UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A*
(Amendment No. 1)
Quarterly Report Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
For the Quarter ended June 30, 2002 Commission File Number: 000-23092
NATIONAL DENTEX CORPORATION
Massachusetts 04-2762050
------------- ----------
(State of Incorporation) (I.R.S. Identification No.)
526 Boston Post Road, Wayland, MA 01778
- --------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(508) - 358 - 4422
------------------
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X___ No _____
*Amendment to Part I, Item 1 and Item 2, as set forth herein.
EXPLANATORY NOTE TO FORM 10-Q/A
We are filing this Amendment to our Quarterly Report on Form 10-Q for the
Quarter ended June 30, 2002. We are amending Part I, Item 1 (Financial
Statements) and Part I, Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) to correct an inadvertent
clerical error. The amount classified in "Cash Flows from Investing Activities"
in the Consolidated Statements of Cash Flows under "Payment of deferred purchase
price" has been increased to reflect activity for the full six months of the
reporting period. In the Form 10-Q we originally filed, this amount reflected
the activity for the second quarter only. This reclassification increases the
amount reported under "Net cash provided by operating activities" within
"Changes in operating assets and liabilities, net of effects of acquisitions".
Finally, the amounts referenced under "Liquidity and Capital Resources" within
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" have been revised to correspond with the corrected amounts in the
Consolidated Statements of Cash Flow. These reclassifications affect only the
specified line items within our cash flow statements, and there is no change to
our net cash position, income statement or balance sheet.
As required by the rules of the Securities and Exchange Commission, the
full text of the affected items is included herein.
PART I. Financial Information
Item 1. Financial Statements
NATIONAL DENTEX CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
2001 2002
---------------------- ---------------------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents................................................ $ 6,378,026 $ 6,264,338
Accounts receivable:
Trade, less allowance of $307,000 in 2001 and
$194,000 in 2002...................................................... 9,582,266 10,758,054
Other.................................................................. 491,120 498,967
Raw material inventories................................................. 5,220,462 5,486,896
Prepaid expenses......................................................... 1,792,607 1,872,155
Deferred tax asset....................................................... 369,195 349,924
----------------- -------------
Total current assets.................................................... 23,833,676 25,230,334
----------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings....................................................... 4,585,731 4,585,731
Leasehold and building improvements...................................... 5,191,126 5,621,319
Laboratory equipment..................................................... 8,880,778 9,553,763
Furniture and fixtures................................................... 3,012,380 3,209,526
------------------ --------------------
21,670,015 22,970,339
------------------ --------------------
Less- Accumulated depreciation and amortization.......................... 11,346,581 11,908,511
------------------ --------------------
Net property, plant and equipment........................................ 10,323,434 11,061,828
------------------ --------------------
OTHER ASSETS, net:
Goodwill................................................................. 21,645,288 23,119,854
Non-competition agreements............................................... 3,568,480 3,176,162
Deferred tax asset....................................................... 362,701 398,956
Other assets............................................................. 2,349,685 2,932,368
----------------- -------------------
Total other assets..................................................... 27,926,154 29,627,340
----------------- -------------------
Total assets........................................................... $ 62,083,264 $ 65,919,502
================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable......................................................... $ 1,889,234 $ 2,288,989
Accrued liabilities:
Payroll and employee benefits.......................................... 3,540,899 3,608,498
Current portion of deferred purchase price............................. 2,778,160 2,501,040
Other accrued expenses................................................. 565,042 838,791
----------------- --------------------
Total current liabilities.............................................. 8,773,335 9,237,318
----------------- --------------------
LONG TERM LIABILITIES:
Payroll and employee benefits............................................ 1,224,231 1,397,322
Deferred purchase price.................................................. 3,058,609 2,189,611
----------------- --------------------
Total long-term liabilities............................................ 4,282,840 3,586,933
------------------ --------------------
COMMITMENTS AND CONTINGENCIES
- -----------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized - 500,000 shares
None issued and outstanding............................................ - -
Common stock, $.01 par value
Authorized - 8,000,000 shares
Issued - 3,625,663 shares at December 31, 2001, and 3,662,973 shares at
June 30, 2002
Outstanding - 3,446,863 at December 31, 2001, and 3,484,173
shares at June 30, 2002.................................................... 36,257 36,630
Paid-in capital.......................................................... 15,982,448 16,609,798
Retained earnings........................................................ 36,549,253 39,989,692
Treasury Stock at cost - 178,800 shares at December 31, 2001
and June 30, 2002....................................................... (3,540,869) (3,540,869)
------------------ ----- --------------------
Total stockholders' equity............................................. 49,027,089 53,095,251
------------------ ----- --------------------
Total liabilities and stockholders' equity............................. $ 62,083,264 $ 65,919,502
================== ----- ====================
The accompanying notes are an integral part of these consolidated financial statements.
3
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended Six months ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2001 2002 2001 2002
Net sales.................................... $ 21,861,049 $ 25,197,082 $ 42,466,650 $ 48,611,261
Cost of goods sold........................... 12,559,818 14,461,645 24,694,471 28,092,199
----------------- --------------- ---------------- ----------------
Gross profit.............................. 9,301,231 10,735,437 17,772,179 20,519,062
Selling, general and administrative expenses. 6,376,841 7,537,210 12,443,278 14,687,530
----------------- --------------- ---------------- ----------------
Operating income.......................... 2,924,390 3,198,227 5,328,901 5,831,532
Other expense................................ 31,800 62,802 59,880 92,593
Interest income.............................. 59,868 9,681 172,831 43,310
Income before provision for income taxes.. 2,952,458 3,145,106 5,441,852 5,782,249
Provision for income taxes................... 1,169,370 1,273,767 2,173,741 2,341,810
----------------- --------------- ---------------- ----------------
Net income ............................... $ 1,783,088 $ 1,871,339 $ 3,268,111 $ 3,440,439
================== ================== ================== ==================
Net income per share - Basic $ .51 $ .54 $ .94 $ .99
================== ================== ================== ==================
Net income per share - Diluted $ .50 $ .52 $ .92 $ .95
================== ================== ================== ==================
Weighted average shares outstanding - Basic 3,485,005 3,479,104 3,491,582 3,464,850
================== ================== ================== ==================
Weighted average shares outstanding - Diluted 3,570,859 3,615,262 3,569,819 3,602,877
================== ================== ================== ==================
The accompanying notes are an integral part of these consolidated financial statements.
4
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(Unaudited)
Common Stock
Number of $.01 Par Paid-in Retained Treasury
Shares Value Capital Earnings Stock Total
------------ ------------ -------------- ------------- ------------ --------------
BALANCE, December 31, 2001.............. 3,625,663 $36,257 $15,982,448 $ 36,549,253 $(3,540,869) $49,027,089
Issuance of 22,144 shares of common
stock under the stock option
plans................................. 22,144 221 323,000 -- -- 323,221
Issuance of 12,706 shares of common
stock under the employee
stock purchase program................ 12,706 127 240,292 -- -- 240,419
Issuance of 2,460 shares of common
stock as directors' fees.............. 2,460 25 64,058 -- -- 64,083
Net income.............................. -- -- -- 3,440,439 -- 3,440,439
BALANCE, June 30, 2002.................. 3,662,973 $36,630 $16,609,798 $39,989,692 $(3,540,869) $53,095,251
============ =========== ============= ============= ============ =============
The accompanying notes are an integral part of these consolidated financial
statements.
5
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six months ended June 30,
--------------------- -------- --------------------
2001 2002
---------------- ---------------
Cash flows from operating activities:
Net income.............................................................. $3,268,111 $3,440,439
Adjustments to reconcile net income to net cash provided by operating
activities, net of effects of acquisitions:
Depreciation and amortization....................................... 1,406,093 1,109,172
(Benefit) provision for deferred income taxes....................... 5,325 (16,984)
Issuance of common stock as directors' fees......................... 64,040 64,083
Changes in operating assets and liabilities, net of effects
of acquisitions:
Increase in accounts receivable.................................... (931,932) (903,996)
Increase in inventories............................................ (90,787) (179,216)
Increase in prepaid expenses ...................................... (1,010,788) (66,324)
Increase in other assets........................................... (457,805) (628,972)
(Decrease) increase in accounts payable and accrued
liabilities..................................................... (85,513) 789,997
--------------------- --------------------
Net cash provided by operating activities.......................... 2,166,744 3,608,199
--------------------- --------------------
Cash flows from investing activities:
Payment for acquisitions, net of cash acquired....................... (2,820,809) (1,681,585)
Payment of deferred purchase price................................... (1,429,459) (1,573,085)
Additions to property, plant and equipment, net...................... (614,337) (1,030,856)
--------------------- --------------------
Net cash used in investing activities.............................. (4,864,605) (4,285,526)
--------------------- --------------------
Cash flows from financing activities:
Proceeds from issuance of common stock............................... 519,435 563,639
Repurchases of common stock.......................................... (2,178,000) -
--------------------- --------------------
Net cash (used in) provided by financing activities................ (1,658,565) 563,639
--------------------- --------------------
Net decrease in cash and cash equivalents.............................. (4,356,426) (113,688)
Cash and cash equivalents at beginning of period....................... 12,300,606 6,378,026
--------------------- --------------------
Cash and cash equivalents at end of period............................. $7,944,180 $6,264,338
--------------------- --------------------
Supplemental disclosures of cash flow information:
Interest paid........................................................ $5,056 $3,666
--------------------- --------------------
Income taxes paid.................................................... $1,657,003 $2,070,900
--------------------- --------------------
The accompanying notes are an integral part of these consolidated financial statements.
6
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(1) Interim Financial Statements
- --------------------------------
The accompanying unaudited financial statements include all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for fair presentation of the results of operations for the
periods presented. Interim results are not necessarily indicative of the results
to be expected for a full year.
Certain information and footnote disclosures normally included in financial
statements, prepared in accordance with accounting principles generally accepted
in the United States of America, have been condensed or omitted as allowed by
Form 10-Q. The accompanying unaudited consolidated financial statements should
be read in conjunction with the Company's consolidated financial statements for
the year ended December 31, 2001 as filed with the Securities and Exchange
Commission on Form 10-K.
(2) Earnings Per Share
- ----------------------
Basic earnings per share was computed by dividing net income by the
weighted-average common shares outstanding. Diluted earnings per share was
computed by giving effect to all dilutive potential common shares outstanding.
These shares include shares issuable upon the exercise of options as determined
by the application of the treasury stock method. The calculation of basic
earnings per share and diluted earnings per share is as follows:
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2001 June 30, 2002 June 30, 2001 June 30, 2002
------------- ------------- ------------- -------------
Net income applicable to common stock $1,783,088 $1,871,339 $3,268,111 $3,440,439
========== ========== ========== ==========
Computation of Basic Earnings per Share:
Weighted average common shares outstanding 3,485,005 3,479,104 3,491,582 3,464,850
Basic earnings per share $.51 $.54 $.94 $.99
Computation of Diluted Earnings per Share:
Weighted average common shares outstanding 3,485,005 3,479,104 3,491,582 3,464,850
Shares issuable from assumed exercise of options
(as determined by the application of the treasury
stock method) 85,854 136,158 78,237 138,027
---------- -------- -------- ---------
Weighted average common shares outstanding as
adjusted 3,570,859 3,615,262 3,569,819 3,602,877
Diluted earnings per share $.50 $.52 $.92 $.95
7
Options to purchase 10,300 shares of common stock at an exercise price of
$21.575 per share were outstanding during the second quarter of 2001 but were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
shares. These options, which expire in March 2006, were still outstanding at
June 30, 2001.
At June 30, 2002, all outstanding options were determined to be issuable.
(3) Recent Accounting Pronouncements
- ------------------------------------
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. SFAS
No. 142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination, whether acquired individually or
with a group of other assets, and the accounting and reporting for goodwill and
other intangibles subsequent to their acquisition. These standards require that
the purchase method of accounting be used for business combinations and
eliminate the use of the pooling-of-interest method. Additionally, they require
that goodwill no longer be amortized. The Company was required to adopt SFAS No.
141 and SFAS No. 142 on a prospective basis as of January 1, 2002. In accordance
with the provisions of SFAS No. 141 and SFAS No. 142, the Company no longer
amortizes goodwill. In the prior year period ended June 30, 2001, the Company
incurred goodwill amortization expense of approximately $438,000.
The impact of goodwill amortization on earnings and earnings per share is as
follows:
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2001 June 30, 2002 June 30, 2001 June 30, 2002
------------- ------------- ------------- -------------
Net income applicable to common stock $1,783,088 $1,871,339 $3,268,111 $3,440,439
Add back: Goodwill amortization 204,808 -- 437,698 --
------------- -----------
Adjusted net income $1,987,896 $1,871,339 $3,705,809 $3,440,439
========== ========== ========== ==========
Computation of Basic Earnings per Share:
- ----------------------------------------
Reported basic earnings per share $.51 $.54 $.94 $.99
Add back: Goodwill amortization .06 -- .13 --
--- ---
Adjusted basic earnings per share $.57 $.54 $1.07 $.99
==== ==== ===== ====
Computation of Diluted Earnings per Share:
- ------------------------------------------
Reported earnings per share $.50 $.52 $.92 $.95
Add back: Goodwill amortization .06 -- .12 --
--- ---
Adjusted diluted earnings per share $.56 $.52 $1.04 $.95
==== ==== ===== ====
8
SFAS No. 142 further requires that goodwill be subject to impairment tests at
least annually. A two-step process is required to complete such testing with the
first step being to identify any potential impairment. The Company was required
to perform this first step effective for the quarter ended June 30, 2002. The
second step of the goodwill impairment test measures the amount of the
impairment loss, if any. This measurement must be as of the beginning of the
year of adoption and must be completed by the end of the Company's fiscal year.
The Company has completed both steps of the impairment testing and it was
determined that no impairment exists.
(4) Legal Proceedings
- ---------------------
The Company is involved from time to time in litigation incidental to its
business. Management believes that the outcome of current litigation will not
have a material adverse effect upon the operations or financial condition of the
Company and will not disrupt the normal operations of the Company.
(5) Acquisitions
- ----------------
On April 1, 2002 the Company acquired all of the outstanding capital stock of
Fox Dental Company of Tampa, Florida. Fox Dental had sales in excess of
$2,500,000 in its last fiscal year ended May 31, 2001. The acquisition has been
accounted for as a purchase in accordance with SFAS No. 141. The results of
operations and cash flows of Fox Dental Company have been included in the
consolidated financial statements of the Company from the date of acquisition.
(6) Subsequent Events
- ---------------------
Effective August 1, 2002, the Company acquired certain assets of E&S Dental
Laboratory of San Diego, California. E&S had sales in excess of $1,500,000 in
its last fiscal year ended December 31, 2001.
9
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
================================================================================
Liquidity and Capital Resources
- -------------------------------
The Company's working capital increased from $15,060,000 at December 31,
2001 to $15,993,000 at June 30, 2002. Cash and cash equivalents decreased
$114,000 from $6,378,000 at December 31, 2001 to $6,264,000 at June 30, 2002.
Operating activities provided $3,608,000 in cash flow for the six month period
ending June 30, 2002.
Cash outflows related to dental laboratory acquisitions totaled $3,255,000
for the six months ended June 30, 2002 compared to $4,250,000 for the same
period in 2001.
The Company maintains a financing agreement (the "Agreement") with Citizens
Bank of Massachusetts (the "Bank"). The Agreement, as amended and extended
effective December 31, 2001, includes a revolving line of credit of $4,000,000
and a term facility of $8,000,000. The interest rate on both lines of credit is
the prime rate minus 0.5% or the London Interbank Offered Rate (LIBOR) rate plus
1.5%, at the Company's option. Both lines of credit mature on June 30, 2004.
A commitment fee of one eighth of 1% is payable on the unused amount of
both lines of credit. At June 30, 2002, the full principal amount was available
to the Company under both lines of credit. The Agreement requires compliance
with certain covenants, including the maintenance of specified net worth and
other financial ratios. As of June 30, 2002, the Company was in compliance with
these covenants.
Management believes that cash flow from operations and the Company's
existing financing will be sufficient to meet contemplated operating and capital
requirements, including costs associated with anticipated acquisitions, if any,
in the foreseeable future.
This Form 10-Q contains 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 statements are not a
guarantee of future performance, and involve certain risks, uncertainties and
assumptions that are difficult to predict. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that could affect capital expenditures, the Company's
requirements for capital, the costs associated with anticipated acquisitions and
the Company's results of operations include general economic conditions, the
availability of laboratories for purchase by the Company, the ability of the
Company to acquire and successfully operate additional dental laboratories,
governmental regulation of health care, trends in the dental industry towards
managed care, other factors affecting patient visits to the Company's clients,
increases in labor and materials costs and other risks indicated from time to
time in filings with the Securities and Exchange Commission, including the
Company's annual report on Form 10-K and quarterly reports on Form 10-Q.
10
Critical Accounting Policies
- ----------------------------
Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 2 of the notes to consolidated financial statements,
in the Company's December 31, 2001 annual report on Form 10-K, includes a
summary of our significant accounting policies and methods used in the
preparation of our consolidated financial statements. While the preparation of
our consolidated financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
reported amounts of expenses during the reporting period, we do not believe the
Company's financial statements are significantly affected by complex accounting
policies and methods.
Results of Operations
- ---------------------
The following table sets forth for the periods indicated the percentage of
net sales represented by certain items in the Company's Consolidated Financial
Statements:
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2001 2002 2001 2002
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 57.5 57.4 58.2 57.8
---- ---- ---- ----
Gross profit 42.5 42.6 41.8 42.2
Selling, general and 29.2 29.9 29.3 30.2
administrative expenses ---- ---- ---- ----
Operating income 13.3 12.7 12.5 12.0
Other income (0.1) (0.2) (0.1) (0.2)
Interest income 0.3 - 0.4 0.1
--- --- -- --- ---
Income before provision for income 13.5 12.5 12.8 11.9
taxes
Provision for income taxes 5.4 5.1 5.1 4.8
--- --- --- ---
Net income 8.2% 7.4% 7.7% 7.1%
---- ---- ---- ----
11
Six Months Ended June 30, 2002 Compared with Six Months Ended June 30, 2001
---------------------------------------------------------------------------
Net Sales
For the six month period ended June 30, 2002, net sales increased
$6,145,000 or 14.5% over the corresponding period of the prior year.
Approximately $6,300,000 of sales growth was attributable to business at dental
laboratories owned less than one year. Same laboratory sales decreased slightly
during the six month period ended June 30, 2002. However, there was one less
sales day than during the comparable period ended June 30, 2001. When adjusted
to a sales per day basis, same laboratory sales growth was .4%. Industry growth
has generally slowed in the current economy as many patients and dentists have
postponed optimal treatment plans in favor of less expensive alternatives.
Cost of Goods Sold
The Company's cost of goods sold increased by $3,398,000 or 13.8% for the
period ended June 30, 2002 over the same six month period ended June 30, 2001,
attributable primarily to increased unit sales. As a percentage of sales, cost
of goods sold decreased from 58.2% to 57.8%. As a percentage of net sales,
increases in labor and benefit costs were more than offset by decreases in
laboratory overhead expenses and material costs. The increase in labor and
benefit costs were primarily attributable to increases in the cost of providing
health insurance for the Company's employees. Material costs have decreased as
the cost of palladium, a component of dental alloys, has decreased and
stabilized after several years of steep increases. Additionally, during 2001 the
Company started to reduce its reliance on palladium through the substitution of
alternative materials.
Selling, General and Administrative Expenses
Operating expenses, which consist of selling, delivery, administrative
expense at both the laboratory and corporate level and amortization expense,
increased by $2,244,000 or 18.0% during the six months ended June 30, 2002 over
the corresponding period in 2001. Operating expenses increased as a percentage
of net sales from 29.3% to 30.2% during the six months ended June 30, 2002
compared with the corresponding period in 2001.
As a percentage of net sales, increases in selling and administrative
expenses were offset in part by decreases in delivery expenses and amortization
charges. Increases in selling and administrative expenses during the period were
primarily related to the continued development and implementation of the
Company's national marketing program, "The NDX Reliance Program." The Company
has continued to absorb the staffing, training and marketing expenses necessary
for the successful implementation of the program.
The decline in amortization expense was attributable to the impact of the
implementation of SFAS No. 141 and SFAS No. 142.
Operating Income
Due to the increase in net sales, partially offset by increases in
operating expenses as a percent of net sales, operating income increased
$503,000 or 9.4% for the six month period ended June 30, 2002 versus the
corresponding period for the prior year. While sales increased by 14.5% and cost
of goods sold declined from 58.2% to 57.8% of net sales, selling, general and
administrative expenses increased from 29.3% to 30.2% of net sales.
Interest Income
Interest income decreased by $130,000 or 75.0% in the six months ended June
30, 2002 over the corresponding period in 2001. The decrease was primarily due
to lower investment principal and lower interest rates.
12
Provision for Income Taxes
The provision for income taxes increased to $2,342,000 for the six month
period ended June 30, 2002 from $2,174,000 in the corresponding period in 2001.
This $168,000 increase was the result of increased income and a higher effective
tax rate. The 40.0% effective tax rate for the six month period ended June 30,
2001 increased to 40.5% for the current period.
Net Income
As a result of all the factors discussed above, net income increased
to $3,440,000 or $0.95 per share on a diluted basis for the six months ended
June 30, 2002 from $3,268,000 or $0.92 per share on a diluted basis for the
corresponding period in 2001.
Three Months Ended June 30, 2002 Compared with Three Months Ended June 30, 2001
- -------------------------------------------------------------------------------
Net Sales
For the quarter ended June 30, 2002, net sales increased $3,336,000 or
15.3% over the corresponding period of the prior year. Approximately $3,200,000
of sales growth was attributable to business at dental laboratories owned less
than one year. Same laboratory sales growth was slightly positive at 0.6%
during the quarter ended June 30, 2002.
Cost of Goods Sold
The Company's cost of goods sold increased by $1,902,000 or 15.1% for the
quarter ended June 30, 2002 over the comparable quarter ended June 30, 2001,
attributable primarily to increased unit sales. As a percentage of sales, for
reasons comparable to the six-month period discussed above, cost of goods sold
decreased from 57.5% to 57.4%.
Selling, General and Administrative Expenses
Operating expenses increased by $1,160,000 or 18.2% during the quarter
ended June 30, 2002 over the corresponding period in 2001. Operating expenses
increased as a percentage of net sales from 29.2% to 29.9% during the quarter
ended June 30, 2002 compared with the corresponding quarter in 2001. The reasons
for the increase are comparable to the six-month period discussed above.
Operating Income
Due to the increase in net sales, partially offset by increases in
operating expenses as a percent of net sales, operating income increased
$274,000 or 9.4% for the quarter ended June 30, 2002 versus the corresponding
period for the prior year. While sales increased by 15.3% and cost of goods sold
declined from 57.5% to 57.4% of net sales, selling, general and administrative
expenses increased from 29.2% to 29.9% of net sales.
Interest Income
Interest income decreased by $50,000 or 83.8% in the quarter ended June 30,
2002 over the corresponding period in 2001. The decrease was primarily due to
lower investment principal and lower interest rates.
Provision for Income Taxes
The provision for income taxes increased to $3,145,000 for the quarter
ended June 30, 2002 from $2,952,000 in the corresponding quarter in 2001. This
$193,000 increase was the result of increased income and a higher effective tax
rate. The 39.6% effective tax rate for the quarter ended June 30, 2001 increased
to 40.5% for the current period.
Net Income
As a result of all the factors discussed above, net income increased to
$1,871,000 or $0.52 per share on a diluted basis for the quarter ended June 30,
2002 from $1,783,000 or $0.50 per share on a diluted basis for the corresponding
quarter in 2001.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
NATIONAL DENTEX CORPORATION
Registrant
August 23, 2002 By:/s/ David L. Brown
------------------
David L. Brown
President, CEO, and Director
(Principal Executive Officer)
August 23, 2002 By:/s/ Richard F. Becker, Jr.
--------------------------
Richard F. Becker, Jr.
Chief Financial Officer, Vice President of Finance and
Treasurer
(Principal Financial and Accounting Officer)
14