Edgar Filing: ORTHODONTIC CENTERS OF AMERICA INC /DE/

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 11-K

ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark one)

[x] Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (No fee required)

For the fiscal year ended December 31, 2002

[ ] Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (No fee required)

For the transition period from _________________ to _________________.

Commission file number: 001-13457

ORTHODONTIC CENTERS OF AMERICA, INC. 401(k) PROFIT SHARING PLAN
(Full title of the plan and the address of the plan,
if different from that of the issuer listed below)

ORTHODONTIC CENTERS OF AMERICA, INC.
3850 N. CAUSEWAY BOULEVARD, SUITE 800
METAIRIE, LOUISIANA 70002
(Name of the issuer of the securities held
pursuant to the plan and the address of
its principal executive office)

REQUIRED INFORMATION

Page
----

Report of Independent Auditors ............................................................. 3

Audited Financial Statements:

Statements of Net Assets Available for Benefits - December 31, 2002 and 2001 ......... 4

Statements of Changes in Net Assets Available for Benefits - Years ended
December 31, 2002 and 2001 ...................................................... 5

Notes to Financial Statements - December 31, 2002 .................................... 6

Supplemental Schedules:

Schedule G, Part III - Schedule of Nonexempt Transactions ............................ 9

Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year) ..................... 10

Exhibits:

Exhibit 23 - Consent of Independent Auditors

Report of Independent Auditors

The Plan Administrator
Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan

We have audited the accompanying statements of net assets available for benefits
of Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan as of
December 31, 2002 and 2001, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.

Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
(held at end of year) as of December 31, 2002 and nonexempt transactions for the
year then ended are presented for purposes of additional analysis and are not a
required part of the financial statements but are supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. These
supplemental schedules are the responsibility of the Plan's management. The
supplemental schedules have been subjected to the auditing procedures applied in
our audits of the financial statements and, in our opinion, are fairly stated in
all material respects in relation to the financial statements taken as a whole.

/s/ Ernst & Young LLP

June 25, 2003

Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan

Statements of Net Assets Available for Benefits

DECEMBER 31,
-----------------------
2002 2001
---------- ----------

ASSETS
Investments, at fair value:
Common collective trust funds ............ $5,221,311 $4,283,834
Mutual funds ............................. 1,873,808 1,393,030
Common stock of employer ................. 216,754 306,851
---------- ----------
Total investments .............................. 7,311,873 5,983,715

Contributions receivable:
Participants ............................. 70,563 53,318
Employer ................................. 6,370 6,128
---------- ----------
Total contributions receivable ................. 76,933 59,446
---------- ----------
Total assets ................................... 7,388,806 6,043,161
---------- ----------

LIABILITIES
Excess 401(k) contributions .................... 15,798 --
---------- ----------
Net assets available for benefits .............. $7,373,008 $6,043,161
========== ==========

See accompanying notes.

Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan
Statements of Changes in Net Assets Available for Benefits

YEAR ENDED DECEMBER 31,
----------------------------
2002 2001
----------- -----------

ADDITIONS
Investment income:
Interest and dividends ........................................ $ 43,802 $ 28,915
Contributions:
Participants .................................................. 1,795,312 1,459,168
Employer, net of forfeitures .................................. 378,022 294,141
----------- -----------
2,173,334 1,753,309
Rollovers from other plans ......................................... 11,929 90,288
Transfer of assets from merged plan ................................ 483,473 --
----------- -----------
Total additions .................................................... 2,712,538 1,872,512

DEDUCTIONS
Net depreciation in fair value of common collective trust funds .... 249,726 121,713
Net depreciation in fair value of mutual funds ..................... 240,349 180,007
Net (appreciation) depreciation in fair value of common stock
of employer ................................................... 203,894 (8,510)
----------- -----------
693,969 293,210

Benefit payments ................................................... 642,241 783,429
Excess 401(k) contributions ........................................ 15,798 --
Trustee fees ....................................................... 30,683 11,377
----------- -----------
688,722 794,806
----------- -----------
Total deductions ................................................... 1,382,691 1,088,016

Net increase ....................................................... 1,329,847 784,496
Net assets available for benefits:
Beginning of year ............................................. 6,043,161 5,258,665
----------- -----------
End of year ................................................... $ 7,373,008 $ 6,043,161
=========== ===========

See accompanying notes.

Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan

Notes to Financial Statements
December 31, 2002

1. DESCRIPTION OF THE PLAN

The following description of the Orthodontic Centers of America, Inc. 401(k)
Profit Sharing Plan (the "Plan") provides only general information. Participants
should refer to the Plan agreement for a more complete description of the Plan's
provisions.

GENERAL

The Plan is a defined contribution plan covering employees of Orthodontic
Centers of America, Inc. (the "Company") who have attained the age of 21 and one
year of service. Orthodontists, pediatric dentists, general dentists and leased
employees are not eligible to participate in the Plan. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").

Effective November 9, 2001, the Company entered into a merger with OrthAlliance,
Inc. ("OrthAlliance") whereby OrthAlliance became a wholly-owned subsidiary of
the Company. OrthAlliance sponsored a defined contribution 401(k) plan (the
"OrthAlliance Plan") for eligible non-highly compensated employees. Participants
from the OrthAlliance Plan became eligible to participate in the Company's Plan
effective January 1, 2002, and their years of service as OrthAlliance employees
transferred to the Company's Plan. On October 18, 2002, the plan assets of the
OrthAlliance Plan totaling $483,473 were merged into the Company's Plan.

CONTRIBUTIONS

Each year, participants may contribute up to 15% of their total compensation.
Matching contributions by the Company are discretionary. The matching
contribution for 2002 and 2001 was 40% of each participant's contribution,
limited to $600 per calendar year. In addition to matching contributions, the
Company may make additional discretionary contributions, although it made no
such contributions in 2002 or 2001.

VESTING

Participants vest immediately in their contributions. Participants vest in the
Company's contributions after five years of service.

BENEFIT PAYMENTS

Upon retirement, termination of employment with the Company, or death,
participants or their beneficiaries receive the total balance of their accounts
in the form of a lump-sum payment. A participant may withdraw all or a portion
of his account in the event of financial hardship, as defined in the Plan.

PRIORITIES UPON TERMINATION

Although the Company has not expressed any intent to do so, the Company may
discontinue its contribution or the Plan may be terminated subject to the
provisions of ERISA at the Company's option. If the Plan should be terminated,
the net assets available for plan benefits shall be liquidated. Amounts credited
to the accounts of participants shall become fully vested and nonforfeitable as
of the date of such termination.

Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan

Notes to Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING

The financial statements of the Plan are prepared on the accrual basis of
accounting in accordance with accounting standards generally accepted in the
United States. Benefits are recorded when paid.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes and schedules. Actual results could differ from those estimates.

INVESTMENTS

The Plan's funds are invested in common collective trust funds and mutual funds
for which the trustee and custodian is Wachovia Bank, National Association
("Wachovia"). The Plan also invests in the Company's common stock, which is held
in a separate Common Stock Trust. The trustee of the Common Stock Trust is a
representative of the Company, and the custodian is Wachovia. Investments in
common collective trust funds are carried at the Plan's pro rata interest in the
fair value of the fund's net assets, as determined by the custodian on the last
business day of the year. Investments in the mutual funds and the Company's
common stock are valued at quoted market prices on the last business day of the
year.

ADMINISTRATIVE EXPENSES

The Company pays certain administrative costs of the Plan.

FORFEITURES

Forfeitures are used to reduce employer contributions in the year following the
forfeiture. As of December 31, 2002 and 2001, there were approximately $16,400
and $32,200, respectively, of forfeited nonvested accounts.

RECLASSIFICATION

Certain amounts in the 2001 financial statements have been reclassified to
conform to the 2002 presentation.

3. INVESTMENTS

The following table represents participant-directed investments that represent
5% or more of the Plan's net assets.

DECEMBER 31,
--------------------------
2002 2001
---------- ----------

Enhanced Stock Market Fund .............................. $1,323,087 $1,485,123
Stable Portfolio Group Trust ............................ 3,898,224 2,798,711
Evergreen Select Balanced Fund .......................... 907,558 1,001,008
Orthodontic Centers of America, Inc. - Common Stock ..... 216,754 306,851

Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan

Notes to Financial Statements

4. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500

The following is a reconciliation of net assets available for benefits at
December 31 per the financial statements to the Form 5500:

DECEMBER 31,
-----------------------------
2002 2001
----------- -----------

Net assets available for benefits per the financial statements ..... $ 7,373,008 $ 6,043,161
Less amounts recorded as contributions receivable .................. (76,933) (59,446)
Add amounts recorded as excess contributions payable ............... 15,798 --
----------- -----------
Net assets available for benefits per the Form 5500 ................ $ 7,311,873 $ 5,983,715
=========== ===========

The following is a reconciliation of the net change to the Plan for the year
ended December 31, 2002 per the financial statements to the Form 5500:

Net increase per the financial statements .......... $ 1,329,847
Less current year contributions receivable ......... (76,933)
Add prior year contributions receivable ............ 59,446
Add current year excess contributions payable ...... 15,798
-----------
Net increase per the Form 5500 ..................... $ 1,328,158
===========

Differences between the financial statements and the Form 5500 are due to the
preparation of the financial statements using the accrual basis and the
preparation of the Form 5500 using the cash basis of accounting.

5. RISKS AND UNCERTAINTIES

The Plan provides for investments in various investment securities which, in
general, are exposed to various risks, such as interest rate, credit and overall
market volatility risks. Due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the values of
investment securities will occur in the near term and that such change could
materially affect the amounts reported in the statements of net assets available
for benefits and participant account balances.

6. INCOME TAX STATUS

The Plan has received a determination letter from the Internal Revenue Service
dated March 16, 1999, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The plan administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.

Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan

Schedule G, Part III - Schedule of Nonexempt Transactions

EIN: 72-1278948 PN: 001

Year ended December 31, 2002

RELATIONSHIP TO
PLAN, EMPLOYER DESCRIPTION CURRENT
OR OTHER OF COST OF VALUE NET
IDENTITY OF PARTY INVOLVED PARTY-IN-INTEREST TRANSACTIONS ASSET OF ASSET GAIN*
-------------------------- --------------------- ---------------------------------- -------- --------- -----

Orthodontic Centers of Employer/Plan Sponsor Loan to employer in the form of $ 78,167 $ 78,167 --
America, Inc. late remittance of participant
deferrals for the payroll periods
ending March 26, 1999, April 2,
1999, May 21, 1999 and May 28, 1999

Orthodontic Centers of Employer/Plan Sponsor Loan to employer in the form of $112,040 $112,040 --
America, Inc. late remittance of participant
deferrals for the payroll periods
ending March 29, 2002, August 30,
2002, September 27, 2002 and
October 25, 2002

----------------

* The Company is in the process of determining the applicable interest in order
to fully correct the late remittances.

Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan

Schedule H, Line 4(i) -- Schedule of Assets (Held at End of Year)

EIN: 72-1278948 PN: 001

December 31, 2002

IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF CURRENT
LESSOR OR SIMILAR PARTY INVESTMENT VALUE
---------------------------- -------------- -----------

Common Collective Trust Funds:
*Enhanced Stock Market Fund ...................... 23,706 units $1,323,087

*Stable Portfolio Group Trust .................... 58,860 units 3,898,224
----------
5,221,311

Mutual Funds:
Evergreen Select Balanced Fund ................... 98,648 units 907,558

Fidelity Advisor Series I Equity Growth Fund ..... 4,735 units 159,888

American Investment Company of America Fund ...... 8,235 units 193,369

Janus Advisor Series Worldwide Fund .............. 6,252 units 135,115

Dreyfus S&P Midcap Index Fund .................... 15,028 units 262,532

Putnam OTC Emerging Growth Fund .................. 3,704 units 18,667

Fidelity Advisor Intermediate Bond Fund .......... 12,023 units 146,663

Goldman Sachs Small Cap Value .................... 559 units 15,151

Putnam Capital Opportunities ..................... 4,575 units 34,865
----------
1,873,808

Employer Common Stock:
*Orthodontic Centers of America, Inc.
Common Stock ................................... 18,737 shares 216,754
----------
$7,311,873
==========

---------------------
* Indicates party-in-interest to the Plan.

SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees have duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.

ORTHODONTIC CENTERS OF AMERICA, INC.
401(k) PROFIT SHARING PLAN

WACHOVIA BANK, as Trustee

June 27, 2003 By: /s/ SUSAN GOSSETT
---------------------------------
Susan Gossett
Vice President and Consultant
Wachovia Retirement Services

EXHIBIT INDEX

Exhibit Number Description
-------------- -----------

23 Consent of Independent Auditors