-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SlfzYRekrjGLlNebs4TMXiekr6Iuv8KtR6B8k240UWC5d74LQ+E3qqucOoQEP5N0 4Pozt1nJKVI4Oj3TxeMdkA== 0000898430-95-000858.txt : 19950516 0000898430-95-000858.hdr.sgml : 19950516 ACCESSION NUMBER: 0000898430-95-000858 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAFEGUARD HEALTH ENTERPRISES INC CENTRAL INDEX KEY: 0000727303 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 521528581 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12050 FILM NUMBER: 95538946 BUSINESS ADDRESS: STREET 1: 505 N EUCLID ST STREET 2: PO BOX 3210 CITY: ANAHEIM STATE: CA ZIP: 92803-3210 BUSINESS PHONE: 7147781005 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED COMMISSION FILE NUMBER 0-12050 MARCH 31, 1995 SAFEGUARD HEALTH ENTERPRISES, INC. (Exact Name of Registrant Specified in its Charter) DELAWARE 52-1528581 (State of Incorporation) (I.R.S. Employer Identification No.) 505 NORTH EUCLID STREET P.O. BOX 3210 ANAHEIM, CALIFORNIA 92803-3210 (Address of principal offices) (Zip code) Registrant's telephone number, including area code: (714) 778-1005 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 _____ ----- The number of shares outstanding of registrant's common stock, par value $.01 per share, at March 31, 1995, was 4,464,503 shares (not including 3,274,788 shares of common stock held in treasury). Page 1 of 10 SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 INFORMATION INCLUDED IN REPORT Part I. Financial Information Item 1. Financial Statements Consolidated Statements of Financial Position Consolidated Statements of Income Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Default Upon Senior Securities Item 4. Other Information Item 5. Exhibits and Reports Page 2 of 10 PART I. FINANCIAL INFORMATION SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 The accompanying Consolidated Financial Statements of Safeguard Health Enterprises, Inc. and subsidiaries (the "Company"), for the quarter ended March 31, 1995, while unaudited, reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim periods. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission, but omit certain information and footnote disclosures necessary to present the statements in accordance with generally accepted accounting principles. These Consolidated Financial Statements should be reviewed in conjunction with the Consolidated Financial Statements and Notes, including Significant Accounting Policies, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Management believes that the disclosures herein are adequate to make the information presented not misleading. Page 3 of 10 ITEM 1. FINANCIAL STATEMENTS SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ($000'S OMITTED, EXCEPT SHARE DATA)
March 31, December 31, 1995 1994 ---------- ------------- ASSETS Current assets: Cash $ 641 $ 503 Short-term investments 1,840 1,723 Investment securities available for 2,997 3,175 sale, at estimated fair value Investment securities held to 3,186 3,260 maturity, at cost Accounts and notes receivable, net of allowances of $503 in 1995 and $206 in 1994 2,083 2,183 Income taxes receivable - 255 Prepaid expenses and other 1,069 1,032 Deferred income taxes 244 247 -------- -------- Total current assets 12,060 12,378 Property and equipment, net 11,595 11,256 Investment securities held to 6,505 6,509 maturity, at cost Other assets 229 229 Intangibles, net of accumulated amortization of 398 420 $1,316 in 1995 and $1,293 in 1994 -------- -------- $ 30,787 $ 30,792 ======== ======== LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,351 $ 2,815 Income taxes payable 57 - Deferred revenue 190 228 -------- -------- Total current liabilities 2,598 3,043 Deferred income taxes 252 280 Stockholders' equity Common stock $.01 par value; 30,000,000 shares authorized; 4,465,000 and 4,465,000 shares 19,212 19,212 outstanding, stated at Retained earnings 27,210 26,725 Net unrealized loss on investment (362) (345) securities available for sale Treasury stock, at cost (18,123) (18,123) Total stockholders' 27,937 27,469 equity -------- -------- $ 30,787 $ 30,792 ======== ========
See accompanying Notes to Consolidated Financial Statements. Page 4 of 10 SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) (000'S OMITTED, EXCEPT PER SHARE DATA)
Three months ended March 31, ------------------ 1995 1994 ------- ------- Health care revenues $19,423 $16,933 ------- ------- Expenses: Health care services 15,472 12,328 Selling, general and administrative 3,349 3,090 ------- ------- Total expense 18,821 15,418 ------- ------- Operating income (loss) 602 1,515 Other income, net 192 220 ------- ------- Income (loss) before income taxes 794 1,735 ------- ------- Provision (benefit) for income taxes $ 309 $ 678 ------- ------- Net income (loss) $ 485 $ 1,057 ======= ======= Net income (loss) per common share and common share equivalent: Primary and fully diluted $.10 $.22 ======= ======= Weighted average common shares and 4,656 4,911 equivalents outstanding
See accompanying Notes to Consolidated Financial Statements. Page 5 of 10 SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ($000'S OMITTED)
Three months ended March 31, ------------------- (Unaudited) 1995 1994 ------ -------- Cash flows from operating activities: Net income $ 485 $ 1,057 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 378 288 Deferred income taxes (benefit) (25) - Change in assets and liabilities: Accounts receivable net 100 (657) Income taxes receivable 255 152 Prepaid expenses and (37) (279) other Accounts payable and (464) 289 accrued expenses Income taxes payable 57 830 Deferred revenue (38) (96) ----- ------- Net cash provided 711 1,584 by operating ----- ------- activities Cash flows from investing activities: Change in marketable securities 156 991 Additions to property and equipment (694) (1,053) Other activity, net (35) (8) ----- ------- Net cash used in (573) ( 70) investing ----- ------- activities Cash flows from financing activities: Proceeds from exercise of stock - 67 options ----- ------- Net cash provided - 67 by financing ----- ------- activities Net increase in cash 138 1,581 Cash at beginning of period 503 873 ----- ------- Cash at end of period $ 641 $ 2,454 ===== =======
See accompanying Notes to Consolidated Financial Statements. Page 6 of 10 SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BASIS OF REPORTING - --------------------------- The accompanying unaudited Consolidated Financial Statements of Safeguard Health Enterprises, Inc. and subsidiaries (the "Company") for the quarter ended March 31, 1995, have been prepared in accordance with generally accepted accounting principles applicable to interim periods. This information should be read in conjunction with the Consolidated Financial Statements and Notes including Significant Accounting Policies, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. In the opinion of management, the accompanying statements contain all adjustments necessary for the interim amounts shown to be fairly presented. NOTE 2: STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE - ---------------------------------------------------- Since October 1986, the Company's Board of Directors has, at various times, authorized the repurchase of up to a total of 4,510,888 shares of its common stock through open market or private transactions. As of March 31, 1995, a total of 3,819,088 shares had been acquired at an average cost of $5.54 per share. All shares acquired prior to August 24, 1987, have been retired as required by California law. All shares acquired after the August 24, 1987 reincorporation in Delaware are being held as treasury stock. Earnings per share for the periods ended March 31, 1995 and 1994 were computed by dividing net income by 4,655,866 and 4,911,378 shares, respectively, which was the weighted average number of outstanding common shares and common share equivalents (stock options) during the respective periods. NOTE 3: INCOME TAXES - --------------------- Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. This statement supersedes APB 11, which the Company had utilized since its inception. The adoption of SFAS No. 109 has had no cumulative net effect on income from continuing operations for the quarter ended March 31, 1995. This statement requires the recognition of deferred tax assets and liabilities for the future consequences of events that have been recognized in the Company's financial statements or tax returns. The measurement of the deferred items is based on enacted tax laws. In the event the future consequences of the Company's assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized. The cumulative effect on the Company's deferred tax accounts at January 1, 1993 of adopting this new statement was the recording of a net deferred tax liability of $177,000. Page 7 of 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1995 Versus 1994 -------------------- Three months ended Results of operations (000') omitted) March 31 - --------------------------------------------------------------- Health care revenues $2,490 Percentage change 14.7% - --------------------------------------------------------------- Membership enrollment 52 Percentage change 7.6% - --------------------------------------------------------------- Health care expenses $3,144 Percentage change 25.5% Percent of revenues 79.7% - --------------------------------------------------------------- Selling, general and administrative $ 259 expenses Percentage change 8.4% Percent of revenues 17.2% - --------------------------------------------------------------- Other income, net $ (28) Percentage change (12.7%) Percent of revenues 1.0% - --------------------------------------------------------------- Net income $ (572) Percentage change (54.1%) - ----------------------------------------------------------------
1995 Versus 1994 - ---------------- Health care revenues increased as a result of sales to new small and mid-size clients, increased revenue from the Company's dental office subsidiary and increased revenue from the Company's indemnity insurance subsidiary. Membership enrollment increased to 740,000 from 688,000 primarily from sales to new small and mid-size group clients and an increase in the number of persons covered under dental indemnity insurance products offered by the Company's insurance subsidiary. Enrollment increases offset entirely continued workforce reductions in a number of the Company's major group clients. Health care expense increased primarily due to increased capitation directly related to increased premium revenue. Health care expense also increased due to increased claims costs associated with the implementation of a number of new indemnity benefit programs offered by the Company's indemnity insurance subsidiary, geographic expansion, and the expansion of the Company's Preferred Provider Organization operations. General and administrative expenses increased due to increased staffing levels to accommodate increasing enrollment. Selling expenses increased primarily due to higher acquisition costs in the distribution of the Company's products through other insurance related sources. Net income decreased due to the above factors. Page 8 of 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources - ------------------------------- The Company's business has not been capital intensive. The Company's operational cash requirements have been met principally from operating cash flow and this is expected to continue. At March 31, 1995, the current ratio was 4.6 to 1.0. The Company's net worth was $27.9 million compared to $28.3 million a year earlier. The Company had $15.2 million of cash and investments as of March 31, 1995 compared to $18.5 million a year earlier. The Company believes that income from operations, together with the existing cash and marketable securities on hand, and other available sources of financing, should be adequate to meet operating capital needs for the foreseeable future. Impact of Inflation - ------------------- Management believes that a major factor supporting the Company's ability to obtain and retain clients has been its ability to provide quality managed dental care benefits to a broad spectrum of clients, at a lower cost than most competitors during a period of escalating health care benefit costs. The Company believes its operations are not otherwise materially affected by inflation due to the capitated or fixed nature of its major costs over the respective terms of its client contracts. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is a defendant in litigation arising in the normal course of business. In the opinion of management, the defense costs and/or ultimate outcome of such litigation is covered by insurance or will not have material effect on the Company's financial position or results of operations. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. OTHER INFORMATION None. ITEM 5. EXHIBITS AND REPORTS There were no reports on Form 8-K filed by the Company during the quarter ended March 31, 1995. Page 9 of 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) or 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, in the City of Anaheim, State of California, on the 8th of May, 1995. SAFEGUARD HEALTH ENTERPRISES, INC. By /s/ STEVEN J. BAILEYS, D.D.S. ------------------------------ STEVEN J. BAILEYS, D.D.S., Vice Chairman, President and Chief Operating Officer By /s/ RONALD I. BRENDZEL ------------------------------ RONALD I. BRENDZEL, Senior Vice President, Chief Financial Officer and Secretary Page 10 of 10 EX-27 2 ART. 5 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 641 8,023 2,586 503 0 12,060 22,877 11,282 30,787 2,850 0 19,212 0 0 8,725 30,787 19,423 19,423 15,472 15,472 3,025 132 0 794 309 485 0 0 0 485 0.10 0.10
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