-----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, Dah2TPLoegVquuOo9QHOhsLRw7R79Uf8P39OkPbNoh7isFr7fg8idI4weWKj4YI4 UroiL1ch8+c22fGsNwTUkw== 0000899243-99-001861.txt : 19990830 0000899243-99-001861.hdr.sgml : 19990830 ACCESSION NUMBER: 0000899243-99-001861 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990827 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORTHODONTIC CENTERS OF AMERICA INC /DE/ CENTRAL INDEX KEY: 0000931702 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 721278948 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-13457 FILM NUMBER: 99701389 BUSINESS ADDRESS: STREET 1: 5000 SAWGRASS VILLAGE CR STREET 2: STE 25 CITY: PONTE VEDRA BEACH STATE: FL ZIP: 32082 BUSINESS PHONE: 9042730004 MAIL ADDRESS: STREET 1: 3850 N CAUSEWAY BLVD STREET 2: STE 990 CITY: METAIRIE STATE: LA ZIP: 70002 11-K 1 FORM 11-K 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 to Section 15(d) of the Securities Exchange Act of 1934 (No fee required) For the fiscal year ended December 31, 1998 OR [ ] 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 : 000-25256 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. 5000 Sawgrass Village Circle, Suite 25 Ponte Vedra Beach, Florida 32082 -------------------------------- (Name of the issuer of the securities held pursuant to the plan and the address of its principal executive office) REQUIRED INFORMATION Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Financial Statements and Supplemental Schedules Years ended December 31, 1998 and 1997 CONTENTS
Report of Independent Auditors............................... 3 Financial Statements Statements of Net Assets Available for Benefits.............. 5 Statements of Changes in Net Assets Available for Benefits... 6 Notes to Financial Statements................................ 7 Supplemental Schedules Item 27a - Schedule of Assets Held for Investment Purposes... 14 Item 27d - Schedule of Reportable Transactions............... 15
2 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, 1998 and 1997, and the related statements of changes in net assets available for benefits for the year ended December 31, 1998. 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. Except as explained in the following paragraph, we conducted our audits in accordance with generally accepted auditing standards. 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. As permitted by 29 CFR 2520.103-8 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, investment assets held by First Union National Bank of North Carolina, the custodian of the Plan, and transactions in those assets were excluded from the scope of our audit of the Plan's 1997 financial statements, except for comparing the information provided by the custodian, which is summarized in Note 3, with the related information included in the financial statements. Because of the significance of the information that we did not audit, we are unable to, and do not, express an opinion on the Plan's financial statements as of December 31, 1997. The form and content of the information included in the 1997 financial statements, other than that derived from the information certified by the custodian, has been audited by us and, in our opinion, is presented in compliance with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. 3 In our opinion, the financial statements referred to above of the Orthodontic Centers of America, Inc., 401(k) Profit Sharing Plan as of December 31, 1998, and for the year then ended present fairly, in all material respects, the net assets available for benefits of Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan as of December 31, 1998, and changes in its net assets available for benefits for the year then ended in conformity with generally accepted accounting principles. Our audit of the Plan's financial statements as of and for the year ended December 31, 1998 was made for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental schedules of assets held for investment purposes as of December 31, 1998 and reportable transactions for the year then ended are presented for the purpose 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 the audit of the financial statements for the year ended December 31, 1998 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 29, 1999 4 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Statements of Net Assets Available for Benefits
December 31 1998 1997 --------------------------------- Assets Investments, at fair value: Common trust funds $1,680,949 $ 832,427 Mutual fund 753,393 462,623 Employer security 71,532 40,989 --------------------------------- Total investments 2,505,874 1,336,039 Contributions receivable: Participants 32,906 19,532 Employer 5,064 3,706 --------------------------------- Total contributions receivable 37,970 23,238 --------------------------------- Net assets available for benefits $2,543,844 $1,359,277 =================================
See accompanying notes. 5 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Statements of Changes in Net Assets Available for Benefits
Year ended December 31 1998 1997 ---------------------------------- ADDITIONS Investment income: Net appreciation in fair value of investments $ 311,800 $ 212,401 ---------------------------------- 311,800 212,401 Contributions: Participants 765,979 415,925 Employer 188,985 110,538 ---------------------------------- 954,964 526,463 Rollovers from other plans 101,990 11,966 ---------------------------------- Total additions 1,368,754 750,830 DEDUCTIONS Benefit payments 184,187 121,059 ---------------------------------- Net increase 1,184,567 629,771 Net assets available for benefits, beginning of year 1,359,277 729,506 ---------------------------------- Net assets available for benefits, end of year $2,543,844 $1,359,277 ==================================
See accompanying notes. 6 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Notes to Financial Statements December 31, 1998 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 Orthodontic Centers of America, Inc. 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 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). CONTRIBUTIONS Each year, participants may contribute up to 15% of their total compensation. Matching contributions by the Company are discretionary. The matching contribution for 1998 and 1997 was 40% of each participant's contribution, limited to $600. In addition to matching contributions, the Company may make additional discretionary contributions, although it made no such contributions in 1998 or 1997. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contribution and allocations of (a) the Company's contribution and (b) plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. INVESTMENT OPTIONS Upon enrollment in the Plan, a participant may direct employer and employee contributions in any of four investment options: (1) Stable Group Trust Portfolio, (2) Enhanced Stock Market Fund, (3) Evergreen Select Balanced Fund, and (4) Orthodontic Centers of America, Inc. Company Stock Fund. 7 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Notes to Financial Statements (continued) 1. DESCRIPTION OF THE PLAN (CONTINUED) 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. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements of the Plan are prepared on the accrual basis of accounting. Benefits are recorded when paid. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions 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 trust funds and a mutual fund for which the trustee and custodian is First Union National Bank of North Carolina (First Union). Effective in 1997, the Plan also invests in Orthodontic Centers, Inc. 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 First Union. Investments in common 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 fund and Orthodontic Centers of America, Inc. common stock are valued at quoted market prices on the last business day of the year. 8 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Notes to Financial Statements (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ADMINISTRATIVE EXPENSES The Company pays all of the administrative costs of 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. 3. INVESTMENTS Financial information relating to all of the Plan's investments as of December 31, 1997 and the related investment income for the year then ended are included in the accompanying financial statements based upon information certified as complete and accurate by the custodian. 9 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Notes to Financial Statements (continued) 4. PARTICIPANT-DIRECTED INVESTMENT PROGRAMS The Plan provides for participant-directed investment programs providing a choice of separate funds. Amounts relating to balances and activity of each of those individual funds for 1998 were as follows:
ORTHODONTIC STABLE ENHANCED EVERGREEN CENTERS OF GROUP STOCK SELECT AMERICA, INC. TRUST MARKET BALANCED COMPANY PORTFOLIO FUND FUND STOCK FUND Total ------------------------------------------------------------------------ Assets Investments, at fair value: Common trust funds $568,923 $1,112,026 $ - $ - $1,680,949 Mutual fund - - 753,393 - 753,393 Employer security - - - 71,532 71,532 ------------------------------------------------------------------------ Total investments 568,923 1,112,026 753,393 71,532 2,505,874 Contributions receivable: Participants 15,112 9,239 7,434 1,121 32,906 Employer 3,394 906 627 137 5,064 ------------------------------------------------------------------------ Total contributions receivable 18,506 10,145 8,061 1,258 37,970 ------------------------------------------------------------------------ Net assets available for benefits $587,429 $1,122,171 $761,454 $ 72,790 $2,543,844 ======================================================================== Additions Investment income: Net appreciation in fair value of assets $ 21,164 $ 214,609 $ 67,288 $ 8,739 $ 311,800 Contributions: Participants 320,561 236,649 180,846 27,923 765,979 Employer 89,342 51,711 41,261 6,671 188,985 ------------------------------------------------------------------------ 409,903 288,360 222,107 34,594 954,964 Rollovers from other plans 58,107 24,300 11,638 7,945 101,990 ------------------------------------------------------------------------ Total additions 489,174 527,269 301,033 51,278 1,368,754 Deductions Benefit payments (67,887) (70,298) (31,061) (14,941) (184,187) Interfund transfer, net (61,364) 43,572 23,225 (5,433) - ------------------------------------------------------------------------ Net increase 359,923 500,543 293,197 30,904 1,184,567 Net assets available for benefits, beginning of year 227,506 621,628 468,257 41,886 1,359,277 ------------------------------------------------------------------------ Net assets available for benefits, end of year $587,429 $1,122,171 $761,454 $ 72,790 $2,543,844 ========================================================================
10 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Notes to Financial Statements (continued) 4. PARTICIPANT-DIRECTED INVESTMENT PROGRAMS (CONTINUED) Amounts relating to balances and activity of each of those individual funds for 1997 were as follows:
ORTHODONTIC STABLE ENHANCED EVERGREEN CENTERS OF GROUP STOCK SELECT AMERICA, INC. TRUST MARKET BALANCED COMPANY PORTFOLIO FUND FUND STOCK FUND Total ---------------------------------------------------------------------- Assets Investments, at fair value: Common trust funds $217,771 $614,656 $ - $ - $ 832,427 Mutual fund - - 462,623 - 462,623 Employer security - - - 40,989 40,989 ---------------------------------------------------------------------- Total investments 217,771 614,656 462,623 40,989 1,336,039 Contributions receivable: Participants 7,505 6,216 5,063 748 19,532 Employer 2,230 756 571 149 3,706 ---------------------------------------------------------------------- Total contributions receivable 9,735 6,972 5,634 897 23,238 ---------------------------------------------------------------------- Net assets available for benefits $227,506 $621,628 $468,257 $41,886 $1,359,277 ====================================================================== ADDITIONS Investment income: Net appreciation (depreciation) in fair value of assets $ 7,379 $134,292 $ 72,561 $(1,831) $ 212,401 Contributions: Participants 135,719 149,218 123,827 7,161 415,925 Employer 46,476 33,043 29,625 1,394 110,538 ---------------------------------------------------------------------- 182,195 182,261 153,452 8,555 526,463 Rollovers from other plans 11,966 - - - 11,966 ---------------------------------------------------------------------- Total additions 201,540 316,553 226,013 6,724 750,830 DEDUCTIONS Benefit payments (10,700) (79,812) (30,298) (249) (121,059) Interfund transfer, net (31,176) 29,293 (33,528) 35,411 - ---------------------------------------------------------------------- Net increase 159,664 266,034 162,187 41,886 629,771 Net assets available for benefits, beginning of year 67,842 355,594 306,070 - 729,506 ---------------------------------------------------------------------- Net assets available for benefits, end of year $227,506 $621,628 $468,257 $41,886 $1,359,277 ======================================================================
11 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Notes to Financial Statements (continued) 5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following is a reconciliation of net assets available for benefits at December 31, 1998 per the financial statements to the Form 5500: December 31 1998 1997 --------------------- Net assets available for benefits per the financial statements 2,543,844 1,359,277 Participants' contribution receivable (32,906) -- Employer's contribution receivable (5,064) -- --------------------- Net assets available for benefits per the Form 5500 2,505,874 1,359,277 The following is a reconciliation of contributions to the Plan at December 31, 1998 and 1997 per the financial statements to the Form 5500: December 31 1998 1997 --------------------- Contributions per the financial statements 954,964 526,463 Participants' contribution receivable (32,906) -- Employer's contribution receivable (5,064) -- --------------------- Contributions per the Form 5500 916,994 526,463 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. 12 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Notes to Financial Statements (continued) 6. FORFEITURES As of December 31, 1998 and 1997, there was approximately $15,900 and $2,600, respectively, of forfeited nonvested accounts. Forfeitures are used to reduce employer contributions in the year following the forfeiture. 7. 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 Company 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. 8. YEAR 2000 ISSUE (UNAUDITED) The Company has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle year 2000 dates. The Company has addressed internal systems that must be modified or replaced to function properly. The Company has substantially completed this phase of the project. Through December 31, 1998, the Company has incurred costs of approximately $34,000 with respect to year 2000 conversion. Additional costs associated with modifying software and equipment are not estimated to be significant and will be paid by the Company. The Company has also established formal communications with its third-party service providers to determine that they have developed plans to address their own year 2000 problems as they relate to the Plan's operations. All third-party service providers have indicated that they are year 2000 compliant. If modification of data processing systems of either the Plan, the Company, or its service providers are not completed timely, the year 2000 problem could have a material impact on the operations of the Plan. The Company has not developed a contingency plan because they are confident that all systems will be year 2000 ready. 13 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Item 27a - Schedule of Assets Held for Investment Purposes EIN: 72-1278948 PN: 001 December 31, 1998
Description of Investment, Including Maturity Date, Identity of Issue, Borrower, Rate of Interest, CURRENT Lessor or Similar Party Collateral or Par COST VALUE - ---------------------------------------------------------------------------------------------------- Common Trust Funds: *First Union National Bank of North Carolina - Enhanced Stock Market Fund 15,521 shares $ 803,520 $1,112,026 *First Union National Bank of North Carolina - Stable Group Trust Portfolio 11,057 shares 546,250 568,923 Mutual Fund: Evergreen Select Balanced Fund 36,428 shares 627,670 753,393 Employer Security: *Orthodontic Centers of America, Inc. Company Stock Fund 3,838 shares 67,171 71,532 ---------------------------------- $2,044,611 $2,505,874 ==================================
* - Indicates party-in-interest to the Plan. 14 Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan Item 27d - Schedule of Reportable Transactions EIN: 72-1278948 PN: 001 Year ended December 31, 1998
CURRENT VALUE TOTAL TOTAL OF ASSET ON NET VALUE OF VALUE OF COST OF TRANSACTION GAIN Identity of Party Involved PURCHASES SALES ASSET DATE (LOSS) - --------------------------------------------------------------------------------------------------------- Category (iii)--A series of transactions in excess of 5% of plan assets. First Union National Bank of North Carolina Stable Group Trust Portfolio $499,569 $ - $499,569 $ - $ - First Union National Bank of North Carolina Stable Group Trust Portfolio - 169,581 164,175 169,581 5,406 First Union National Bank of North Carolina Enhanced Stock Market Fund 362,901 - 362,901 - - First Union National Bank of North Carolina Enhanced Stock Market Fund - 80,140 60,125 80,140 20,015 First Union National Bank of North Carolina Evergreen Select Balanced Fund 272,403 - 272,403 - - First Union National Bank of North Carolina Evergreen Select Balanced Fund - 48,922 41,926 48,922 6,996
There were no category (i), (ii) or (iv) reportable transactions during 1998. 15 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 August 17, 1999 By: /s/ Brian D. Reynolds ---------------------------- First Union National Bank The Trustee 16 EXHIBIT INDEX 23 Consent of Ernst & Young LLP, Independent Auditors EX-23 2 CONSENT OF ERNST & YOUNG EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan for the registration of 75,000 Shares of Orthodontic Centers of America, Inc. common stock of our report dated June 29, 1999, with respect to the financial statements of the Orthodontic Centers of America, Inc. 401(k) Profit Sharing Plan included in this Annual Report (Form 11-K) for the year ended December 31, 1998. /s/ Ernst & Young LLP New Orleans, Louisiana August 20, 1999 -----END PRIVACY-ENHANCED MESSAGE-----