Showing posts with label Smile Brands Group Inc. Show all posts
Showing posts with label Smile Brands Group Inc. Show all posts

Monday, December 10, 2012

S & P down grade of Smiles Brands put it a step closer to bankruptcy, hopefully



S & P cuts Smile Brand Group rating, revises outlook
Overview
-- U.S. dental practice management services provider Smile Brands Group Inc. had negative free operating cash flow after elevated capital spending for the past four quarters, resulting in depleted liquidity.
-- Early in 2013, we expect Smile Brands to bring capital expenditures, mainly for new dental offices, into line with internally generated cash flow.
-- We are lowering our corporate credit rating on Smile Brands to 'B-' from 'B' and revising our rating outlook to negative. At the same time, we are lowering our rating on the company's senior secured debt to 'B-' from 'B'.
-- The negative rating outlook reflects the possibility that Smile Brands will exhaust the $13.5 million of funds available from its revolving credit facility as of Sept. 30, 2012, or breach a loan agreement covenant.
Rating Action
On Nov. 21, 2012, Standard & Poor's Ratings Services lowered its corporate credit rating on Irvine, Calif.-based Smile Brands Group Inc. to 'B-'from 'B'. At the same time, we revised the outlook on the rating to negative
In addition, we lowered our rating on Smile Brands' senior secured debt to 'B-', in conjunction with the downgrade, from 'B'. Our recovery rating on this debt remains unchanged at '3', indicating our expectation for meaningful (50% to 70%) recovery of principal in the event of payment default.
Rationale
The rating on dental practice management (DPM) services provider Smile Brands Group Inc. continues to reflect its "vulnerable" business risk profile (according to Standard & Poor's Ratings Services' criteria), characterized by its narrow scope of operations in intensely competitive markets with low barriers to entry.

Smile Brands had negative free operating cash flow (FOCF) after elevated capital spending for the past four quarters and we expect this to continue in the fourth quarter of 2012. Our downgrade is based on the expectation that early in 2013, Smile Brands will stem the trend of negative FOCF by reducing spending for new dental offices or taking other actions, such as paying interest on its holding company debt in kind, rather than in cash. 
We also expect adjusted debt to EBITDA will rise to about 8x by the end of 2012, significantly higher than our prior expectations, but still consistent with a "highly leveraged" financial risk profile. As of Sept. 30, 2012, debt to EBITDA was 7.7x, adjusted to capitalize operating leases and including holding company debt. We have lowered our expectations for Smile Brands' revenue growth, EBITDA generation, and cash flow over the next one to two years.

We expect revenues will grow at a mid-single-digit annual rate, somewhat faster than the total U.S. dental services industry over the next few years, primarily fueled by Smile Brands' geographic expansion and a slowly strengthening economic climate. Our prior growth expectations were mid- to high-single-digit annual growth. 

Although Smile Brands' revenue growth slowed in the second and third quarter of 2012, revenues increased 4.2% for the 12 months ended Sept. 30, 2012. 
We believe an unsuccessful marketing strategy, which was subsequently abandoned, contributed to the growth slowdown. Still, we believe underlying industry fundamentals remain sound and relatively resistant to downturns. During the 2008 to 2010 recession, when revenue for the total U.S. industry was nearly flat (according to data from the Centers for Medicare and Medicaid Services), Smile Brands grew modestly, supporting our expectation for continued, albeit modest, growth.
As newer offices mature, we expect the lease-adjusted EBITDA margin (11.7% in the third quarter of 2012, compared with 12.8% in the third quarter of 2011) to gradually recover to the 12% to 14% range, with some quarter-to-quarter variation. 
Smile Brands' profitability is supported by its infrastructure, economies of scale, and supplier discounts. More rapid office expansion in recent quarters contributed to lower profitability. Smile Brands' EBITDA margin (adjusted for leases, stock compensation and nonrecurring items) began to dip in the fourth quarter of 2011, after rising substantially and steadily from 8.9% in 2005 to 14.8% for the 12 months ended Sept. 30, 2011. Our lowered expectations for 2012 and 2013 EBITDA also affect cash flow generation Smile Brands' affiliated dental practices operate a network of approximately 350 dental offices that offer general and specialty dental services. 
The $110 billion U.S. dental practice industry is extremely fragmented and highly competitive, contributing to our vulnerable business risk assessment.
Treatment volume, especially for more discretionary services such as orthodontics, and patient financial capacity exhibit some sensitivity to economic conditions. The availability of financing for patients influences demand. 
We also see vulnerabilities in the nature of the DPM structure. While we believe potential changes in state or federal laws, regulations, or accounting rules could hurt the DPM industry, we do not currently incorporate any adverse developments in our base-case scenario.
The DPM business model has many retail industry attributes, and so carries risks associated with advertising and promotion, branding, and real estate selection, among others. Smile Brands markets its brands, selects high-traffic office locations, and offers customers convenient hours, comprehensive treatment, financing, and prices typically 15% to 25% below those of traditional dentists. It targets middle-income patients in growing metropolitan areas. Affiliated offices operate in 18 states, but there are material concentrations in Texas and California.
The company provides administrative, financial, and operating services to affiliated professional corporations (PCs). Although the company does not own the affiliated PCs, its financial statements consolidate them. Smile Brands generally owns the dental office assets, but dentists and hygienists generally are not employees of the company, in accordance with state laws. 
We analyze the consolidated financial statements on the basis presented (adjusted for the capitalization of operating leases and other standard adjustments) because we believe they best reflect the economic substance of the company's business model.
Liquidity
We revised our assessment of Smile Brands' liquidity to "less than adequate" (according to our criteria), reflecting its diminished liquid resources.
As of Sept. 30, 2012, Smile Brands reported a negative cash balance of $0.5 million, and $13.5 million was available from its $35 million revolving credit facility. We believe Smile Brands may borrow an additional $1 million to $5 million in the fourth quarter of 2012.
We estimate Smile Brands will generate about $20 million of funds from operations (FFO) in 2012 and $25 million in 2013. We expect small, if any,annual increases in working capital. We project about $32 million of capital expenditures in 2012 (actual spending for the first nine months was $27.5 million), including the recently completed roll out of digital x-rays. In 2013, we expect Smile Brands to bring capital expenditures, mainly for new dental offices, into line with internally generated cash flow. We believe annual maintenance capital spending is less than $10 million.
Our assessment of Smile Brands' liquidity profile incorporates the following assumptions and expectations:
-- Over the next 12 months, we expect sources of liquidity, including potential borrowing under the revolver, to exceed uses by 1.2x. Even if EBITDA is 15% below our projections, we estimate liquidity sources would cover cash needs, although in that scenario the revolver could be fully drawn.
-- Debt amortization is only $2.4 million annually through 2014.
-- Our analysis of Smile Brands includes unrated holding company notes with a face value of $100 million ($87 million after the original issue discount). Smile Brands has been paying the 10% coupon in cash. To conserve cash, we believe it may begin to pay interest in kind at 13%.
-- We expect Smile Brands to remain in compliance with its loan agreement covenants, notwithstanding requirement tightening. As of Sept. 30, 2012, there was a 17% cushion under the tightest covenant.
-- We assume Smile Brands will not make any acquisitions over the next two years.
Recovery analysis
For our complete recovery analysis, see our recovery report on Smile Brands, to be published following this report on RatingsDirect.
Outlook
Our negative rating outlook on Smile Brands reflects the possibility that it will exhaust the $13.5 million of funds available from its revolving credit facility as of Sept. 30, 2012, or breach a loan agreement covenant. We would consider lowering the rating if negative FOCF persists in the first quarter of 2013 or we expect the covenant cushion to approach 5%.
We would consider revising the outlook to stable if Smile Brands generates discretionary cash flow (through a combination of improved EBITDA and lower capital spending), restores availability of its revolver, and we expect the covenant cushion to stay above 15%.

Friday, August 17, 2012

Smiles Brands, Inc. job listing appears to be retail sales position within dental care - disguise as a Patient Service Rep.

sblogo

 

 

 

Patient Services Representative (Call Center)

City: Plano
State: TX
Company: Smile Brands Inc.
REQ ID: 12-0491

If you have customer service or dental experience, this is a great opportunity for you. We are currently seeking self-motivated , high energy and enthusiastic people to join our growing call center in Plano, TX.

The primary role of the Inbound Patient Services Representative will be to assist patients who need to complete dental treatment in process and schedule appointments with our dental offices.

  • Assist patients with questions or concerns [treatment advice?]
  • Track calls and appointments in the lead database [huh? leads?]
  • Record, report and maintain patient information as required
  • Achieve assigned individual and team objectives [i.e. you and your team will be required to meet quotas]
  • Provide excellent customer service


Requirements

  • 1+ years Customer Service experience
  • Dental experience preferred [what about a doctorate of dentistry?]
  • Strong written and verbal communication skills
  • Bi-lingual – Spanish
  • Computer skills MS Office – Word, Excel & Outlook
  • Type 35 words (minimum)
  • College coursework/degree preferred
  • A comprehensive benefits package is offered, which includes: Medical, Vision, Life Insurance and 401K. Equal Opportunity Employer.

Job posting

Monday, March 05, 2012

Galdi v Megdal and Bright Now! Dental

Anyone know what this is about:

Case No: United States of America Cr-02-00349CAS
Case No YCO30202: Galdi vs. Megdal

Mimi Villegas Galdi

vs.

Bright Dental Now! Phillip Megdal,
Jordan Moss,
Katrina Mejia-Blom,
Dale Blom
City of Redondo Beach
State of California
United States of America.

Read the story here
More on it here.

It appears this Dr. Philip Megdal was the same dentist accused of negligence in the death of 4 year old Javier Villa, Jr. in 1998

More on Javier’s death.

Consumer Dental bought the Megdal clinics after Javier’s death

Monday, October 04, 2010

Kool Smiles Said to Have Received Offer of $700 Million Clinics

Oct. 4 (Bloomberg) -- American Securities LLC, a New York- based private-equity firm, is the leading bidder for a U.S. chain of dental clinics owned by Friedman Fleischer & Lowe LLC with an offer of about $700 million, according to people with knowledge of the auction.

Friedman Fleischer owns two companies, NCDR LLC and DPMS Inc., that provide facilities and support staff to dental groups operating under the Kool Smiles brand, according to the San Francisco-based firm’s website. TPG Capital also submitted an offer in the final round of bidding, said the people, who asked not to be identified because the deal hasn’t been completed.

The two companies are not really two companies, it's Kool Smiles and Kool Smiles 2.  KS is the clinics in the East and KS2 are the western most clinics.

Read the full article here: Business Week

However since after time passes and the stinch of a company begins to fill the offices of these PE firms, stories like this seem to vanish from the Internet.  So in case that happens, here is the full story:

By Cristina Alesci, Jeffrey McCracken and Jason Kelly
Oct. 4 (Bloomberg) -- American Securities LLC, a New York- based private-equity firm, is the leading bidder for a U.S. chain of dental clinics owned by Friedman Fleischer & Lowe LLC with an offer of about $700 million, according to people with knowledge of the auction.
Friedman Fleischer owns two companies, NCDR LLC and DPMS Inc., that provide facilities and support staff to dental groups operating under the Kool Smiles brand, according to the San Francisco-based firm’s website. TPG Capital also submitted an offer in the final round of bidding, said the people, who asked not to be identified because the deal hasn’t been completed.
Rajat Duggal, a managing director at Friedman Fleischer, couldn’t be reached for comment. Officials for American Securities and TPG declined to comment.
Private-equity firms have resumed dealmaking after a two- year lull following the global financial crisis that started in mid-2007, freezing credit markets and ending the biggest leveraged-buyout boom in history. There were $59 billion in deals in the third quarter, more than triple the amount a year earlier, according to data compiled by Bloomberg.

American Securities, which was founded in 1947 by a Sears Roebuck & Co. heir, has invested in companies including vacuum- cleaner maker Oreck Corp. and the El Pollo Loco chain of chicken restaurants, according to its website. The firm was a runner-up at the recent sales of Air Medical Group Holdings Inc. and Aspen Dental Management Inc., both owned by private-equity firms, according to a person with knowledge of the sales.

Air Medical, Aspen Dental
Leonard Green & Partners, the Los Angeles-based private- equity firm, is buying Aspen Dental from Ares Management LLC. Bain Capital LLC, the Boston-based leveraged buyout-fund manager, is acquiring Air Medical from Brockway Moran & Partners Inc. and MVP Capital Partners.

Kool Smiles caters to children enrolled in Medicaid, a federal-state health insurance program for the poor, and other state health insurance plans, according to Friedman Fleischer’s website. Some firms that looked at Kool Smiles were concerned that it was too reliant on Medicaid payments as governments face deficits, said one person familiar with the auction.

Private-equity firms are increasingly buying companies from each other as more than half the companies that submitted plans for U.S. IPOs in 2010 have yet to complete them. Sales among buyout firms allow the seller to return cash to investors, while the acquirer is able to deploy unused capital that was raised during the boom. Clients saw distributions last year fall to the lowest level since at least 2000, according to London-based research firm Preqin.

Opening Clinics
Smile Brands Group Inc., a separate dental chain backed by private-equity firm Freeman Spogli & Co., scrapped an initial public offering in May. The company, which relies on patients with private insurance for most of its revenue, is now shopping itself in a sale process that is still in early stages, according to a person with knowledge of the matter.

American Securities plans to expand Kool Smiles’ main business of opening clinics in places where access to dentists and other medical services is limited, the person said.

TPG has been pursuing deals. The Fort Worth, Texas-based firm and Goldman Sachs Group Inc.’s buyout arm agreed in July to purchase Belgian diaper-maker Ontex NV for $1.55 billion from London-based private-equity firm Candover Investments Plc. TPG also acquired a 35 percent stake in Creative Artists Agency for an undisclosed amount in a deal announced Oct. 1.

Friedman Fleischer has more than $2 billion under management, according to its website. Its holdings include Korn/Ferry International, the executive-recruiting firm, and Montpelier Re Holdings Ltd., a Bermuda-based property reinsurance company.

--Editors: Elizabeth Wollman, Larry Edelman
To contact the reporters on this story: Cristina Alesci in New York at Calesci2@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net.