Young Innovations, Inc. Business Information, Profile, and History

Company Perspectives:

Over the past 100 years, Young has become a true partner in preventive dentistry. For dentists and hygienists, the Young name is synonymous with quality, reliability, and innovation. Building on our strong foundation, Young Innovations has a three-pronged strategy for growth: to continuously improve our manufacturing processes, to develop innovative new products, and to execute strategic acquisitions.

History of Young Innovations, Inc.

Young Innovations, Inc., based in Earth City, Missouri, was organized and incorporated in 1995 as the parent company for subsidiaries that design, manufacture, and market consumable supplies, instruments and other products needed by dental professionals. Their products are primarily used in preventive and restorative dentistry and instrument sterilization, and include prophy products (disposable and metal prophy angles, cups, brushes, and pastes), fluorides, infection control products, dental X-ray equipment, dental instruments, orthodontic supplies, flavored examination gloves, and children's toothpaste and toothbrushes. Young markets its products under its subsidiaries' brand names: Young, Denticator, Panoramic, Athena/Champion, and Plak Smacker. Although Young does sell its products abroad, it markets are largely in the United States, where it has nine locations. In 2000, its international sales accounted for less than 10 percent of its revenues. The family of CEO George Richmond has a controlling interest in Young, owning just over half of the company. His son, Richard, who stepped down as the company's vice-president and secretary at the end of 2000, owns about 3.8 percent.

1900-67: Young Dental Becomes a Revitalized Company after Its Purchase by George Richmond

The modern history of Young Innovations, Inc. began in 1961, when George Richmond purchased Young Dental and quickly began changing its focus to making preventive dentistry products, chiefly the prophy polishing angle, an instrument used in hygienic dentistry. Richmond actually bought the company from his mother. At the time, the firm had only had seven employees and had reached annual sales of only $61,000. It was already a long established company, so it hardly seemed positioned or destined for growth.

Young Dental started manufacturing dental products in the early 1900s. It was just one of several small companies making instruments and supplies for the dental profession, which at that time was still in its infancy, just a few years past an age when dentistry and barberry were synonymous enterprises. Over the next half century, though, the company garnered an excellent reputation for making reliable instruments.

Young's reputation meant a great deal to Richmond. In an article in the St. Louis Business Journal of June 22, 2001, Richmond recounted an experience he had once had at a dentistry conference, where a man, explaining why he would love to work for Young, told Richmond that in all his travels as a dentistry salesman, he had found that "whenever dentists complained about their tools not working right they would always recommend Young."

Although it remained a small company in a very fragmented industry, for several decades Young kept pace with the evolution of dentistry by working with academic clinicians and practicing dentists to identify problems in the profession, and, by using its design and manufacturing capabilities, helped solve them. It would continue to do so under a new owner's direction.

1968-89: A Period of Slow but Steady Growth

In 1968, seven years after Richmond bought the company, Young began marketing its Triple Seal prophy angle. Unlike other prophy angles then in use, the Triple Seal angle did not show any significant eroding effects from the abrasive polish used in cleaning teeth and was made to hold up under repeated sterilizations almost indefinitely. Although significantly more expensive than prophy angles sold by competitors, the durable Triple Seal angle quickly gained a leading share in its U.S. market sector, thanks to its high quality. The company also claimed market front ranking with its prophy cups, which were used in conjunction with the Triple Seal angles.

Still, for the next two decades, Young grew very slowly. It kept its focus on preventive dentistry, however, which the dental profession itself increasingly stressed. Meanwhile, companies that would later play significant roles in the growth of Young got their start.

Rapid Growth Through New Products and Diversification

During the late 1980s and early 1990s, public awareness and concern about infectious disease, including AIDS, became a critical concern of the dental profession and helped ignite a major increase in the number of subscribers to dental health plans. Between 1990 and 1994, that number more than doubled, growing from 7.8 million to 18.4 million. Among others, Young took an active role in establishing standards for infection control in dental care procedures. The new public and professional concern helped boost the sale of the company's metal Triple Seal prophy angle, primarily because of the angle's durability and design. It also led to a new product when, in 1990, Young introduced a disposable Triple Seal angle. The new single-use angle quickly garnered a major share of its particular market, just as the company's older reusable Triple Seal angle had done a dozen years before. In fact, by the end of the decade, the disposable prophy angles would become the largest source of the company's revenue.

The success of Young's prophy angles fueled the company's growth and put it in a financial position both to expand and diversify, something it started to do in 1995. In that year, the company took a significant step forward by acquiring Lorvic Holdings Inc. Lorvic produced a line of infection control products. These included fluoride treatment and application products as well as products for dental equipment sterilization and plaque removal. Also, to position itself for further expansion, Young Dental filed a preliminary prospectus with the SEC. Its plan was to go public and raise up to $25 million in an initial public offering. The move was delayed, however, and the stock issue was not floated until 1997.

Meanwhile, in 1996, using an $18.5 million bank loan from Boatmen's National Bank, the company both paid down its existing debt and purchased Denticator International Inc. of Rancho Cordova, California. Denticator, which produced low cost disposable prophy angles, was in competition with Young, whose angles were somewhat higher in cost. With its acquisition of Denticator, Young both gained 75 percent of the special disposable prophy angle market and broadened its price range within that market. By 1996, between 80 million and 90 million disposable prophy angles were being marketed each year.

Revenues generated by its new acquisitions helped boost Young's gross to $21.6 million in 1996, up from $17.5 million the previous year. It was holding to a pattern of success, which throughout the 1990s showed a steady increase in annual revenues and a corresponding increase in its annual net income. On average, between 1992 and 2000, the company's net profit margin ranged between 15.3 percent and 23.6 percent, which provides a good indication of its excellent financial performance--one that through the 1990s encouraged the company to continue its aggressive growth.

1997-98: Young Goes Public and Continues Expanding

To help spur its sales, in July 1997, Young significantly modified its marketing strategy. Until that time, the company used independent sales representatives who were moving not only Young's products but lines of other companies as well. To improve its domestic marketing efficiency, the company switched to using company employees who represented and sold Young's lines exclusively; however, it did continue to use non-exclusive distributors in overseas markets.

Also, Young at last went public in 1997, making its initial public offering (IPO) of 2.3 million shares on November 10. The sale netted Young $25.2 million, giving the company considerable capital for further expansion. A major acquisition soon followed when, in 1998, Young acquired Panoramic Corporation of Fort Wayne, Indiana. Panoramic, founded in 1986, was created to design, manufacture, and market a panoramic X-ray machine (one allowing dentists to X-ray a patient's whole mouth in one exposure) in the United States and Canada. A highly successful company, Panoramic was unique within the domestic dental equipment market in that bypassing all middle marketers it sold its machines directly to its client dentists. With the purchase of Panoramic, Young picked up that customer database. It also kept its focus on preventive dental care, since panoramic x-rays were widely used for the early detection of dental problems.

Panoramic's founder, Eric Stetzel, had begun selling dental supplies immediately after graduating from college. He jobbed a Japanese panoramic X-ray line and soon became its largest U.S. distributor. In mid-1980s, prompted by the inflating value of the yen, he decided to manufacture a competitive panoramic X-ray machine on his own. Stetzel's new concern reverse-engineered the Japanese product, and by 1988 Panoramic had begun marketing its new product. The company's PC-100, thanks to its high quality, low manufacturing cost, and very competitive price, soon made Panoramic the market-share leader in the United States. When acquired by Young, expectations were that its annual sales would increase by up to 9 percent in 1999.

It was also in 1998 that Young completed the transfer and consolidation of most of its Denticator product line manufacturing, moving it from its facility in Sacramento, California, to its facility in St. Louis. Its injection molding production remained at the Sacramento facility. The manufacturing transfer had a slightly negative impact on the company's profit margin, but it was expected to improve Young's earnings in the next and subsequent years.

1999-2001: Continued Growth Through Further Acquisition

Young's growth, fueled by a spending spree, continued through the rest of the decade and into the start of the next century. In 1999, the company acquired Athena Technology, Inc., or Athena/Champion. That company developed, made and marketed handpieces and other related items and supplies for the dental profession. The price tag on Athena/Champion was about $4.9 million, which included Young's assumption of the company's $1 million debt. Young's projections were that the acquisition would add about $4.0 million to its annual sales. In addition, Young bought a one-third interest in Brownsville, Texas-based International Assembly, Inc. (IAI), the company that assembled some of Young's disposable prophy angles at its Maquiladora plant in Matamoros, Mexico. The terms of the agreement included an option, to be exercised before an early date in 2001, which would allow Young to purchase the remaining two-thirds ownership of IAI.

In the next year, Young also bought Plak Smacker, Inc., a Riverside, California-based distributer of a range of dental products for retail consumers and dental professionals, including orthodontic tools and brushes, flavored gloves, and children's toothbrushes and toothpastes. Among its products was a cordless, battery-operated flossing device called Floss-o-matic, which the company had introduced in 1996. In addition to marketing its products directly to orthodontists and pedodontists, Plak-Smacker sold its line through mass market outlets. Young bought the company for about $7.0 million, in anticipation of realizing an annual increase in its sales of about $10 million as a result of the acquisition.

Young Innovations, Inc. continued its buying spree in 2001, acquiring both Biotrol International Inc. and Challenge Control Products Inc., two subsidiaries of Pro-Dex Corp., a Louisville, Colorado holding company. Biotrol manufactured infection control products, while Challenge made fluoride gels and whitening products. The cost of the two Pro-Dex subsidiaries was $9.0 million in cash. Their acquisition significantly expanded Young's infection control and preventive product lines, and it was estimated that in tandem they would produce an increase in Young's annual revenue of approximately $8.5 million.

As Young's mission statement indicates, the company's strategy for the new century is to do more of what it was doing at the close of the old one. Plans call for upgrading and expanding its manufacturing capabilities, developing new, innovative products, and making new acquisitions. Its reputation and financial condition argue that the company is very well positioned to execute those plans successfully.

Principal Subsidiaries: Athena Champions Inc.; Denticator International, Inc.; Panoramic Corporation; Plak Smacker Inc.; Young Dental Mfg. Co.

Principal Competitors: DENTSPLY International, Inc.; Henry Schein, Inc.; Milestone Scientific, Inc.; Patterson Dental Company; Sybron Dental Specialties, Inc.

Chronology

• Key Dates:
• 1900: Young Dental Manufacturing Company is founded in Missouri.
• 1953: The Lorvic Corporation is founded.
• 1961: George Richmond acquires Young Dental.
• 1968: Young Dental introduces its Triple Seal prophy angle and gains market share leadership in prophy cups and angles.
• 1986: Eric Stetzel forms Panoramic Corp.
• 1990: Young introduces the disposable version of its Triple Seal prophy angle.
• 1995: Young acquires The Lorvic Corporation; Young Innovations, Inc. (YII) is formed as a parent company for Young Dental and other subsidiaries.
• 1996: YII purchases Denticator International, Inc.
• 1997: The company goes public and makes IPO.
• 1998: YII acquires Panoramic Corporation.
• 1999: Corporation purchases Athena Technology, Inc.
• 2000: YII acquires Plak Smacker Inc.
• 2001: Company acquires assets of Biotrol and Challenge from Pro-Dex Corp.