SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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: 0-14807
AMERICAN CLAIMS EVALUATION, INC.
(Exact name of Registrant as specified in its charter)
New York 11-2601199
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Jericho Plaza, Jericho, New York 11753
(Address of principal executive offices) (Zip Code)
(516) 938-8000
(Registrant's telephone number, including area code)
(Not applicable)
(Former name, former address and former fiscal year, if changed
since last report)
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 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 _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share
4,073,500 shares outstanding at October 25, 1996
AMERICAN CLAIMS EVALUATION, INC.
INDEX
Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
September 30, 1996 and March 31, 1996 3
Consolidated Statements of Earnings for
the Six Months and Three Months,
respectively, ended September 30, 1996
and 1995 4
Consolidated Statements of Cash Flows for
the Six Months ended September 30, 1996
and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
PART I. FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets
Sep.30,1996 Mar.31,1996
----------- -----------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 7,577,137 7,242,029
Marketable securities -- 364,500
Accounts receivable, net 370,335 771,585
Prepaid expenses 47,544 53,571
----------- -----------
Total current assets 7,995,016 8,431,685
Property and equipment, net 216,628 269,015
Excess cost over fair value of net
assets acquired, net 549,874 566,086
----------- -----------
$ 8,761,518 9,266,786
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 316,709 511,694
Accrued expenses 101,605 129,293
Income taxes payable 7,169 142,703
Deferred income taxes 14,473 78,826
----------- -----------
Total current liabilities 439,956 862,516
----------- -----------
Stockholders' equity:
Common stock, $.01 par value;
authorized 10,000,000 shares;
issued 4,250,000 shares 42,500 42,500
Additional paid-in capital 3,267,699 3,267,699
Unrealized gain on marketable
securities, net of tax -- 117,155
Retained earnings 5,309,580 4,976,916
----------- -----------
8,619,779 8,404,270
Less treasury stock, at cost,
176,500 shares at Sept. 30, 1996 (298,217) --
----------- -----------
Total stockholders' equity 8,321,562 8,404,270
----------- -----------
$ 8,761,518 9,266,786
=========== ===========
Note: The balance sheet at March 31, 1996 has been derived from the audited
financial statements at that date.
3
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
Three months ended Six months ended
------------------------ ------------------------
Sep.30,1996 Sep.30,1995 Sep.30,1996 Sep.30,1995
----------- ----------- ----------- -----------
Revenues $ 738,486 1,382,875 1,691,646 2,776,944
Cost of services 309,408 656,607 749,687 1,284,196
--------- --------- --------- ---------
Gross margin 429,078 726,268 941,959 1,492,748
Selling, general and
administrative expenses 446,108 621,131 940,235 1,298,711
--------- --------- --------- ---------
Operating earnings (loss) (17,030) 105,137 1,724 194,037
Other income:
Interest income 106,834 84,823 218,619 166,053
Gain on sale of
marketable securities -- 28,228 285,356 66,721
Miscellaneous income 10,982 19,427 21,965 38,853
--------- --------- --------- ---------
Earnings before provision
for income taxes 100,786 237,615 527,664 465,664
Provision for income taxes 31,000 100,000 195,000 190,000
--------- --------- --------- ---------
Net earnings $ 69,786 137,615 332,664 275,664
========= ========= ========= =========
Net earnings per share
of common stock $ .02 .03 .08 .06
========= ========= ========= =========
Weighted average
common and common
equivalent shares 4,192,528 4,251,267 4,229,343 4,250,634
========= ========= ========= =========
4
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
----------------------------
Sep.30,1996 Sep.30,1995
----------- -----------
Cash flows from operating activities:
Net earnings $ 332,664 275,664
----------- -----------
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 68,599 72,750
Gain on sales of marketable
securities (285,356) (66,721)
Deferred income taxes (4,000) (91,000)
Changes in assets and liabilities:
Decrease in accounts receivable 401,250 8,660
Decrease in prepaid expenses 6,027 38,065
Decrease in deposits -- 1,000
Increase (decrease) in accounts
payable (194,985) 27,461
(Decrease) in accrued expenses (27,688) (14,178)
Increase (decrease) in income
taxes payable (135,534) 171,908
----------- -----------
Total adjustments (171,687) 147,945
----------- -----------
Net cash provided by operating
activities 160,977 423,609
----------- -----------
Cash flows from investing activities:
Purchases of marketable securities (118,768) (26,893)
Proceeds from sales of marketable
securities 591,116 215,909
Capital expenditures -- (10,367)
----------- -----------
Net cash provided by investing
activities 472,348 178,649
----------- -----------
Cash flows from financing activities:
Purchase of treasury stock (298,217) --
----------- -----------
Net increase in cash and cash
equivalents 335,108 602,258
Cash and cash equivalents at beginning
of period 7,242,029 5,500,159
----------- -----------
Cash and cash equivalents at end of
period $ 7,577,137 6,102,417
=========== ===========
Supplemental Disclosure of Cash Flow
Information:
Income taxes paid $ 335,800 109,092
=========== ===========
5
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
General
The accompanying consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not contain all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. These statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended March
31, 1996, as filed with the Securities and Exchange Commission.
6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Six Months ended September 30, 1996 and 1995
The following table sets forth information with respect to the Company's sources
of revenue for the six month and three month periods ended September 30, 1996
and 1995, respectively:
Six months ended Three months ended
-------------------------- --------------------------
Sep.30,1996 Sep.30,1995 Sep.30,1996 Sep.30,1995
----------- ----------- ----------- -----------
Hospital bill
audit services $1,089,858 2,137,465 437,787 1,057,757
Vocational rehab.
services 601,788 639,479 300,699 325,118
---------- ---------- ---------- ----------
$1,691,646 2,776,944 738,486 1,382,875
========== ========== ========== ==========
Consolidated revenues for the six months ended September 30, 1996 decreased
46.6% to $1,691,646 from the $2,776,944 reported for the comparable period ended
September 30, 1995. During this period, hospital bill audit ("HBA") services
declined by 49.0% with vocational rehabilitation services decreasing 7.5% from
last year's corresponding results. Over the past several years, the HBA industry
as a whole has suffered a decline in demand for its services. The most notable
cause for the Company's decrease in HBA revenues is the previously announced
loss of business from a single client. During August 1995, MetraHealth notified
the Company that it was to be acquired by United Healthcare Corp. and planned to
perform its hospital bill audits internally, thus phasing out the use of the
Company's HBA services. MetraHealth, formerly the Company's largest client,
accounted for approximately 22% of consolidated revenues prior to August 1995.
The cost of evaluations for HBA services as a percentage of HBA revenues
decreased slightly to 45.6% from the previous year's comparable percentage of
46.1%. The cost of services for vocational rehabilitation services decreased to
42.0% of related revenues for the six months ended September 30, 1996 as
compared to 46.9% for the six months ended September 30, 1995.
Selling, general and administrative expenses for the six months ended September
30, 1996 increased to 55.6% of consolidated revenues from 46.8% of consolidated
revenues during the six months ended September 30, 1995. This percentage
increase was caused by the revenue reductions experienced by the Company. In
response to this situation, management cut selling, general and administrative
expenses by $358,476, or 27.1%, during the six months ended September 30, 1996
from the comparable period last year.
7
During the six months ended September 30, 1996, the Company earned $218,619 of
interest income representing an increase of $52,566 over the six months ended
September 30, 1995. This increase resulted from the combination of higher
interest rates and the increase in cash and cash equivalents available for
investment. The Company also realized net gains on the sales of marketable
securities of $285,356 during the six months ended September 30, 1996, as
compared to gains of $66,721 on the sales of marketable securities during the
six months ended September 30, 1995.
Liquidity and Capital Resources
During the six month period ended September 30, 1996, cash provided by operating
activities was $160,977, compared with $423,609 during the comparable period
last year. Net earnings of $332,664 coupled with a decrease in accounts
receivable of $401,250 which were offset by gains on the sale of marketable
securities of $285,356 and decreases in accounts payable and taxes payable of
$194,985 and $135,534, respectively, were the major factors in net cash provided
by operations during the current six month period.
Cash provided by investing activities for the six months ended September 30,
1996 was $472,348, as compared with $178,649 in the comparable period last year.
During the six months ended September 30, 1996, $591,116 of cash provided from
the proceeds of sales of marketable securities was offset by $118,768 used for
the purchases of marketable securities.
Cash used in financing activities during the second quarter ended September 30,
1996 consisted of $298,217 used by the Company to repurchase 176,500 of its
Common Shares.
The Company had working capital of $7,555,060 at September 30, 1996, compared to
working capital of $7,569,169 at March 31, 1996. The Company believes that it
has sufficient cash resources and working capital to meet its capital
requirements for the foreseeable future.
The Company has intensified its review of strategic alternatives for maximizing
shareholder value, focusing upon acquisitions and/or the dispositions of certain
assets. Potential acquisitions will be evaluated based on their merits within
the Company's current line of business, as well as other fields.
8
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of American Claims Evaluation, Inc.
was held on September 24, 1996.
One proposal, subject to shareholder approval, was approved at the
Annual meeting by a vote of shareholders. Under this proposal,
management nominees for election to the Board of Directors, Messrs.
Gelman, Elkin and Gutmann, were re-elected as directors of the Company
to serve until the Annual Meeting of Shareholders to be held in 1997
and until their respective successors are duly elected and qualified.
Item 6 - Exhibits and Reports on Form 8-K
(a) None.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
9
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
AMERICAN CLAIMS EVALUATION, INC.
Date: October 25, 1996 By: /s/ Gary Gelman
----------------
Gary Gelman
Chairman of the Board,
President and Chief Executive
Officer
(Principal Executive Officer)
Date: October 25, 1996 By: /s/ Gary J. Knauer
-------------------
Gary J. Knauer
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
10