-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OzBHLLEiBiCQz0RxyBX1VgB/HTkq6+RLTeCzcN9unAWPjeG3y6KCdb0mkwEdBRF9 EcUvo+PmnGUV+BD0G6Dx8w== 0000898430-95-002109.txt : 19951130 0000898430-95-002109.hdr.sgml : 19951130 ACCESSION NUMBER: 0000898430-95-002109 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951101 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAFEGUARD HEALTH ENTERPRISES INC CENTRAL INDEX KEY: 0000727303 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95586494 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 SEPTEMBER 30, 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 September 30, 1995, was 4,633,170 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 SEPTEMBER 30, 1995 INFORMATION INCLUDED IN REPORT Part I. Financial Information Item 1. Financial Statements Consolidated Statements of Financial Position Consolidated Statements of Income (Loss) 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 SEPTEMBER 30, 1995 The accompanying Consolidated Financial Statements of Safeguard Health Enterprises, Inc. and subsidiaries (the "Company"), for the quarter ended September 30, 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)
September 30, December 31, 1995 1994 ------------- ------------- ASSETS Current assets: Cash $ 6 $ 503 Short-term investments 2,395 1,723 Investment securities available for sale, at estimated fair value 5,450 3,175 Investment securities held to maturity, at cost 585 3,260 Accounts and notes receivable, net of allowances of $387 in 1995 and $206 in 1994 3,501 2,183 Income taxes receivable - 255 Prepaid expenses and other 833 1,032 Deferred income taxes 247 247 -------- -------- Total current assets 13,017 12,378 -------- -------- Property and equipment, net 12,561 11,256 Investment securities held to maturity, at cost 7,869 6,509 Other assets 229 229 Intangibles, net of accumulated amortization of $1,362 in 1995 and $1,293 in 1994 395 420 -------- -------- $ 34,071 $ 30,792 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 880 $ 1,307 Accrued expenses 2,376 1,508 Income taxes payable 170 - Deferred revenue 78 228 -------- -------- Total current liabilities 3,504 3,043 -------- -------- Deferred income taxes 403 280 Stockholders' equity Common stock $.01 par value; 30,000,000 shares authorized; 4,633,000 and 4,465,000 shares outstanding, stated at 20,031 19,212 Retained earnings 28,409 26,725 Net unrealized loss on investment (153) (345) securities available for sale Treasury stock, at cost (18,123) (18,123) -------- -------- Total stockholders' equity 30,164 27,469 -------- -------- $ 34,071 $ 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 Nine months ended September 30 September 30 -------------------- ------------------ 1995 1994 1995 1994 --------- -------- -------- ------- Health care revenues $20,834 $18,060 $60,299 $52,405 ------- ------- ------- ------- Expenses: Health care services 16,773 15,694 48,387 41,542 Selling, general and administrative 3,476 3,346 10,072 9,696 ------- ------- ------- ------- Total expenses 20,249 19,040 58,459 51,238 ------- ------- ------- ------- Operating income (loss) 585 (980) 1,840 1,167 Other income, net 403 208 846 615 ------- ------- ------- ------- Income (loss) before income taxes 988 (772) 2,686 1,782 Provision (benefit) for income taxes 339 (297) 1,002 707 ------- ------- ------- ------- Net income (loss) $ 649 $ (475) $ 1,684 $ 1,075 ======= ======= ======= ======= Net income (loss) per common share and common share equivalent: Primary and fully diluted $ .14 $ (.10) $ .35 $ .22 ======= ======= ======= ======= Weighted average common shares and equivalents outstanding 4,777 4,691 4,766 4,844 ======= ======= ======= =======
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)
Nine months ended September 30 ------------------ (Unaudited) 1995 1994 ------- ------- Cash flows from operating activities: Net income $ 1,684 $ 1,075 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,194 1,028 Deferred income taxes (benefit) 123 (198) Change in assets and liabilities: Accounts receivable, net (1,318) (108) Income taxes receivable 255 152 Prepaid expenses and other 199 9 Accounts payable (427) (515) Accrued expenses 868 777 Income taxes payable 170 10 Deferred revenue (150) (270) ------- ------- Net cash provided by operating activities 2,598 1,960 ------- ------- Cash flows from investing activities: Change in marketable securities (1,440) 622 Additions to property and equipment (2,431) (3,583) Other activity, net (43) (21) ------- ------- Net cash used in investing activities (3,914) (2,982) ------- ------- Cash flows from financing activities: Stock repurchases - (70) Proceeds from exercise of stock options 819 406 ------- ------- Net cash provided by financing activities 819 336 ------- ------- Net decrease in cash (497) (686) Cash at beginning of period 503 873 ------- ------- Cash at end of period $ 6 $ 187 ======= =======
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 September 30, 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 4,510,888 shares of its common stock through open market or private transactions. As of September 30, 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 September 30, 1995 and 1994 were computed by dividing net income by 4,777,262 and 4,843,731 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 September 30, 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 1995 Versus 1994 ------------------ ------------------ Three months ended Nine months ended Results of operations (000's) omitted September 30 September 30 - - -------------------------------------------------------------------------------------------------------------- Health care revenues $2,774 $7,894 Percentage change 15.4% 15.1% - - -------------------------------------------------------------------------------------------------------------- Membership enrollment 51 Percentage change 7.3% - - -------------------------------------------------------------------------------------------------------------- Health care expenses $1,079 $6,845 Percentage change 6.9% 16.5% Percent of revenues 80.5% 80.2% - - -------------------------------------------------------------------------------------------------------------- Selling, general and administrative expenses $ 130 $ 376 Percentage change 3.9% 3.9% Percent of revenues 16.7% 16.7% - - -------------------------------------------------------------------------------------------------------------- Other income, net $ 195 $ 231 Percentage change 93.8% 37.6% Percent of revenues 1.9% 1.4% - - -------------------------------------------------------------------------------------------------------------- Net income $1,124 $ 609 Percentage change 236.6% 56.7% - - --------------------------------------------------------------------------------------------------------------
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 751,000 primarily from sales to new small and mid-size group clients and an increase in the number of persons covered under various 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 expenses within the Company's dental office subsidiary, increased capitation, and increased indemnity benefits paid to insureds directly related to increased premium revenue. Health care expense also increased due to increased claims and claims reserve costs associated with the implementation of a number of new indemnity benefit programs offered by the Company's indemnity insurance subsidiary, geographic expansion, and to a lesser extent, the expansion of the Company's Preferred Provider Organization operations. General and administrative expenses increased at a lower rate due to increased operating efficiencies. Selling expenses increased primarily due to higher costs in the distribution of the Company's products through insurance related sources. Other income increased due to the favorable disposition by the Company of certain equity investments and dividend income. Net income increased 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 September 30, 1995, the current ratio was 3.7 to 1.0. The Company's net worth was $30.2 million compared to $28.6 million a year earlier. The Company had $16.3 million of cash and investments as of September 30, 1995 compared to $16.6 million a year earlier. The Company believes that income from operations, together with the existing cash and investments 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 the Company's operations are not materially affected by inflation. The Company believes that a majority of its costs are capitated or fixed in nature and are directly related to membership levels, and therefore related to premium levels. 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 September 30, 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 30th of October, 1995. SAFEGUARD HEALTH ENTERPRISES, INC. By STEVEN J. BAILEYS, D.D.S. -------------------------- STEVEN J. BAILEYS, D.D.S., Chairman, President and Chief Executive Officer By RONALD I. BRENDZEL ------------------- RONALD I. BRENDZEL, Senior Vice President, Chief Financial Officer and Secretary Page 10 of 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1995 JUL-01-1995 SEP-30-1995 6 8,430 3,888 387 0 13,017 24,584 12,022 34,071 3,907 0 20,031 0 0 10,133 34,071 20,834 20,834 16,773 16,773 3,476 (403) 0 988 339 649 0 0 0 649 .14 .14
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