<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
{x} Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended JUNE 30, 1997
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 : 333-2796
CERULEAN COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-2217138
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3350 Peachtree Road, N.E., Atlanta, Georgia 30326
(Address of principal executive offices) (Zip Code)
(404) 842-8000
(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
----------- ----------
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.
Class: Class A Convertible Common Stock, no par value, $0.01 stated value.
Outstanding as of July 31, 1997 - 351,470 shares
<PAGE> 2
CERULEAN COMPANIES, INC.
FORM 10-Q
JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 Page 3
Consolidated Statements of Income for the three months
and six months ended June 30, 1997 and 1996 Page 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 Page 5
Notes to Consolidated Financial Statements Page 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations Page 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk Page 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Page 11
Item 2. Changes in Securities Page 11
Item 3. Defaults Upon Senior Securities Page 11
Item 4. Submission of Matters to a Vote of Security Holders Page 11
Item 5. Other Information Page 11
Item 6. Exhibits and Reports on Form 8-K Page 11
Signatures Page 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CERULEAN COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available-for-sale, at fair value (amortized cost: $181,803,504;
$156,949,004) $183,876,356 $157,637,412
Equity securities, at fair value (cost: $34,923,793; $50,969,299) 47,207,823 60,104,421
Short-term investments, at fair value (cost: $22,437,103; $475,000) 22,437,103 423,788
------------ ------------
Total investments 253,521,282 218,165,621
Cash and cash equivalents 57,029,418 89,024,410
Reimbursable portion of estimated benefit liabilities 99,526,300 101,645,300
Accounts receivable 48,738,794 42,606,134
FEP assets held by agent 22,715,241 22,715,241
Property and equipment 31,042,600 31,264,521
Other assets 13,882,754 11,808,667
------------ ------------
Total assets $526,456,389 $517,229,894
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Estimated benefit liabilities $189,574,288 $181,718,093
Unearned premiums 11,128,197 8,983,956
FEP stabilization reserve 22,715,241 22,715,241
Accounts payable and accrued expenses 25,958,574 31,519,728
Payables to other plans 1,443,052 2,633,307
Other liabilities 32,724,479 31,944,999
Note payable 3,500,000 3,500,000
------------ ------------
Total liabilities 287,043,831 283,015,324
------------ ------------
Mandatorily redeemable preferred stock:
Class B Convertible Preferred Stock, no par value; liquidation
preference, $1,000 per share; mandatory redemption, $900 per share
Authorized, issued and outstanding, 49,900 shares 46,645,042 46,645,042
------------ ------------
Shareholders' equity:
Blank Preferred Stock, no par value
Authorized and unissued 100,000,000 shares -- --
Class A Convertible Common Stock, no par value, $0.01, stated value
Authorized 50,000,000 shares; issued and outstanding 351,425 and
350,615 shares, respectively 3,514 3,506
Common Stock, no par value
Authorized and unissued 100,000,000 shares -- --
Net unrealized appreciation on securities 11,586,882 7,886,318
Retained earnings 181,177,120 179,679,704
------------ ------------
Total shareholders' equity 192,767,516 187,569,528
============ ============
Total liabilities and shareholders' equity $526,456,389 $517,229,894
============ ============
</TABLE>
See accompanying notes.
3
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CERULEAN COMPANIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Premiums $ 376,313,848 $ 324,748,103 $ 738,928,596 $ 648,753,115
Investment and other income 4,362,727 3,323,782 8,008,872 6,521,087
Realized gains 3,871,775 810,643 5,787,022 900,350
------------- ------------- ------------- -------------
Total revenues 384,548,350 328,882,528 752,724,490 656,174,552
Benefits expense 345,260,244 290,013,467 669,044,208 579,051,439
Operating expenses 40,524,928 33,894,579 82,198,438 68,347,975
------------- ------------- ------------- -------------
Operating income (loss) (1,236,822) 4,974,482 1,481,844 8,775,138
Non-operating income - 1,275,000 1,275,000 1,275,000
------------- ------------- ------------- -------------
Income (loss) before income taxes and minority
interest (1,236,822) 6,249,482 2,756,844 10,050,138
Income tax expense (benefit) (Note 4) (517,000) 1,132,000 102,000 1,947,000
Minority interests 407,597 (121,140) 339,580 (304,009)
------------- ------------- ------------- -------------
Net income (loss) $ (312,225) $ 4,996,342 $ 2,994,424 $ 7,799,129
============= ============= ============= =============
</TABLE>
See accompanying notes.
4
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CERULEAN COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,994,424 $ 7,799,129
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Non-cash and non-operating items:
Depreciation 4,752,745 4,410,980
Amortization 151,022 161,137
Uncollectible receivables (310,528) 1,109,240
Gain on sale of investments (5,787,022) (900,350)
Gain loss on sale of property and equipment (58,166) 14,568
Non-operating income (1,275,000) (1,275,000)
Decrease (increase) in certain assets:
Reimbursable portion of estimated benefit liabilities 2,119,000 (3,998,000)
Accounts receivable (5,822,132) (7,058,001)
Other assets (2,958,087) 984,490
Increase (decrease) in certain liabilities:
Estimated benefit liabilities 7,856,195 7,256,451
Unearned premiums 2,144,241 890,670
Accounts payable and accrued expenses (5,561,154) 7,302,622
Payables to other plans (1,190,255) 156,539
Other liabilities (717,520) (4,639,337)
Minority interest in sale of stock by a subsidiary (1,225,000) (1,225,000)
------------ ------------
Net cash provided by (used in) operating activities (4,887,237) 10,990,138
INVESTING ACTIVITIES
Investments purchased (88,209,546) (65,545,875)
Investments sold or matured 63,074,449 34,143,484
Property and equipment purchased (4,568,409) (4,252,672)
Property and equipment sold 95,751 625,189
------------ ------------
Net cash used in investing activities (29,607,755) (35,029,874)
FINANCING ACTIVITIES
Proceeds from note payable - 1,000,000
Proceeds from the issuance of preferred stock - 46,633,000
Sale of stock by a subsidiary 2,500,000 2,500,000
------------ ------------
Net cash provided by financing activities 2,500,000 50,133,000
------------ ------------
(Decrease) increase in cash and cash equivalents (31,994,992) 26,093,264
Cash and cash equivalents at beginning of period 89,024,410 49,304,688
------------ ------------
Cash and cash equivalents at end of period $ 57,029,418 $ 75,397,952
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
CERULEAN COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
UNAUDITED
1. ORGANIZATION
Cerulean Companies, Inc. (the "Company") was incorporated under the laws of the
State of Georgia on February 2, 1996 to act as the holding company for Blue
Cross and Blue Shield of Georgia, Inc. ("BCBSGA") and its subsidiaries, and for
other lawful purposes. On February 2, 1996, the Company acquired all of the
outstanding capital stock of BCBSGA, following BCBSGA's conversion from a
not-for-profit corporation to a for-profit corporation pursuant to a Plan of
Conversion approved by the Georgia Commissioner of Insurance on December 27,
1995 (the "Conversion"). In connection with the Conversion, the Company issued
49,900 shares of Class B Convertible Preferred Stock ("Preferred Stock") to
raise $49.9 million in capital. After deducting offering costs, the net proceeds
to the Company were $46.6 million.
Although the Company did not become a holding company for BCBSGA until the
Conversion on February 2, 1996, the consolidated results of operations include
the historical operations of BCBSGA and its subsidiaries prior to February 2,
1996 and the Company (including BCBSGA and its subsidiaries on a consolidated
basis) from the period February 2, 1996 to June 30, 1996 and thereafter.
Effective May 14, 1996, the Company's registration under the Securities Act of
1933 of the public offering of its Class A Convertible Common Stock, no par
value (the "Class A Stock") with the Securities and Exchange Commission became
effective. The registration of the Class A Stock under section 12(g) of the
Exchange Act of 1934 became effective on June 30, 1997. As of July 31, 1997,
351,470 shares of Class A Stock were issued and outstanding. Currently, the
Class A Stock is not publicly traded.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company's accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles ("GAAP")
and require the use of management's estimates. As to the Company's managed care,
health and life insurance operations, GAAP varies in some respects from
statutory accounting practices permitted or prescribed by insurance regulatory
authorities. The Company's health care plan subsidiary, its health maintenance
organization and its life insurance subsidiary are subject to regulation by the
Georgia Insurance Department, including minimum capital and surplus requirements
and restrictions on payment of dividends. Because of the nature of the Company's
operations, the results for interim periods are not necessarily indicative of
results expected for the entire year. In the opinion of management, all material
adjustments necessary for a fair presentation of the financial position and
results of operations for the interim periods have been made. All such
adjustments are of a normal recurring nature.
PRINCIPLES OF CONSOLIDATION
The Company's accompanying consolidated financial statements include the
accounts of the Company, BCBSGA and its wholly-owned health maintenance and life
insurance subsidiaries, a non-insurance subsidiary and community health
partnership network joint ventures ("CHPNs") in which BCBSGA has a majority
interest. All significant intercompany transactions and balances have been
eliminated in consolidation.
ACCOUNTING FOR A SALE OF STOCK BY A SUBSIDIARY
Gains arising from a subsidiary issuing its own stock to a third party are
recorded as non-operating income and are presented as a separate line item in
the consolidated statements of income.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform to the current
year presentation.
6
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CERULEAN COMPANIES, INC.
3. EARNINGS PER SHARE
Earnings per share are omitted because such data are not meaningful at the
present time due to the likely dilutive events that will occur prior to the
conversion of the Class A Convertible Common Stock or the Class B Convertible
Preferred Stock. Presently there is no market for the Class A Stock or any
equity securities of the Company, and the Company does not anticipate
development of such a market in the foreseeable future.
4. INCOME TAXES
The Company increased the net value of certain long-lived tax assets which will
result in an estimated additional tax benefit of approximately $2.1 million in
1997 whereby $1.0 million was recognized during the six months ended June 30,
1997.
7
<PAGE> 8
CERULEAN COMPANIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto. The Company's actual future results
could differ materially from its historical results.
OVERVIEW
Cerulean Companies, Inc. (the "Company") was incorporated under the laws of the
State of Georgia on February 2, 1996 to act as the holding company for Blue
Cross and Blue Shield of Georgia, Inc. ("BCBSGA") and its subsidiaries, and for
other lawful purposes. On February 2, 1996 the Company acquired all of the
outstanding capital stock of BCBSGA, following BCBSGA's conversion from a
not-for-profit corporation to a for-profit corporation pursuant to a Plan of
Conversion approved by the Georgia Commissioner of Insurance on December 27,
1995 (the "Conversion"). In connection with the Conversion, the Company issued
49,900 shares of Class B Convertible Preferred Stock ("Preferred Stock") to
raise $49.9 million in capital. After deducting offering costs, the net proceeds
to the Company were $46.6 million.
Although the Company did not become a holding company for BCBSGA until the
Conversion on February 2, 1996, the consolidated results of operations include
the historical operations of BCBSGA and its subsidiaries prior to February 2,
1996 and the Company (including BCBSGA and its subsidiaries on a consolidated
basis) from the period February 2, 1996 to June 30, 1996 and thereafter.
Effective May 14, 1996, the Company's registration under the Securities Act of
1933 of the public offering of its Class A Convertible Common Stock, no par
value (the "Class A Stock") with the Securities and Exchange Commission became
effective. The registration of the Class A Stock under section 12(g) of the
Exchange Act of 1934 became effective on June 30, 1997. As of July 31, 1997,
351,470 shares of Class A Stock were issued and outstanding. Currently, the
Class A Stock is not publicly traded.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Premium revenues increased 16% to $376.3 million for the three months ended June
30, 1997 from $324.7 million for the three months ended June 30, 1996. Premium
revenues for indemnity and PPO products increased $5.3 million to $271.0 million
for the three months ended June 30, 1997. The Company experienced lower
enrollment of 2% on the average in its indemnity and PPO products during the
1997 second quarter compared to the same period in 1996. HMO and POS premiums
increased to $101.3 million for the three months ended June 30, 1997 from $56.5
million for the three months ended June 30, 1996. New sales, in-group-growth,
and to a lesser extent, migrations from traditional indemnity products into HMO
and POS products, continued to drive HMO and POS membership growth to 295,000
members at June 30, 1997 from 174,000 members at June 30, 1996.
Investment and other income increased 31% to $4.4 million for the three months
ended June 30, 1997 from $3.3 million for the three months ended June 30, 1996
as a result of growth in the Company's investment portfolio.
Realized gains on the sale of marketable securities increased to $3.9 million
for the three months ended June 30, 1997 from $0.8 million for the three months
ended June 30, 1996. These results are not necessarily indicative of results to
be expected in the future. The magnitude of realized gains in any quarter can
fluctuate due to fixed and equity market performance, as well as timing
individual sale transactions, which are subject to decisions made by individual
investment portfolio managers.
The Company's total loss ratio (benefits expense as a percentage of premium
revenues) increased to 91.7% for the three months ended June 30, 1997 from 89.3%
for the three months ended June 30, 1996 as the Company experienced increasing
medical cost trends and higher utilization in its indemnity and PPO products in
all markets, and higher cost trends and utilization in all of its managed care
networks. Accordingly, the loss ratio for indemnity and PPO products increased
to 93.0% for the second quarter of 1997 from 90.3% for the second quarter of
1996 and the loss ratio for HMO and POS products increased to 89.9% for the
second quarter of 1997 from 86.6% for the second quarter of 1996. The Company
has observed that many industry competitors are reporting worsening medical cost
trends, particularly in HMO products in Georgia and throughout the Southeast.
8
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CERULEAN COMPANIES, INC.
Operating expenses increased 20% to $40.5 million for the second quarter of 1997
from $33.9 million for the second quarter of 1996, principally due to growth in
the Company's infrastructure necessary to support its Medicare Risk product
development and the increased HMO and POS membership base. As a result, the
operating expense ratio (operating expenses as a percentage of premium revenues)
increased to 10.8% for the three months ended June 30, 1997, from 10.4% for the
three months ended June 30, 1996.
Non-operating income of $1.3 million for the three months ended June 30, 1996
related to a gain on the sale of a 5% interest in one of the BCBSGA's community
health partnership network joint ventures ("CHPNs") subsidiaries to a third
party.
The Company recorded a net tax benefit of $0.5 million for the three months
ended June 30, 1997 compared to tax expense of $1.1 million for the three months
ended June 30, 1996. The net tax benefit arose from operating losses for the
1997 period combined with a tax benefit related to the increase in 1997 of the
net value of certain long-lived tax assets offset by CHPN subsidiary operating
losses for which tax benefits are not available to the Company's consolidated
tax group.
As a result of the foregoing factors, net loss for the three months ended June
30, 1997 was $0.3 million compared to net income of $5.0 million for the three
months ended June 30, 1996.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Premium revenues increased 14% to $738.9 million for the six months ended June
30, 1997 from $648.8 million for the six months ended June 30, 1996. Premium
revenues for indemnity and PPO products increased $7.2 million to $539.3 million
for the six months ended June 30, 1997. Enrollment for Indemnity and PPO
products decreased 2% as of June 30, 1997 compared to June 30, 1996. HMO and POS
premiums increased $81.3 million to $192.5 million for the six months ended June
30, 1997, resulting from a 69% increase in membership. New sales,
in-group-growth, and to a lesser extent, migrations from traditional indemnity
products into HMO and POS products, continued to drive HMO and POS membership
growth to 295,000 members at June 30, 1997 from 174,000 members at June 30,
1996.
Investment and other income increased 23% to $8.0 million for the six months
ended June 30, 1997 from $6.5 million for the six months ended June 30, 1996 as
a result of growth in the Company's investment portfolio. A $0.4 million expense
related to an arbitration award against the Company's health maintenance
organization provided an offset to other income in the 1997 period.
Realized gains of $5.8 million on the sale of marketable securities for the six
months ended June 30, 1997 were $4.9 million higher than gains realized in the
six months ended June 30, 1996. These results are not necessarily indicative of
results to be expected in the future. The magnitude of realized gains in any
quarter can fluctuate due to fixed and equity market performance, as well as
timing of individual sale transactions, which are subject to decisions made by
individual investment portfolio managers.
The Company's total loss ratio (benefits expense as a percentage of premium
revenues) increased to 90.5% for the six months ended June 30, 1997 from 89.3%
for the six months ended June 30, 1996 as the Company experienced increasing
medical cost trends and higher utilization in its indemnity and PPO products in
all markets, and higher cost trends and utilization in all of its managed care
networks. Accordingly, the loss ratio for indemnity and PPO products increased
to 91.9% for the 1997 six month period from 90.2% for the same period in 1996
and the loss ratio for HMO and POS products increased to 88.1% for the first six
months of 1997 from 86.5% for the 1996 period. The Company has observed that
many industry competitors are reporting worsening medical cost trends,
particularly in HMO products in Georgia and throughout the Southeast.
Operating expenses increased 20% to $82.2 million for the six months ended June
30, 1997 from $68.3 million for the six months ended June 30, 1996, principally
due to growth in the Company's infrastructure necessary to support its Medicare
Risk product development and the increased HMO and POS membership base. As a
result, the operating expense ratio increased to 11.1% for the six months ended
June 30, 1997, from 10.5% for the six months ended June 30, 1996.
On May 23, 1996, a hospital purchased a 5% interest in one of BCBSGA's CHPN
subsidiaries. On January 1, 1997, another hospital purchased a 5% interest in
the same CHPN subsidiary. These transactions were recorded as non-operating
income for the six months ending June 30, 1996 and 1997, respectively.
9
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CERULEAN COMPANIES, INC.
In 1997, the Company increased the net value of certain long-lived assets which
will provide an estimated additional tax benefit of $2.1 million for 1997 of
which $1.0 million was recognized during the six months ended June 30, 1997.
Lower earnings in the 1997 period and this additional tax benefit for 1997,
offset by CHPN subsidiary operating losses for which tax benefits are not
available to the Company's consolidated tax group, resulted in tax expense of
$0.1 million for the six months ended June 30, 1997 compared to $1.9 million for
the same period a year ago.
As a result of the foregoing factors, net income decreased to $3.0 million for
the six months ended June 30, 1997 from $7.8 million for the six months ended
June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
The Company has both short-term and long-term liquidity needs and has structured
its investment portfolios accordingly. Over $172.6 million of the Company's
investment portfolio is held at BCBSGA and is subject to limitations prescribed
by Georgia insurance statutes. Short-term liquidity needs to fund its operating
costs as well as the payment obligations to its customers are met from funds
invested primarily in institutional money market accounts. Assets not required
for short-term liquidity needs are invested in the fixed income and equity
markets. These investments provide reserves for future payment obligations and
funds for long-term liquidity needs. The Company's investment policies are
designed to provide liquidity to meet anticipated payment obligations, to
preserve capital and to maximize yield in conformity with all regulatory
requirements.
Net cash used in operating activities amounted to $4.9 million for the six
months ended June 30, 1997 compared to net cash provided by operating activities
of $11.0 million for the same period in 1996. This was primarily the result of
lower operating earnings in the 1997 six month period and the payment in 1997 of
certain obligations incurred in 1996. Because of the nature of the Company's
business, the cash flows from operations for interim periods are not necessarily
indicative of cash flows from operations expected for the entire year. The
Company believes its future cash resources will be adequate to meet its
operating requirements.
The Company experienced higher claim payouts during the quarter ended June 30,
1997 compared to the quarter ended June 30, 1996. To maintain its short-term
working funds at an appropriate level, approximately $15.0 million of fixed
income and equity securities were sold during the second quarter of 1997 and
reinvested in short-term securities.
In February 1996, the Company received $46.6 million in connection with its
Preferred Stock offering, net of offering costs of $3.3 million.
The Company believes that its long-term capital requirements can be met with a
combination of (i) its current resources, including proceeds from the sale of
the Preferred Stock, (ii) cash flows from operations and (iii) potential debt or
equity offerings.
10
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CERULEAN COMPANIES, INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not required.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 25, 1997 the Company held the 1997 Annual Meeting of Class A
Shareholders. The following item was submitted to vote by the holders of all
shares of Class A Common Stock held of record on February 28, 1997.
Election of Class A Designated Directors
<TABLE>
<CAPTION>
For Against Abstain Non-vote Total
<S> <C> <C> <C> <C> <C>
Joseph D. Green to serve until the 2000 annual meeting of 174,410 3,185 230 172,710 350,535
shareholders or until a successor is duly elected and qualified
James R. Lientz, Jr. to serve until the 2000 annual meeting of 174,210 3,265 350 172,710 350,535
shareholders or until a successor is duly elected and qualified
Arnold Tenenbaum to serve until the 1998 annual meeting of 174,795 2,950 80 172,710 350,535
shareholders or until a successor is duly elected and qualified
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Blue Cross and Blue Shield of Georgia, Inc. Plan of Conversion, Filed with the Insurance Department of the
State of Georgia, October 30, 1995.(1)
2.2 Form A Statement regarding the Acquisition of Control of or Merger with a Domestic Insurer filed with respect
to Blue Cross and Blue Shield of Georgia, Inc. by Cerulean Companies, Inc. on October 30, 1995, as amended
and supplemented.(1)
</TABLE>
- --------------
(1) This exhibit to Form S-1, Registration No. 333-2796, filed on March 27, 1996
and subsequent amendments is incorporated herein by reference.
11
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CERULEAN COMPANIES, INC.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.3 Conversion Order dated December 27, 1995 from Georgia Insurance Commissioner.(1)
3.1 Articles of Incorporation of Cerulean Companies, Inc.(1)
3.2 Bylaws of Cerulean Companies, Inc. (1)
4.1 Stock Escrow Agreement among Cerulean Companies, Inc., Blue Cross and Blue Shield of Georgia, Inc. and
SunTrust Bank, Atlanta.(1)
4.2 Specimen form of Class A Convertible Common Stock certificate.(1)
10.1 Administrative Services Agreement between the State Personnel Board and Blue Cross and Blue Shield of
Georgia, Inc., dated July 1, 1994.(1)
10.2 Plaza Lease Capital Plaza Associate ("Landlord") and Blue Cross and Blue Shield of Georgia, Inc. ("Tenant")
dated December 23, 1986.(1)
10.3 Executive Compensation Plans and Arrangements.
(a) Employment Agreement between Blue Cross and Blue Shield of Georgia, Inc. and
Mark Kishel, M.D., dated September 23, 1993.(1)
(b) Deferred Compensation Plan.(1)
(c) Annual Executive Incentive Plan. (1)
(d) Long-Term Incentive Plan. (1)
(e) Employment Agreement between Blue Cross and Blue Shield of Georgia, Inc. and Richard D. Shirk
dated January 1, 1997.(3)
10.4 $55,000,000 Insolvency Credit Agreement dated as of April 18, 1996 among Blue Cross and Blue Shield of
Georgia, Inc., the Banks Listed Herein and Wachovia Bank of Georgia, N.A., as agent.(1)
10.5 $9,000,000 Credit Facility Between Blue Cross and Blue Shield of Georgia, Inc., as Borrower and Wachovia Bank
of Georgia, N.A., as Agent, dated December 19, 1996.(2)
27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
- -----------------
(1) This exhibit to Form S-1, Registration No. 333-2796, filed on March 27,
1996 and subsequent amendments is incorporated herein by reference.
(2) This exhibit to Form 10-K filed on March 31, 1997 is incorporated herein by
reference.
(3) This exhibit to Form 10-Q filed on May 15, 1997 is incorporated
herein by reference.
12
<PAGE> 13
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.
CERULEAN COMPANIES, INC.
Registrant
Date: August 11, 1997 By: /s/Richard D. Shirk
---------------------------------
Richard D. Shirk, President and
Chief Executive Officer
Date: August 11, 1997 By: /s/John A. Harris
---------------------------------
John A. Harris, Treasurer
13
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CERULEAN
COMPANIES, INC. ON FORM 10-Q FOR THE QUARTER END AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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<CASH> 57,029,418
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<POLICY-LOSSES> 189,574,288
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46,645,042
0
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738,928,596
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