -------------

Noncontrolling Interest 1,288 584

Commitments and contingencies Stockholders' equity 183,377 146,498 ------------- ------------- Total liabilities and stockholders' equity $ 341,273 $ 353,253 ============= =============

AMERICAN DENTAL PARTNERS, INC. SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts and selected statistical data) (unaudited)

Adjusted consolidated statement of income for the three months ended September 30, 2009

Non-GAAP GAAP Debt Adjusted 2009 Adjustments(a) 2009 -------- ----------- -------- Net revenue $ 67,986 - $ 67,986 Operating Expenses: Salaries and benefits 28,745 - 28,745 Lab fees and dental supplies 9,527 - 9,527 Office occupancy expenses 8,647 - 8,647 Other operating expenses 6,871 - 6,871 General corporate expenses 3,546 - 3,546 Depreciation 2,688 - 2,688 Amortization 2,289 - 2,289 Litigation settlement (income) - - - -------- ----------- -------- Total operating expenses 62,313 - 62,313 -------- ----------- -------- Earnings from operations 5,673 - 5,673 Interest expense, net 2,981 1,043 1,938 -------- ----------- -------- Earnings before income taxes 2,692 (1,043) 3,735 Income taxes 1,070 1,483 -------- -------- Consolidated net earnings 1,622 2,252 Noncontrolling interest 223 223 -------- -------- Net earnings 1,399 2,029 Amortization of service agreements, net of tax 1,373 1,373 -------- -------- Cash net earnings (b) $ 2,772 $ 3,402 ======== ========

Diluted net earnings per common share $ 0.10 $ 0.14 ======== ======== Diluted cash net earnings per common share (b) $ 0.19 $ 0.23 ======== ========

(a) Includes expenses associated with the retirement of the Company's $75,000,000 revolving credit facility and $100,000,000 term loan.

(b) Cash net earnings and diluted cast net earnings per share are not measures of financial performance under GAAP. Cash net earnings excludes amortization expense related to service agreement 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 a significant portion of their intangible assets pursuant to Statement of Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets. The Company believes that cash net earnings and diluted cash net earnings per share are important financial measures for understanding its relative financial performance.

AMERICAN DENTAL PARTNERS, INC. SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts and selected statistical data) (unaudited)

Pro forma consolidated statement of income for the three months ended September 30, 2008

Net revenue $ 71,548 - $ 3,333 $ 68,215 Operating expenses Salaries and benefits 30,491 - 246 30,245 Lab fees and dental supplies 9,967 - - 9,967 Office occupancy expenses 8,291 - 60 8,231 Other operating expenses 6,726 - 108 6,618 General corporate expenses 3,055 - - 3,055 Litigation expenses (7) (7)(d) - - -------- ----------- ----------- --------- EBITDA 13,025 7 2,919 10,099 Depreciation 2,658 - 14 2,644 Amortization 2,409 - - 2,409 -------- ----------- ----------- --------- Earnings from operations 7,958 7 2,905 5,046 Interest expense, net 2,390 - - 2,390 -------- ----------- ----------- --------- Earnings before income taxes 5,568 7 2,905 2,656 Income taxes 2,118 982 -------- --------- Consolidated earnings 3,450 1,674 Noncontrolling interest 140 140 -------- --------- Net earnings 3,310 1,534 Amortization of service agreements, net of tax 1,364 1,364 -------- --------- Cash net earnings (e) $ 4,674 $ 2,898 ======== =========

Diluted net earnings per common share $ 0.25 $ 0.12 ======== ========= Diluted cash net earnings per common share (e) $ 0.35 $ 0.22 ======== =========

(c) The Company agreed to provide interim management services to PDG through September 30, 2008. Includes interim management fee revenue and expenses associated with providing such services. (d) Includes miscellaneous income and expenses, including professional fees associated with the PDG litigation settlement. (e) Cash net earnings and diluted cash net earnings per share are not measures of financial performance under GAAP. Cash net earnings excludes amortization expense related to service agreement 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 a significant portion of their intangible assets pursuant to Statement of Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets. The Company believes that cash net earnings and diluted cash net earnings per share are important financial measures for understanding its relative financial performance.

AMERICAN DENTAL PARTNERS, INC. SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts and selected statistical data) (unaudited)

Adjusted consolidated statement of income for the nine months ended September 30, 2009

Non-GAAP GAAP Debt Adjusted 2009 Adjustments(f) 2009 --------- ----------- --------- Net revenue $ 207,749 - $ 207,749 Operating expenses: Salaries and benefits 87,494 - 87,494 Lab fees and dental supplies 30,141 - 30,141 Office occupancy expenses 25,688 - 25,688 Other operating expenses 19,872 - 19,872 General corporate expenses 10,238 - 10,238 Depreciation 8,103 - 8,103 Amortization 7,138 - 7,138 --------- ----------- --------- Total operating expenses 188,674 - 188,674 --------- ----------- --------- Earnings from operations 19,075 - 19,075 Interest expense, net 8,538 1,043 7,495 --------- ----------- --------- Earnings before income taxes 10,537 (1,043) 11,580 Income taxes 4,182 4,595 --------- --------- Consolidated net earnings 6,355 6,985 Noncontrolling interest 524 524 --------- --------- Net earnings 5,831 6,461 Amortization of service agreements, net of tax 4,116 4,116 --------- --------- Cash net earnings (g) $ 9,947 $ 10,577 ========= =========

Diluted net earnings per common share $ 0.43 $ 0.47 ========= ========= Diluted cash net earnings per common share (g) $ 0.73 $ 0.77 ========= =========

(f) Includes expenses associated with the retirement of the Company's $75,000,000 revolving credit facility and $100,000,000 term loan. (g) Cash net earnings and diluted cast net earnings per share are not measures of financial performance under GAAP. Cash net earnings excludes amortization expense related to service agreement 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 a significant portion of their intangible assets pursuant to Statement of Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets. The Company believes that cash net earnings and diluted cash net earnings per share are important financial measures for understanding its relative financial performance.

AMERICAN DENTAL PARTNERS, INC. SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts and selected statistical data) (unaudited)

Pro forma consolidated statement of income for the nine months ended September 30, 2008

Pro Forma Adjustments ------------------------- Settlement Management Pro Forma Actual Assets (h) Services(i) 2008 --------- --------- ---------- ----------

Net revenue $ 225,998 $ 7,697 $ 10,000 $ 208,301 Operating expenses Salaries and benefits 97,347 4,717 1,453 91,177 Lab fees and dental supplies 33,091 1,436 - 31,655 Office occupancy expenses 25,784 1,092 180 24,512 Other operating expenses 20,206 135 323 19,748 General corporate expenses 10,150 - - 10,150 Litigation expenses (30,821) (30,821)(j) - - --------- --------- ---------- ---------- EBITDA 70,241 31,138 8,044 31,059 Depreciation 8,116 317 42 7,757 Amortization 7,205 - - 7,205 --------- --------- ---------- ---------- Earnings from operations 54,920 30,821 8,002 16,097 Interest expense, net 7,264 - - 7,264 --------- --------- ---------- ---------- Earnings before income taxes 47,656 30,821 8,002 8,833 Income taxes 18,417 3,277 --------- ---------- Consolidated earnings 29,239 5,556 Noncontrolling interest 431 431 --------- ---------- Net earnings 28,808 5,125 Amortization of service agreements, net of tax 4,079 4,079 --------- ---------- Cash net earnings (k) $ 32,887 $ 9,204 ========= ==========

Diluted net earnings per common share $ 2.19 $ 0.39 ========= ========== Diluted cash net earnings per common share (k) $ 2.50 $ 0.70 ========= ==========

(h) Includes expense reimbursement associated with (i) 25 dental facilities transferred on February 29, 2008 to PDG as part of litigation settlement and (ii) the PDG doctors who practiced temporarily in the six dental facilities retained by the Company.

(i) The Company agreed to provide interim management services to PDG through September 30, 2008. Includes interim management fee revenue, expenses associated with providing such services, and salaries and benefits expense of management staff, including severance, who were terminated as a result of realigning the Company's Minnesota-based management team.

(j) Includes gain on disposal of assets of $30,763,000 and insurance proceeds of $1,002,000 for professional fees associated with the PDG litigation which were partially reimbursable pursuant to insurance coverage offset by professional fees and other expenses associated with the litigation of $951,000.

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

AMERICAN DENTAL PARTNERS, INC. SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts and selected statistical data) (unaudited)

Change in consolidated statement of income for the three and nine months ended September 30, 2009 and 2008

Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ------------------------- Adjusted Pro Forma Adjusted Pro Forma 2009 2008 Change 2009 2008 Change -------- -------- ----- --------- --------- -----

Net revenue $ 67,986 $ 68,215 0% $ 207,749 $ 208,301 0% Operating expenses Salaries and benefits 28,745 30,245 -5% 87,494 91,177 -4% Lab fees and dental supplies 9,527 9,967 -4% 30,141 31,655 -5% Office occupancy expenses 8,647 8,231 5% 25,688 24,512 5% Other operating expenses 6,871 6,618 4% 19,872 19,748 1% General corporate expenses 3,546 3,055 16% 10,238 10,150 1% -------- -------- ----- --------- --------- ----- EBITDA 10,650 10,099 5% 34,316 31,059 10% Depreciation 2,688 2,644 2% 8,103 7,757 4% Amortization 2,289 2,409 -5% 7,138 7,205 -1% -------- -------- ----- --------- --------- ----- Earnings from operations 5,673 5,046 12% 19,075 16,097 19% Interest expense, net 1,938 2,390 -19% 7,495 7,264 3% -------- -------- ----- --------- --------- ----- Earnings before income taxes 3,735 2,656 41% 11,580 8,833 31% Income taxes 1,483 982 51% 4,595 3,277 40% -------- -------- ----- --------- --------- ----- Consolidated net earnings 2,252 1,674 35% 6,985 5,556 26% Noncontrolling interest 223 140 59% 524 431 22% -------- -------- ----- --------- --------- ----- Net earnings 2,029 1,534 32% 6,461 5,125 26% Amortization of service agreements, net of tax 1,373 1,364 1% 4,116 4,079 1% -------- -------- ----- --------- --------- ----- Cash net earnings $ 3,402 $ 2,898 17% $ 10,577 $ 9,204 15% ======== ======== ===== ========= ========= =====

Diluted net earnings per common share $ 0.14 $ 0.12 16% $ 0.47 $ 0.39 21% ======== ======== ===== ========= ========= ===== Diluted cash net earnings per common share $ 0.23 $ 0.22 6% $ 0.77 $ 0.70 11% ======== ======== ===== ========= ========= =====

AMERICAN DENTAL PARTNERS, INC. SUPPLEMENTAL OPERATING DATA (in thousands, except per share amounts and selected statistical data) (unaudited)

Selected statistical data

September 30, September 30, 2009 2008 ------------- -------------

Number of dental facilities 241 244 Number of operatories (l) 2,123 2,115 Number of affiliated dentists (m) 542 551

(l) An operatory is an area where dental care is performed and generally contains a dental chair, a hand piece delivery system and other essential equipment. (m) Includes full-time equivalent general or specialty dentists employed by or contracted with the affiliated practices, including Arizona's Tooth Doctor for Kids.

Patient revenue and same market patient revenue growth (n)

Three Months Ended Nine Months Ended September 30, September 30, ----------------- % ----------------- % 2009 2008 Change 2009 2008 Change -------- -------- ----- -------- -------- ----- Patient revenue of affiliated practices: Platform dental group practices affiliated with us in both periods of comparison $102,865 $103,560 -0.7% $315,050 $315,904 -0.3% Platform dental group practices that affiliated with us during periods of comparison 359 - 100.0% 1,978 981 101.6% -------- -------- ----- -------- -------- ----- Total patient revenue 103,224 103,560 -0.3% 317,028 316,885 0.0% Patient revenue of Arizona's Tooth Doctor for Kids 6,765 6,427 5.3% 19,163 18,592 3.1% -------- -------- ----- -------- -------- ----- Patient revenue of platform dental group practices affiliated with us by means of service agreements 96,459 97,133 -0.7% 297,865 298,293 -0.1% Amounts due to us under service agreements 60,652 60,979 -0.5% 186,621 186,805 -0.1% -------- -------- ----- -------- -------- ----- Amounts retained by platform dental group practices affiliated with us by means of service agreements $ 35,807 $ 36,154 -1.0% $111,244 $111,488 -0.2% ======== ======== ===== ======== ======== =====

(n) Includes patient revenue of affiliated dental group practices which are not consolidated with the Company's financial results and patient revenue of Arizona's Tooth Doctor for Kids which is consolidated with the Company's financial results.

Contacts:
Gregory A. Serrao
Chairman, President and
Chief Executive Officer
781-224-0880

Breht T. Feigh
Executive Vice President,
Chief Financial Officer and Treasurer
781-224-0880

American Dental Partners, Inc.
401 Edgewater Place, Suite 430
Wakefield, MA 01880
Phone: 781/224-0880
Fax: 781/224-4216