<PAGE>
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 December 31, 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 January 24, 1997
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AMERICAN CLAIMS EVALUATION, INC.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1996 and
March 31, 1996 3
Consolidated Statements of Earnings for the Nine Months and
Three Months, respectively, ended December 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the Nine Months
ended December 31, 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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets
Dec.31,1996 Mar.31,1996
----------- -----------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 7,671,133 7,242,029
Marketable securities - 364,500
Accounts receivable, net 442,020 771,585
Prepaid expenses 28,076 53,571
----------- ---------
Total current assets 8,141,229 8,431,685
Property and equipment, net 193,965 269,015
Excess cost over fair value of net
assets acquired, net 541,768 566,086
----------- ---------
$ 8,876,962 9,266,786
=========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 360,309 511,694
Accrued expenses 109,647 129,293
Income taxes payable 26,175 142,703
Deferred income taxes 14,473 78,826
----------- ---------
Total current liabilities 510,604 862,516
----------- ---------
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 5,354,376 4,976,916
----------- ---------
8,664,575 8,404,270
Less treasury stock, at cost,
176,500 shares at Dec. 31, 1996 (298,217) -
----------- ---------
Total shareholders' equity 8,366,358 8,404,270
----------- ---------
$ 8,876,962 9,266,766
=========== =========
Note: The balance sheet at March 31, 1996 has been derived from the audited
financial statements at that date.
3
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AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
Three months ended Nine months ended
------------------------- ------------------------
Dec.31,1996 Dec.31,1995 Dec.31,1996 Dec.31,1995
----------- ----------- ----------- -----------
Revenues $ 719,680 1,356,754 2,411,326 4,133,698
Cost of services 325,425 663,377 1,075,112 1,947,573
----------- --------- ---------- ---------
Gross margin 394,255 693,377 1,336,214 2,186,125
Selling, general and
administrative expenses 439,607 655,826 1,379,842 1,954,537
----------- --------- ---------- ---------
Operating earnings (loss) (45,352) 37,551 (43,628) 231,588
Other income:
Interest income 99,165 88,082 317,784 254,135
Gain on sale of
marketable securities - 170,478 285,356 237,199
Miscellaneous income 10,983 19,426 32,948 58,279
----------- --------- ---------- ---------
Earnings before provision
for income taxes 64,796 315,537 592,460 781,201
Provision for income taxes 20,000 120,000 215,000 310,000
----------- --------- ---------- ---------
Net earnings $ 44,796 195,537 377,460 471,201
=========== ========= ========== =========
Net earnings per
share of common stock $ .01 .05 .09 .11
=========== ========= ========== =========
Weighted average
common and common
equivalent shares 4,073,500 4,250,824 4,177,395 4,250,697
=========== ========= ========== =========
4
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
-------------------------
Dec.31,1996 Dec.31,1995
----------- -----------
Cash flows from operating activities:
Net earnings $ 377,460 471,201
----------- ----------
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 99,368 109,887
Gain on sales of marketable
securities (285,356) (237,199)
Deferred income taxes (4,000) (91,000)
Changes in assets and liabilities:
Decrease in accounts receivable 329,565 62,206
Decrease in prepaid expenses 25,495 49,840
Decrease in deposits - 987
Increase (decrease) in accounts
payable (151,385) 210,319
Increase (decrease) in accrued
expenses (19,646) 19,578
Increase (decrease) in income
taxes payable (116,528) 14,446
----------- ----------
Total adjustments (122,487) 139,064
----------- ----------
Net cash provided by operating
activities 254,973 610,265
----------- ----------
Cash flows from investing activities:
Purchase of marketable securities (118,768) (26,893)
Proceeds from sales of marketable
securities 591,116 675,708
Capital expenditures - (14,690)
----------- ----------
Net cash provided by
investing activities 472,348 634,125
----------- ----------
Cash flows from financing activities:
Purchase of treasury stock (298,217) -
----------- ----------
Net increase in cash and cash
equivalents 429,104 1,244,390
Cash and cash equivalents at beginning
of period 7,242,029 5,500,159
----------- ----------
Cash and cash equivalents at end of
period $ 7,671,133 6,744,549
=========== ==========
Supplemental Disclosure of Cash Flow
Information:
Income taxes paid $ 336,797 386,553
=========== ==========
5
<PAGE>
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
(consist ing 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
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations - Nine Months ended December 31, 1996 and 1995
The following table sets forth information with respect to the Company's sources
of revenue for the nine month and three month periods ended December 31, 1996
and 1995, respectively:
Nine months ended Three months ended
------------------------- -------------------------
Dec.31,1996 Dec.31,1995 Dec.31,1996 Dec.31,1995
----------- ----------- ----------- -----------
Hospital bill
audit services $1,519,955 3,163,468 430,097 1,026,003
Vocational rehab.
services 891,371 970,230 289,583 330,751
---------- --------- --------- ---------
$2,411,326 4,133,698 719,680 1,356,754
========== ========= ========= =========
Consolidated revenues for the nine months ended December 31, 1996 decreased
41.7% to $2,411,326 from the $4,133,698 reported for the comparable period ended
December 31, 1995. During this period, hospital bill audit ("HBA") services
declined approximately 52.0% with vocational rehabilitation services decreasing
8.1% 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
single 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 45.7% from the previous year's comparable percentage of
47.6%. The cost of services for voca tional rehabilitation services decreased to
42.7% of related revenues for the nine months ended December 31, 1996 as
compared to 45.6% for the nine months ended December 31, 1995.
Selling, general and administrative expenses for the nine months ended December
31, 1996 increased to 57.2% of consolidated revenues from 47.3% of consolidated
revenues during the nine months ended December 31, 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 $574,695, or 29.4%, during the nine months ended December 31, 1996
from the comparable period last year.
7
<PAGE>
During the nine months ended December 31, 1996, the Company earned $317,784 of
interest income representing an increase of $63,649 over the nine months ended
December 31, 1995. This increase resulted from the combination of higher
interest rates and an increase in cash and cash equivalents available for
investment purposes. The Company also realized net gains on the sales of
marketable securities of $285,356 during the nine months ended December 31,
1996, as compared to gains of $237,199 on the sales of marketable securities
during the nine months ended December 31, 1995.
Liquidity and Capital Resources
During the nine month period ended December 31, 1996, cash provided by operating
activities was $254,973, compared with $610,265 during the comparable period
last year. Net earnings of $377,460 coupled with a decrease in accounts
receivable of $329,565 which were offset by gains on the sale of marketable
securities of $285,356 and decreases in accounts payable and taxes payable of
$151,385 and $116,528, respectively, were the major factors in net cash provided
by operations during the nine month period ended December 31, 1996.
Cash provided by investing activities for the nine months ended December 31,
1996 was $472,348, as compared with $634,125 in the comparable period last year.
During the nine months ended December 31, 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 nine ended December 31, 1996
consisted of $298,217 used by the Company to repurchase 176,500 of its Common
Shares.
The Company had working capital of $7,630,625 at December 31, 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
<PAGE>
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) None.
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
9
<PAGE>
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: January 27, 1997 By: /s/ Gary Gelman
Gary Gelman
Chairman of the Board,
President and Chief Executive
Officer
(Principal Executive Officer)
Date: January 27, 1997 By: /s/ Gary J. Knauer
Gary J. Knauer
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 7,671,133
<SECURITIES> 0
<RECEIVABLES> 452,020
<ALLOWANCES> 10,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,141,229
<PP&E> 647,320
<DEPRECIATION> 453,355
<TOTAL-ASSETS> 8,876,962
<CURRENT-LIABILITIES> 510,604
<BONDS> 0
<COMMON> 42,500
0
0
<OTHER-SE> 3,267,699
<TOTAL-LIABILITY-AND-EQUITY> 8,876,962
<SALES> 2,411,326
<TOTAL-REVENUES> 2,411,326
<CGS> 1,075,112
<TOTAL-COSTS> 1,075,112
<OTHER-EXPENSES> 1,379,842
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 592,460
<INCOME-TAX> 215,000
<INCOME-CONTINUING> 377,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 377,460
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
