UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-19393
LIFEMARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3338328
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)
7600 NORTH 16TH STREET
SUITE 150
PHOENIX, ARIZONA 85020
(Address of principal executive offices)
(Zip Code)
602-331-5100
(Registrant's telephone number, including area code)
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 ______
There were 5,084,673 shares of common stock outstanding as of April 10, 2000.
TABLE OF CONTENTS
PAGE
Part I Financial Information
Item 1.Financial Statements
Consolidated Balance Sheets......................................3
Consolidated Statements of Income................................4
Consolidated Statements of Cash Flows............................5
Notes to Unaudited Consolidated Financial Statements..........6-10
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFEMARK CORPORATION
CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, MAY 31,
2000 1999
-------------- -------------
(UNAUDITED)
ASSETS
------
Current Assets:
Cash and cash equivalents, including restricted cash of $11,163,000
and $9,713,000, respectively $ 15,924,000 $ 13,792,000
Short-term investments, including restricted investments of $2,878,000
and none, respectively 2,878,000 501,000
Accounts and notes receivable and unbilled services, net 19,480,000 5,886,000
Deferred income taxes, net 1,054,000 1,213,000
Prepaid expenses and other current assets 1,394,000 882,000
------------ ------------
Total current assets $ 40,730,000 $ 22,274,000
Related party notes receivable - 568,000
Property and equipment, net 5,532,000 4,205,000
Performance bonds 6,823,000 4,203,000
Goodwill, net 2,188,000 2,462,000
Other assets 321,000 1,108,000
------------ ------------
Total assets $ 55,594,000 $ 34,820,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 659,000 $ 659,000
Accrued medical claims 25,832,000 8,662,000
Risk pool payable 654,000 691,000
Related party risk pool payable 164,000 152,000
Accrued compensation 2,261,000 2,464,000
Other accrued expenses 4,070,000 1,750,000
Current portion of related party interest payable - 710,000
Current portion of long-term debt 1,308,000 23,000
------------ ------------
Total current liabilities 34,948,000 15,111,000
Long-term debt 2,581,000 211,000
Related party long-term debt 300,000 3,440,000
Deferred income taxes, net 210,000 155,000
------------ ------------
Total liabilities 38,039,000 18,917,000
------------ ------------
Commitments and Contingencies - -
Stockholders' Equity:
Common stock, $0.01 par value
Authorized - 10,000,000 shares
Issued and outstanding 5,085,000 shares
and 4,808,000 shares, respectively 51,000 48,000
Capital in excess of par value 16,955,000 16,148,000
Stockholder notes receivable (696,000) -
Retained earnings (accumulated deficit) 1,245,000 (293,000)
------------ ------------
Total stockholders' equity 17,555,000 15,903,000
------------ ------------
$ 55,594,000 $ 34,820,000
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
LIFEMARK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- ------------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
2000 1999 2000 1999
-------------- ------------- -------------- --------------
Revenues $ 49,650,000 $ 21,573,000 $ 97,832,000 $ 61,456,000
Direct cost of operations 43,418,000 16,064,000 79,226,000 45,675,000
Marketing, sales and administrative 5,108,000 5,145,000 16,522,000 14,260,000
-------------- ------------- -------------- --------------
Total costs and expenses 48,526,000 21,209,000 95,748,000 59,935,000
-------------- ------------- -------------- --------------
Operating income 1,124,000 364,000 2,084,000 1,521,000
-------------- ------------- -------------- --------------
Interest income 614,000 234,000 1,137,000 720,000
Interest expense (99,000) (91,000) (292,000) (271,000)
-------------- ------------- -------------- --------------
Net interest income 515,000 143,000 845,000 449,000
-------------- ------------- -------------- --------------
Income before income taxes 1,639,000 507,000 2,929,000 1,970,000
Provision (benefit) for income taxes 830,000 (111,000) 1,391,000 438,000
-------------- ------------- -------------- --------------
Net income $ 809,000 $ 618,000 $ 1,538,000 $ 1,532,000
============== ============= ============== ==============
Net income per share--basic $ 0.17 $ 0.13 $ 0.32 $ 0.32
============== ============= ============== ==============
Weighted average common
shares outstanding--basic 4,850,000 4,767,000 4,822,000 4,727,000
============== ============= ============== ==============
Net income per share--assuming dilution $ 0.16 $ 0.11 $ 0.30 $ 0.28
============== ============= ============== ==============
Weighted average common shares
outstanding--assuming dilution 4,984,000 5,882,000 5,454,000 5,891,000
============== ============= ============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
LIFEMARK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
-------------------------------
FEBRUARY 29, FEBRUARY 28,
2000 1999
-------------- ---------------
Cash flows from operating activities:
Net income $ 1,538,000 $ 1,532,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Bad debt expense (11,000) (2,000)
Depreciation and amortization 1,615,000 1,685,000
Loss on sale of property and equipment 6,000 5,000
Deferred income taxes 214,000 (332,000)
Interest on long-term debt 163,000 165,000
Changes in assets and liabilities:
Accounts receivable and unbilled services (13,583,000) (1,410,000)
Prepaid expenses and other current assets (512,000) (93,000)
Other assets 787,000 (195,000)
Accounts payable - 913,000
Accrued medical claims 17,170,000 1,273,000
Risk pool payable (37,000) (136,000)
Related party risk pool payable 12,000 (35,000)
Accrued compensation (203,000) 453,000
Accrued expenses 2,320,000 (379,000)
Interest paid on long-term debt (844,000) -
-------------- ---------------
Net cash provided by operating activities 8,635,000 3,444,000
-------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment (2,966,000) (1,003,000)
Proceeds from sale of property and equipment 290,000 55,000
Purchase of short-term investments (2,878,000) (1,645,000)
Proceeds from maturity/sale of short-term investments 501,000 999,000
Proceeds from related party notes receivable 568,000 121,000
Proceeds from maturity of assets securing performance bond - 1,241,000
Purchases of assets securing performance bond (2,620,000) -
-------------- ---------------
Net cash used in investing activities (7,105,000) (232,000)
-------------- ---------------
Cash flows from financing activities:
Proceeds from long-term debt 3,698,000 -
Payments on long-term debt (3,210,000) (155,000)
Proceeds from common stock issuance 114,000 198,000
-------------- ---------------
Net cash provided by (used in) financing activities 602,000 43,000
-------------- ---------------
Net increase (decrease) in cash and cash equivalents 2,132,000 3,255,000
Cash and cash equivalents, beginning of period 13,792,000 12,764,000
-------------- ---------------
Cash and cash equivalents, end of period $ 15,924,000 $ 16,019,000
============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
LIFEMARK CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
In management's opinion, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) considered necessary for a fair statement of the results for the
interim periods presented. The results of operations for the period ended
February 29, 2000 are not necessarily indicative of the results to be expected
for the full year. The interim consolidated financial statements should be read
in conjunction with the Lifemark Corporation ("Lifemark" or "Company")
consolidated financial statements and notes thereto included in the Company's
Form 10-K for the year ended May 31, 1999.
NOTE 2 - NET INCOME PER SHARE
Basic net income per share is computed by dividing net income by the weighted
average number of common shares outstanding during each period. Net income per
share assuming dilution is computed by dividing net income by the weighted
average number of common shares outstanding during the period after giving
effect to dilutive stock options and warrants and adjusted for dilutive common
shares assumed to be issued on conversion of the Company's convertible loans.
The following is the computation of the reconciliation of the numerators and
denominators of net income per common share - basic and net income per common
share - assuming dilution in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings Per Share".
THREE MONTHS ENDED
---------------------------------------------------------------------------
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------------------------- ----------------------------------
Income Shares Per Share Income Shares Per Share
(NUMERATOR) (DENOMINATOR) Amount (NUMERATOR) (DENOMINATOR) Amount
---------- ------------ --------- --------- ----------- ---------
Net income per common share:
Income available to common stockholders $ 809,000 5,085,000 $ 618,000 4,767,000
Reduction in shares outstanding in
connection with stockholder notes
receivable (6,000) (235,000) - -
---------- --------- ---------- -----------
Adjusted income available to common
stockholders 803,000 4,850,000 $ 0.17 618,000 4,767,000 $ 0.13
Effect of dilutive securities:
Stock options and warrants - 56,000 - 258,000
Convertible notes 3,000 78,000 40,000 857,000
---------- --------- ---------- -----------
Net income per common share,
assuming dilution:
Income available to common
stockholders and assumed conversions $ 806,000 4,984,000 $ 0.16 $ 658,000 5,882,000 $ 0.11
========== ========= ========= ========== =========== =========
6
NINE MONTHS ENDED
---------------------------------------------------------------------------
FEBRUARY 29, 2000 FEBRUARY 28, 1999
-------------------------------------- ----------------------------------
Income Shares Per Share Income Shares Per Share
(NUMERATOR) (DENOMINATOR) Amount (NUMERATOR) (DENOMINATOR) Amount
----------- ------------- ---------- ----------- ------------ ---------
Net income per common share:
Income available to common stockholders $ 1,538,000 4,939,000 $ 1,532,000 4,727,000
Reduction in shares outstanding in
connection with stockholder notes
receivable (10,000) (117,000) - -
----------- ------------- ----------- -----------
Adjusted income available to common
shareholders 1,528,000 4,822,000 $ 0.32 1,532,000 4,727,000 $ 0.32
Effect of dilutive securities:
Stock options and warrants - 42,000 - 307,000
Convertible notes 83,000 590,000 119,000 857,000
----------- ------------- ----------- -----------
Net income per common share,
assuming dilution:
Income available to common
stockholders and assumed conversions $ 1,611,000 5,454,000 $ 0.30 $ 1,651,000 5,891,000 $ 0.28
=========== ============= ========== =========== =========== =========
NOTE 3 - ACCOUNTS AND NOTES RECEIVABLE
Third party accounts and notes receivable and unbilled services consist of the
following:
February 29, 2000 May 31, 1999
----------------- ------------
Due from Rio Grande HMO, Inc. $ 14,216,000 $ -
Contract management receivables 3,170,000 3,869,000
Due from AHCCCSA 1,697,000 1,810,000
Interest receivable 170,000 147,000
Other 262,000 95,000
------------- -------------
19,515,000 5,921,000
Less allowance for doubtful accounts (35,000) (35,000)
------------- -------------
Net current portion of accounts and
notes receivables $ 19,480,000 $ 5,886,000
============== =============
The amount due from Rio Grande HMO, Inc. primarily represents revenue earned by
Lifemark of Texas, Inc. ("LMTX"), a subsidiary of the Company, which has
contracted with Rio Grande HMO, Inc. ("RGHMO"), a subsidiary of Health Care
Services Corporation ("HCSC") as successor to Blue Cross Blue Shield of Texas
("BCBSTX").
The amounts due from AHCCCSA primarily include billed and unbilled reinsurance,
SOBRA and capitation receivables.
The current portion of related party notes receivable are $213,000 and none at
February 29, 2000 and May 31, 1999 respectively. The related party note
receivable at February 29, 2000 is due from a Director of the Company. The note
bears an interest rate of 8% and matures on December 31, 2000.
7
NOTE 4 - RESTRICTIONS ON FUND TRANSFERS
Certain of the Company's operating subsidiaries are subject to state regulations
which require compliance with certain net worth, reserve and deposit
requirements. To the extent the operating subsidiaries must comply with these
regulations, they may not have the financial flexibility to transfer funds to
the parent organization, Lifemark. Net assets of subsidiaries (after
inter-company eliminations) which, at February 29, 2000, may not be transferred
to Lifemark by subsidiaries in the form of loans, advances or cash dividends
without the consent of a third party are referred to as "Restricted Net Assets".
Total Restricted Net Assets of these operating subsidiaries were $12,429,000 at
February 29, 2000, with deposit and reserve requirements representing $6,923,000
of the Restricted Net Assets and net worth requirements, in excess of deposit
and reserve requirements, representing the remaining $5,506,000.
NOTE 5 - BUSINESS SEGMENTS
The Company's business segments consist of management services, long-term care
health services and acute care health services. The management services segment
is engaged in the business of administering risk-based managed care plans and
programs in seven states. Long-term care health services is comprised of Ventana
Health Systems, Inc. ("Ventana"), which is a long-term care Medicaid health plan
operating in seven counties in Arizona; Lifemark of Texas, Inc. ("LMTX") which
has contracted with RGHMO to share financial risk in the state of Texas'
STAR+PLUS program contract in Harris County, Texas. Lifemark At Home, Inc.,
which provides in-home personal, respite, companionship and homemaking services
to qualified recipients in Arizona. Acute care health services consists of
Arizona Health Concepts, Inc. ("AHC"), an acute care Medicaid health plan
currently operating in two counties in Arizona.
8
Information concerning operations by business segment follows:
For the Three Months Ended February 29, 2000
-----------------------------------------------------------
Management Long-Term Care Acute Care
SERVICES HEALTH SERVICES HEALTH SERVICES TOTALS
------------ --------------- ---------------- ------
Total revenues from reportable segments $ 13,142,000 $ 36,149,000 $ 5,399,000 $ 54,690,000
Intersegment revenues (4,650,000) (390,000) - (5,040,000)
------------ ------------- ------------ -------------
Total consolidated revenues $ 8,492,000 $ 35,759,000 $ 5,399,000 $ 49,650,000
============ ============= ============ =============
Interest income $ 84,000 $ 446,000 $ 84,000 $ 614,000
Intersegment interest income - - - -
Interest expense (99,000) - - (99,000)
Intersegment interest expense - - - -
------------ ------------- ------------ -------------
Net interest income (expense) $ (15,000) $ 446,000 $ 84,000 $ 515,000
============ ============= ============ =============
Depreciation and amortization $ 541,000 $ - $ - $ 541,000
============ ============= ============ =============
Segment income (loss) before taxes $ 1,667,000 $ (58,000) $ 30,000 $ 1,639,000
============ ============= ============ =============
Expenditures for capital assets $ 1,111,000 $ - $ - $ 1,111,000
============ ============= ============ =============
For the Three Months Ended February 28, 1999
--------------------------------------------------------------
Management Long-Term Care Acute Care
SERVICES HEALTH SERVICES HEALTH SERVICES TOTALS
------------ --------------- ---------------- ------
Total revenues from reportable segments $ 11,084,000 $ 7,713,000 $ 4,381,000 $ 23,178,000
Intersegment revenues (1,302,000) (303,000) - (1,605,000)
------------ ------------- ------------ -------------
Total consolidated revenues $ 9,782,000 $ 7,410,000 $ 4,381,000 $ 21,573,000
============ ============= ============ =============
Interest income $ 47,000 $ 118,000 $ 75,000 $ 240,000
Intersegment interest income - (6,000) - (6,000)
Interest expense (97,000) - - (97,000)
Intersegment interest expense 6,000 - - 6,000
------------ ------------- ------------ -------------
Net interest income (expense) $ (44,000) $ 112,000 $ 75,000 $ 143,000
============ ============= ============ =============
Depreciation and amortization $ 543,000 $ - $ - $ 543,000
============ ============= ============ =============
Segment income (loss) before taxes $ 103,000 $ 547,000 $ (143,000) $ 507,000
============ ============= ============ =============
Expenditures for capital assets $ 378,000 $ - $ - $ 378,000
============ ============= ============ =============
9
For the Nine Months Ended February 29, 2000
-----------------------------------------------------------
Management Long-Term Care Acute Care
SERVICES HEALTH SERVICES HEALTH SERVICES TOTALS
------------ --------------- ---------------- ------
Total revenues from reportable segments $ 38,589,000 $ 52,780,000 $ 15,058,000 $ 106,427,000
Intersegment revenues (7,493,000) (1,102,000) - (8,595,000)
------------ ------------- ------------ -------------
Total consolidated revenues $ 31,096,000 $ 51,678,000 $ 15,058,000 $ 97,832,000
============ ============= ============ =============
Interest income $ 213,000 $ 709,000 $ 219,000 $ 1,141,000
Intersegment interest income - (4,000) - (4,000)
Interest expense (296,000) - - (296,000)
Intersegment interest expense 4,000 - - 4,000
------------ ------------- ------------ -------------
Net interest income $ (79,000) $ 705,000 $ 219,000 $ 845,000
============ ============= ============ =============
Depreciation and amortization $ 1,615,000 $ - $ - $ 1,615,000
============ ============= ============ =============
Segment income (loss) before taxes $ 3,370,000 $ 244,000 $ (685,000) $ 2,929,000
============ ============= ============ =============
Expenditures for capital assets $ 2,966,000 $ - $ - $ 2,966,000
============ ============= ============ =============
Segment total assets $ 28,105,000 $ 29,663,000 $ 7,359,000 $ 65,127,000
Intersegment assets (8,915,000) (204,000) (414,000) (9,533,000)
------------ ------------- ------------ -------------
Total assets $ 19,190,000 $ 29,459,000 $ 6,945,000 $ 55,594,000
============ ============= ============ =============
For the Nine Months Ended February 28, 1999
-----------------------------------------------------------
Management Long-Term Care Acute Care
SERVICES HEALTH SERVICES HEALTH SERVICES TOTALS
------------ --------------- ---------------- ------
Total revenues from reportable segments $ 31,573,000 $ 22,029,000 $ 12,369,000 $ 65,971,000
Intersegment revenues (3,678,000) (837,000) - (4,515,000)
------------ ------------- ------------ -------------
Total consolidated revenues $ 27,895,000 $ 21,192,000 $ 12,369,000 $ 61,456,000
============ ============= ============ =============
Interest income $ 132,000 $ 357,000 $ 255,000 $ 744,000
Intersegment interest income - (24,000) - (24,000)
Interest expense (295,000) - - (295,000)
Intersegment interest expense 24,000 - - 24,000
------------ ------------- ------------ -------------
Net interest income (expense) $ (139,000) $ 333,000 $ 255,000 $ 449,000
============ ============= ============ =============
Depreciation and amortization $ 1,685,000 $ - $ - $ 1,685,000
============ ============= ============ =============
Segment income (loss) before taxes $ 440,000 $ 1,744,000 $ (214,000) $ 1,970,000
============ ============= ============ =============
Expenditures for capital assets $ 1,003,000 - - $ 1,003,000
============ ============= ============ =============
Segment total assets $ 24,388,000 $ 11,665,000 $ 8,314,000 $ 44,367,000
Intersegment assets (8,337,000) (402,000) (105,000) (8,844,000)
------------ ------------- ------------ -------------
Total assets $ 16,051,000 $ 11,263,000 $ 8,209,000 $ 35,523,000
============ ============= ============ =============
10
SIGNATURES
Pursuant to the requirements of 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.
LIFEMARK CORPORATION
By: /S/ RHONDA E. BREDE
----------------------------------------------
Rhonda E. Brede, President and Chief Executive
Officer (Principal Executive Officer)
By: /S/ MICHAEL J. KENNEDY
----------------------------------------------
Michael J. Kennedy, Vice President and Chief
Financial Officer (Principal Financial and
Accounting Officer)
Dated: April 19, 2000
11