-------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
For the Quarter ended March 31, 2003
Commission file number 000-23092
NATIONAL DENTEX CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2762050
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
526 Boston Post Road, Wayland, MA 01778
(Address of Principal Executive (Zip Code)
Offices)
(508) 358 - 4422
(Registrant's Telephone No., including Area Code)
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 _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes __X__ No _____
As of May 7, 2003, 3,682,192 shares of the registrant's Common Stock, par
value $.01 per share, were issued and 3,419,992 were outstanding.
- --------------------------------------------------------------------------------
NATIONAL DENTEX CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
TABLE OF CONTENTS
PART I. Financial Information Page
-------
Item 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 2002 and March 31, 2003
(Unaudited)................................................................................. 3
Consolidated Statements of Income for the three month period ended March 31, 2002
(Unaudited) and 2003 (Unaudited)............................................................ 4
Consolidated Statements of Stockholders' Equity for the three month period ended
March 31, 2003 (Unaudited).................................................................. 5
Consolidated Statements of Cash Flows for the three months ended March 31, 2002
(Unaudited) and 2003 (Unaudited)............................................................ 6
Notes to Consolidated Financial Statements................................................ 7-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................................ 9-11
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................... 11
Item 4. Controls and Procedures........................................................... 11
PART II. Other Information
--------
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures..................................................................................13
Certifications of Principal Executive Officer and Principal Financial Officer
regarding facts and circumstances relating to quarterly reports....................... 14-15
2
NATIONAL DENTEX CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
2002 2003
------------- ----------
ASSETS (Unaudited)
------
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 5,808,435 $ 4,133,762
Accounts receivable:
Trade, less allowance of $307,000 in 2002 and $334,000 in 2003 10,041,989 10,737,602
Other....................................................... 442,154 340,755
Inventories of raw materials.................................. 5,558,316 5,605,767
Prepaid expenses.............................................. 2,178,002 2,495,146
Deferred tax asset, current................................... 270,829 272,890
----------- -----------
Total current assets........................................ 24,299,725 23,585,922
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings............................................ 4,585,731 4,585,731
Leasehold and building improvements........................... 5,969,018 6,304,182
Laboratory equipment.......................................... 10,192,772 10,547,598
Furniture and fixtures........................................ 3,392,192 3,489,778
---------- -----------
24,139,713 24,927,289
Less-- Accumulated depreciation and amortization............ 12,613,976 12,998,009
----------- -----------
Net property, plant and equipment........................... 11,525,737 11,929,280
----------- -----------
OTHER ASSETS, net:
Goodwill...................................................... 24,123,203 24,338,615
Non-competition agreements.................................... 2,640,657 2,552,197
Deferred tax asset, non-current............................... 186,895 187,911
Other assets.................................................. 3,040,654 3,046,948
----------- -----------
Total other assets.......................................... 29,991,409 30,125,671
----------- -----------
Total assets............................................... $65,816,871 $65,640,873
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable.............................................. $ 1,961,915 $ 1,822,658
Accrued liabilities:
Payroll and employee benefits............................... 4,285,269 2,677,316
Current portion of deferred purchase price.................. 2,325,932 1,990,368
Other accrued expenses...................................... 227,922 898,622
----------- -----------
Total current liabilities................................... 8,801,038 7,388,964
----------- -----------
LONG-TERM LIABILITIES:
Payroll and employee benefits................................. 1,525,903 1,615,504
Deferred purchase price....................................... 1,543,959 1,357,083
----------- -----------
Total long-term liabilities................................. 3,069,862 2,972,587
----------- -----------
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 -- 3,665,209 shares at December 31, 2002 and
3,665,342 shares at March 31, 2003.
Outstanding -- 3,403,009 shares at December 31, 2002 and
3,403,142 shares at March 31, 2003.......................... 36,652 36,653
Paid-in capital............................................... 16,643,963 16,645,691
Retained earnings............................................. 42,430,900 43,762,522
Treasury stock at cost-- 262,200 shares at December 31, 2002 and
March 31, 2003.............................................. (5,165,544) (5,165,544)
----------- ------------
Total stockholders' equity.................................. 53,945,971 55,279,322
----------- -----------
Total liabilities and stockholders' equity.................. $65,816,871 $65,640,873
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
3
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31, March 31,
2002 2003
------------- -------------
Net sales............................. $23,414,179 $23,965,295
Cost of goods sold.................... 13,630,554 14,409,816
----------- -----------
Gross profit........................ 9,783,625 9,555,479
Selling, general and administrative 7,150,320 7,344,445
expenses.............................. ----------- -----------
Operating income.................... 2,633,305 2,211,034
Other expense......................... 29,791 52,792
Interest income...................... 33,629 8,628
----------- -----------
Income before provision for income taxes 2,637,143 2,166,870
Provision for income taxes............ 1,068,043 835,248
----------- -----------
Net income.......................... $ 1,569,100 $ 1,331,622
=========== ===========
Net income per share - basic.......... $ .45 $ .39
=========== ===========
Net income per share - diluted........ $ .44 $ .39
=========== ===========
Weighted average shares outstanding -
basic................................. 3,450,439 3,403,027
=========== ===========
Weighted average shares outstanding -
diluted............................... 3,596,393 3,445,828
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
4
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Common Stock
Number of $.01 Par Paid-in Retained Treasury
Shares Value Capital Earnings Stock Total
--------- -------- ------- -------- --------- -----------
BALANCE, December 31, 2002........ 3,665,209 $ 36,652 $16,643,963 $42,430,900 $(5,165,544) $ 53,945,971
Issuance of 133 shares of common
stock under the stock option 133 1 1,728 -- -- 1,729
plans.............................
Net income........................ -- -- -- 1,331,622 -- 1,331,622
------------ ----------- ---------- ------------ ------------ --------------
BALANCE, March 31, 2003........... 3,665,342 $ 36,653 $16,645,691 $43,762,522 $(5,165,544) $ 55,279,322
=========== =========== ========== =========== ============ =============
The accompanying notes are an integral part of these consolidated financial statements.
5
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
March 31, March 31,
2002 2003
------------- ---------
Cash flows from operating activities:
Net income $ 1,569,100 $ 1,331,622
Adjustments to reconcile net income to net cash
provided by (used in) operating activities,
net of effects of acquisitions:
Depreciation and amortization............... 534,976 544,818
Benefit from deferred income taxes.......... (1,997) (3,077)
Provision for bad debts..................... 4,483 23,360
Changes in operating assets and liabilities, net
of effects of acquisitions:
Increase in accounts receivable............. (920,371) (535,160)
Increase in inventories..................... (89,132) (34,597)
Increase in prepaid expenses................ (131,277) (317,144)
(Increase) decrease in other assets......... (151,260) 11,533
Decrease in accounts payable and accrued
liabilities............................... (317,876) (1,079,321)
------------- -------------
Net cash provided by (used in) operating
activities................................. 496,646 (57,966)
------------- ------------
Cash flows from investing activities:
Payment for acquisitions, net of cash acquired. - (482,414)
Payment of deferred purchase price............. (1,278,103) (466,798)
Additions to property, plant and equipment, net (335,916) (669,224)
--------- ---------
Net cash used in investing activities....... (1,614,019) (1,618,436)
----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock..... 161,064 1,729
------------ ------------
Net cash provided by financing activities... 161,064 1,729
----------- -----------
Net decrease in cash and cash equivalents.............. (956,309) (1,674,673)
Cash and cash equivalents at beginning of period. 6,378,026 5,808,435
----------- -----------
Cash and cash equivalents at end of period....... $ 5,421,717 $ 4,133,762
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid.................................. $ 3,429 $ 2,519
=========== ===========
Income taxes paid.............................. $ 56,900 $ 32,327
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
6
NATIONAL DENTEX CORPORATION
Notes to Consolidated Financial Statements
March 31, 2003
(1) Interim Financial Statements
The accompanying unaudited financial statements include all adjustments
(consisting only of normal recurring accruals) that 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.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
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, 2002 as filed with the Securities and Exchange
Commission on Form 10-K.
.
(2) Earnings Per Share
In accordance with the disclosure requirements of Statement of Financial
Accounting Standard ("SFAS") No. 128, "Earnings per Share," basic earnings per
share is computed by dividing net income by the weighted average number of
shares outstanding and diluted earnings per share reflects the dilutive effect
of stock options. The weighted average number of shares outstanding, the
dilutive effects of outstanding stock options, and the shares under option plans
that were antidilutive for the quarter ended March 31, 2002 and 2003 are as
follows:
Three Months Ended March 31,
2002 2003
---- ----
Weighted average number of shares used in basic earnings
per share calculation.............................................. 3,450,439 3,403,027
Incremental shares under option plans.............................. 145,954 42,801
------- ------
Weighed average number of shares used in diluted earnings per
share calculation.................................................. 3,596,393 3,445,828
========= =========
Shares under option plans excluded in computation of diluted
earnings per share due to antidilutive effects..................... --- 505,173
=== =======
The following table summarizes options that were outstanding 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:
Three Months Ended March 31,
2002 2003
---- ----
Number of Options for Common Shares None 505,173
Range of
Exercise Prices --- $19.52 - $24.88
Expire Through: --- January 2013
7
Notes to Consolidated Financial Statements (Continued)
(3) Stock-Based Compensation
Effective January 1, 1996, the Company adopted the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation." The Company has elected
to continue to account for employee stock options at intrinsic value, in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," with disclosure of the effects of fair value
accounting on net income and earnings per share on a pro forma basis. Had
compensation costs for the Company's 1992 Long-Term Incentive Plan (the "LTIP"),
2001 Stock Plan and 1992 Employees' Stock Purchase Plan ("The Stock Purchase
Plan") been determined consistent with SFAS No. 123, the Company's net income
and earnings per share would have been reduced to the following pro forma
amounts:
Three Months Ended March 31,
2002 2003
---------- -------
Stock-based employee compensation expense, as $ - $ -
reported ========= ======
Net income, as reported: $1,569,100 $1,331,622
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects 193,547 151,253
---------- -----------
Pro forma net income $1,375,553 $1,180,369
========== ===========
Earnings per share: As reported, basic $ .45 $ .39
Pro forma, basic .40 .35
As reported, diluted .44 .39
Pro forma, diluted .38 .34
(4) Recent Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others"("FIN
45"). FIN 45 elaborates on the disclosures to be made by a guarantor in its
interim and quarterly financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. FIN 45 does not prescribe a
specific approach for subsequently measuring the guarantor's recognized
liability over the term of the related guarantee. This Interpretation also
incorporates, without change, the guidance in FASB Interpretation No. 34,
"Disclosure of Indirect Guarantees of Indebtedness of Others", which is being
superseded. The Company has adopted the disclosure provisions of this
pronouncement as of December 31, 2002. The adoption of the financial provisions
of this pronouncement on January 1, 2003 did not have a material effect on the
results of the Company.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"). This interpretation of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," addresses
consolidation by business enterprises of variable interest entities that possess
certain characteristics. FIN 46 requires that if a business enterprise has a
controlling financial interest in a variable interest entity, the assets,
liabilities, and results of the activities of the variable interest entity must
be included in the consolidated financial statements with those of the business
enterprise. FIN 46 applies immediately to variable interest entities created
after January 31, 2003 and to variable interest entities in which an enterprise
obtains an interest after that date. The Company does not have any ownership in
any variable interest entities as of March 31, 2003. The Company will apply the
consolidation requirement of FIN 46 in future periods if the Company should own
any interest in any variable interest entity.
(5) 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.
(6) Acquisitions
The Company's acquisition strategy is to consolidate within the dental
laboratory industry and use its financial and operational synergies to create a
competitive advantage. Certain factors, such as the laboratory's technical
skills, reputation in the local marketplace and value as a going concern result
in the recognition of goodwill.
Effective March 1, 2003, the Company acquired certain assets of Nobilium
Dental Laboratory of Houston, Texas ("Nobilium"). Nobilium recorded revenues of
approximately $1,000,000 in its last fiscal year ended December 31, 2002.
Nobilium was merged into the Company's existing facility in Houston during the
month of March and has been reflected in the accompanying consolidated financial
statements from the date of acquisition.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements and Risk Factors
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. Such forward-looking statements
include statements regarding the Company's future financial performance,
acquisition activity, and marketplace competitiveness, that are based on the
Company's current expectations, beliefs, assumptions, estimates, forecasts and
projections about the industry and markets in which National Dentex operates.
The statements contained in this release are not guarantees of future
performance and involve certain risks, uncertainties and assumptions that are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed in such forward-looking statements. Important
factors that may affect future operating and financial results include the
timing, duration and effects of adverse changes in overall economic conditions,
the Company's ability to acquire and successfully operate additional
laboratories, governmental regulation of health care, trends in the dental
industry towards managed care, increases in labor, benefits and material costs,
product development risks, technological innovations, and other risks indicated
from time to time in the Company's filings with the Securities and Exchange
Commission.
Liquidity and Capital Resources
The Company's working capital increased from $15,499,000 at December 31,
2002 to $16,197,000 at March 31, 2003. Cash and equivalents decreased $1,675,000
from $5,808,000 at December 31, 2002 to $4,134,000 at March 31, 2003. Operating
activities consumed $58,000 in cash flow for the three months ended March 31,
2003 compared to providing $497,000 during the three months ended March 31,
2002. Cash outflows related to dental laboratory acquisitions including deferred
purchase price payments totaled $949,000 for the three months ended March 31,
2003 compared to $1,278,000 for the three months ended March 31, 2002. The
decrease in cash was primarily due to payment of certain payroll and employee
benefits that were accrued at December 31, 2002, coupled with a decrease in net
income in comparison to the three months ended March 31, 2002.
The Company maintains a financing agreement (the "Agreement") with Citizens
Bank of Massachusetts (the "Bank"). The Agreement includes revolving lines of
credit of $4,000,000 and $8,000,000. The interest rate on both revolving 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 revolving 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 March 31, 2003, the full principal amount was available to
the Company under both revolving lines of credit. The Agreement requires
compliance with certain covenants, including the maintenance of specified net
worth and other financial ratios. As of March 31, 2003, the Company was in
compliance with these covenants.
Management believes that cash flow from operations and existing financing
will be sufficient to meet contemplated operating and capital requirements,
including costs associated with anticipated acquisitions, if any, in the
foreseeable future.
Commitments and Contingencies
The following table represents a list of the Company's contractual obligations
and commitments as of March 31, 2003:
Payments Due By Period
Less Than Greater Than
Total 1 Year 1 - 3 Years 4 - 5 Years 5 Years
------------ ------ ----------- ----------- -------------
Operating Leases:
Real Estate.................... $ 8,350,000 $1,796,000 $ 4,111,000 $ 953,000 $ 1,490,000
Vehicles......................... 872,000 495,000 377,000 -- --
Equipment.................... 211,000 98,000 111,000 2,000 --
Laboratory Purchase Obligations... 3,347,000 1,990,000 1,357,000 -- --
------------- ---------- ------------- ------------ -------------
TOTAL........................ $12,780,000 $4,379,000 $ 5,956,000 $ 955,000 $ 1,490,000
============= ========== ============= ============ =============
Laboratory purchase obligations totaling $3,347,000 classified as deferred
acquisition costs are presented in the liability section of the balance sheet.
The Company is committed under various non-cancelable operating lease agreements
covering its office space and dental laboratory facilities, vehicles and certain
equipment. Certain of these leases also require the Company to pay maintenance,
repairs, insurance and related taxes.
9
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 March 31,
2002 2003
--------- -------
Net sales........................... 100.0% 100.0%
Cost of goods sold.................. 58.2 60.1
------- -------
Gross profit........................ 41.8 39.9
Selling, general and administrative
expenses........................... 30.5 30.6
------- -------
Operating income.................... 11.3 9.3
Other expense....................... 0.1 0.2
Interest income..................... 0.1 0.0
------- -------
Income before provision for income 11.3 9.1
taxes
Provision for income taxes.......... 4.6 3.5
------- -------
Net income.......................... 6.7% 5.6%
======= =======
Three Months Ended March 31, 2003 Compared with Three Months Ended March
31, 2002
Net Sales
For the three months ended March 31, 2003, net sales increased $551,000 or
2.4% over the prior year. Net sales increased by approximately $926,000, or
4.0%, as a result of acquisitions, measured by business at dental laboratories
owned less than one year. Net sales declined approximately $375,000, a decline
of 1.6%, at dental laboratories owned for both the three months ended March 31,
2003 and the comparable three months ended March 31, 2002. Management believes
that both the Company's revenues and industry revenues as a whole have been
unfavorably impacted as a result of uncertainties within the current economic
climate.
Cost of Goods Sold
The Company's cost of goods sold increased by $779,000 or 5.7% in the three
months ended March 31, 2003 compared with the three months ended March 31, 2002.
As a percentage of sales, cost of goods sold increased from 58.2% to 60.1%. The
increase was primarily attributable to increased labor and benefit costs.
Relatively flat sales caused continued overcapacity while higher than expected
medical insurance claims combined to reduce the Company's gross profit.
Additionally, increased capacity led to higher overhead costs as a percentage of
sales. Materials costs were consistent with the comparable three month period
ended March 31, 2002.
Selling, General and Administrative Expenses
Operating expenses, which consist of selling, delivery and administrative
expenses both at the laboratory and corporate level, increased by $194,000, or
2.7%, over the comparable three month period ended March 31, 2002. During the
same period, operating expenses increased as a percentage of net sales from
30.5% in 2002 to 30.6% in 2003. Selling costs declined slightly compared to the
three months ended March 31, 2002, primarily due to a planned reduction in
marketing expenditures related to "the NDX Reliance Program". Marketing costs
were higher in the three months ended March 31, 2002 since expenditures related
to the initial launch of the program were incurred at that time. The decrease in
selling costs was offset by an increase of $380,000 in administrative expenses
at both laboratory and corporate levels. In addition to the added administrative
costs from two laboratories acquired during 2002, the Company continued to
invest in its group and sales management team.
Operating Income
As a result of the factors discussed above, which include relatively flat
sales growth, increases in labor and medical insurance costs, and investments in
the strengthening of the Company's management team, coupled with the current
economic climate, the Company's operating income declined by $470,000 to
$2,167,000 for the three months ended March 31, 2003 from $2,637,000 for the
comparable three months ended March 31, 2002. As a percentage of net sales,
operating income declined from 11.3% in 2002 to 9.3% for 2003.
Interest Income
Interest income decreased by $25,000 for the three months ended March 31,
2003 from 2002. The decrease was due to lower investment principal and lower
interest rates.
10
Provision for Income Taxes
The provision for income taxes decreased to $835,000 in 2003 from $1,068,000
in 2002. This $233,000 decrease was the result of decreased income and a lower
effective tax rate. The 40.5% effective tax rate for 2002 decreased to 38.5% for
three months ended March 31, 2003 to more accurately reflect the Company's
expected 2003 tax rate.
Net Income
As a result of all of the factors discussed above, net income decreased to
$1,332,000 or $.39 per share on a diluted basis in 2003 from $1,569,000 or $.44
per share on a diluted basis in 2002.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk exposure includes potential price volatility of
commodities used by the Company in its manufacturing processes. The Company
purchases dental alloys that contain gold, palladium and other precious metals.
The Company has not participated in hedging transactions. The Company has relied
on pricing practices that attempt to pass increased costs on to the customer, in
conjunction with materials substitution strategies.
Item 4. Controls and Procedures
(a) Explanation of disclosure controls and procedures.
Within the 90 days prior to the filing date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's President and Chief Executive
Officer and its Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures as defined in Rule
13a-14 of the Securities Exchange Act of 1934. Based on that evaluation, such
officers concluded that the Company's disclosure controls and procedures are
designed to ensure that information required to be disclosed by the Company in
reports it files or submits under the Securities and Exc hange Act of 1934 is
recorded, processed, summarized, and reported within the time periods specified
in Securities and Exchange Commission rules and forms and are operating in an
effective manner.
(b) Changes in internal controls.
There have been no significant changes in the Company's internal controls or in
other factors which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
PART II. Other Information
Item 1. 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.
Item 2. Changes in Securities and Use of Proceeds:
Not Applicable
Item 3. Defaults upon Senior Securities:
Not Applicable
11
Item 4. Submission of Matters to a Vote of Security Holders:
The Company's Special Meeting in lieu of an Annual Meeting of
Stockholders was held on April 8, 2003. On February 18, 2003, the record date
for the meeting, there were 3,403,009 shares of Common Stock outstanding, of
which 2,801,858 shares or 82.3% were represented at the meeting or by proxy. At
the meeting, the following matters were voted upon and approved:
(a) Proposal to fix the number of directors at five and to elect the
following persons as directors.
Number of Votes Cast Number of Votes Withheld
Name FOR Nominee FROM Nominee
- ----
------------------------------ ------------------------------
David L. Brown 2,785,563 16,295
Jack R. Crosby 2,743,640 58,218
David V. Harkins 2,386,071 415,787
Norman F. Strate 2,779,045 22,813
Daniel A. Grady 2,744,273 57,585
(b) Proposal to approve the appointment of PricewaterhouseCoopers LLP
as auditors of the Company for the fiscal year ending December
31, 2003.
Number of Votes Cast Number of Votes Cast Number of Votes
FOR Proposal AGAINST Proposal ABSTAINED
- ---------------------------------- ------------------------------ ------------------------------
2,797,615 4,000 243
Item 5. Other Information:
Not Applicable
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit 99.1 Certification of David L. Brown, Chief Executive
Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Exhibit 99.2 Certification of Richard F. Becker, Jr., Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) On April 30, 2003, a Form 8-K was filed by the Company under Item
9, Regulation FD Disclosure and Item 12, Disclosure of Results of
Operations and Financial Condition.
12
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, thereunto duly authorized.
NATIONAL DENTEX CORPORATION
-----------------------------
Registrant
May 12, 2003 /s/ DAVID L. BROWN
By:............................................
David L. Brown
President, CEO and Director
(Principal Executive Officer)
May 12, 2003 /s/ Richard F. Becker, Jr.
By:..........................................
Richard F. Becker, Jr.
Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer)
13
CERTIFICATION
I, David L. Brown, President, Chief Executive Officer and Director, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of National Dentex
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries (if any), is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 12, 2003 By:/s/ David L. Brown
------------------
David L. Brown
President, Chief Executive Officer
and Director
14
CERTIFICATION
I, Richard F. Becker, Jr., Chief Financial Officer, Vice President of Finance
and Treasurer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of National Dentex
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries (if any), is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 12, 2003 By:/s/ Richard F. Becker, Jr.
--------------------------
Richard F. Becker, Jr.
Vice President, Treasurer and Chief Financial Officer
15
Exhibit 99.1
Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of National Dentex
Corporation (the "Company") on Form 10-Q for the quarter ending March 31, 2003
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, David L. Brown, President, Chief Executive Officer, and Director
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.
By:/s/ David L. Brown
- ---------------------
David L. Brown
President, Chief Executive Officer and Director
May 12, 2003
16
Exhibit 99.2
Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of National Dentex
Corporation (the "Company") on Form 10-Q for the quarter ending March 31, 2003
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Richard F. Becker, Jr., Chief Financial Officer, Vice President of
Finance and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.
By:/s/ Richard F. Becker, Jr.
--------------------------
Richard F. Becker, Jr.
Vice President, Treasurer and Chief Financial Officer
May 12, 2003
17