<PAGE> 1
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 March 31, 1997
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: 0-26090
COMPDENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3185995
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CompDent Corporation
100 Mansell Court East, Suite 400
Roswell, Georgia 30076
(Address of principal executive offices)
(770) 998-8936
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 12, 1997
----- --------------------------
Common Stock, $.01 par value 10,106,039
1
<PAGE> 2
COMPDENT CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page #
<S> <C>
Part I. Financial Information
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports Filed on Form 8-K 13
Signatures 14
Exhibit Index 15
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The Company's actual
results could differ materially from those set forth in the forward-looking
statements. Certain factors that might cause such a difference include, among
others, risk associated with the successful completion of new acquisitions, the
effective integration of new acquisitions, general competitive and pricing
pressures in the marketplace, and continued growth in the dental coverage
marketplace. Other risk factors are listed in the Company's Prospectus and in
required filings with the U.S. Securities and Exchange Commission.
3
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS
COMPDENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 23,764 $ 26,959
Premiums receivable from subscribers 4,154 3,121
Income taxes receivable 247
Deferred income taxes 3,147 3,106
Other current assets 1,242 650
-------- --------
Total current assets 32,307 34,083
-------- --------
Restricted funds 2,147 2,070
Property and equipment, net of accumulated depreciation 3,561 2,977
Excess of purchase price over net assets acquired 137,085 135,040
Noncompetition agreement 799 945
Unamortized loan fees 162 189
Reinsurance receivable 5,438 5,388
Cash surrender value of officers' life insurance 147 140
Deferred income taxes 1,818 2,026
Other assets 1,550 1,309
-------- --------
$185,014 $184,167
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Unearned revenue $ 9,790 $ 9,582
Accounts payable and accrued expenses 11,366 10,956
Accrued interest payable 352 390
Income taxes payable 609
Dental claims reserves 1,617 1,421
Other current liabilities 397 1,924
-------- --------
Total current liabilities 24,131 24,273
-------- --------
Aggregate reserves for life policies and contracts 5,401 5,338
Notes payable 38,000 41,663
Deferred compensation expense 328 338
Other liabilities 408 372
-------- --------
Total liabilities 68,268 71,984
-------- --------
Commitments and contingencies (Note 3)
Stockholders' equity:
Common stock 101 101
Additional paid-in capital 97,544 95,820
Retained earnings 19,101 16,262
-------- --------
Total stockholders' equity 116,746 112,183
-------- --------
$185,014 $184,167
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
COMPDENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------
1997 1996
----- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues:
Subscriber premiums $35,636 $30,831
Other revenue 2,199 554
------- -------
Total revenue 37,835 31,385
------- -------
Expenses:
Dental care providers' fees and claim costs 19,544 16,481
Commissions 3,172 3,013
Premium taxes 265 259
General and administrative 7,860 6,771
Depreciation and amortization 1,321 1,047
------- -------
Total expenses 32,162 27,571
------- -------
Operating income 5,673 3,814
------- -------
Other (income) expense:
Interest income (161) (153)
Interest expense 708 46
Other, net (45) (10)
------- -------
502 (117)
------- -------
Income before provision for income taxes 5,171 3,931
Income tax provision 2,332 1,694
------- -------
Net income $ 2,839 $ 2,237
======= =======
Net Income per common share $ 0.28 $ 0.22
======= =======
Weighted average common shares outstanding 10,167 10,156
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
COMPDENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1997 1996
---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 2,839 $ 2,237
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,348 1,065
Gain on sale of property and equipment (10)
Deferred income tax expense (benefit) 553 (43)
Changes in assets and liabilities:
Premiums receivable from subscribers (1,033) (1,357)
Income taxes receivable/payable 856 939
Other assets (655) 764
Unearned revenue 201 1,537
Accounts payable and accrued expenses (1,393) 687
Other liabilities (1,242) (3,208)
-------- -------
Net cash provided by operating activities 1,464 2,621
-------- -------
Cash flows from investing activities:
Additions to property and equipment (873) (247)
Increase in restricted cash (2)
Proceeds from sale of property and equipment 18
Cash surrender value of life insurance (7) (25)
Payments made in connection with proposed business acquisitions (242) (49)
Purchase of businesses, net of cash acquired (473) (23,132)
-------- -------
Net cash used in investing activities (1,579) (23,453)
-------- -------
Cash flows from financing activities:
(Repayments) proceeds under credit agreement (3,663) 4,000
Tax benefit realized from exercise of nonqualified stock options 583
Proceeds from exercise of stock options 11
-------- -------
Net cash (used in) provided by financing activities (3,080) 4,011
-------- -------
Decrease in cash and cash equivalents (3,195) (16,821)
Cash and cash equivalents, beginning of period 26,959 40,388
-------- -------
Cash and cash equivalents, end of period $ 23,764 $23,567
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 718 $ 29
======== ======
Income taxes $ 340 $ 729
======== ======
Non-cash investing and financing activities:
Stock issued in exchange for business acquired $ 1,141
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
COMPDENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 1997
1. BASIS OF PRESENTATION
The unaudited consolidated balance sheet as of March 31, 1997 and the
unaudited consolidated statements of operations and cash flows for the three
months ended March 31, 1997 and 1996, in the opinion of management, have been
prepared on the same basis as the audited consolidated financial statements and
include all significant adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of the results of the interim
periods. The data disclosed in these notes to the financial statements for
these periods are also unaudited. The consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto as of December 31, 1996 and 1995, and for the
years ended December 31, 1996, 1995, and 1994 included in the 1996 Annual
Report of CompDent Corporation and its subsidiaries, (the "Company", except as
the context otherwise requires) on Form 10-K. Operating results of the Company
for the three months ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 1997.
2. BUSINESS COMBINATIONS
Effective January 8, 1996, the Company completed the acquisition of Texas
Dental Plans, Inc., a Texas-based referral fee-for-service dental company, and
affiliated entities ("Texas Dental"), for an aggregate cash purchase price of
approximately $23.0 million. The acquisition was funded with net proceeds
remaining from the Company's second stock offering. The Texas Dental
acquisition was accounted for using the purchase method of accounting, with the
results of operations of the businesses acquired included from the effective
date of the acquisition. The acquisition resulted in excess of cost over fair
value of net assets acquired of $26.0 million which is being amortized over 40
years.
The following is a summary of assets acquired, liabilities assumed, and
consideration paid in connection with the acquisition:
<TABLE>
<S> <C>
Fair value of assets acquired $ 27,239,000
Cash paid for assets acquired, net of cash acquired (23,132,000)
Acquisition costs paid ( 540,000)
-------------
Liabilities assumed $ 3,567,000
=============
</TABLE>
Effective May 8, 1996, the Company acquired all of the outstanding capital
stock and options of Dental Care Plus Management, Corp. ("Dental Care"). The
aggregate purchase price for Dental Care and its wholly-owned subsidiary, IHCS,
Inc. ("IHCS"), was $38 million, of which the Company paid approximately $27
million in cash and assumed approximately $11 million in accrued liabilities.
Dental Care and its subsidiary IHCS are based in Chicago, Illinois and provide
managed dental care services through a network of dental care providers.
Dental Care also acts as a third party administrator and provides management
services to Health Care Systems, Inc., a non-profit dental company. The Company
financed the purchase of Dental Care as well as satisfaction of the assumed
liabilities by drawing down the Company's revolving credit facility. The
acquisition of Dental Care was accounted for using the purchase method of
accounting with the results of operations of the businesses acquired included
from the effective date of the acquisition. The acquisition resulted in excess
cost over fair value of net assets acquired of $39.7 million which is being
amortized over 40 years. In 1996, the Company finalized its allocation of the
purchase price of Dental Care which resulted in an increase to excess of
purchase price over net assets acquired of $1.5 million to $41.2 million.
7
<PAGE> 8
The following is a summary of assets acquired, liabilities assumed, and
consideration paid in connection with the acquisition:
<TABLE>
<S> <C>
Fair value of assets acquired $46,770,000
Cash paid for assets acquired, net of cash acquired (26,836,000)
Acquisition costs paid (843,000)
-----------
Liabilities assumed $19,091,000
===========
</TABLE>
Effective March 21, 1997, the Company completed the acquisition of
American Dental Providers, Inc. ("AMDP"), and Diamond Dental & Vision, Inc.
("DDV"). The aggregate purchase price of $1.7 million consisted of $519,030 in
cash and $1,140,998 of Company common stock issued at fair market value. AMDP
provides managed dental care services through a network of dental care
providers, and DDV provides a vision plan and referral fee-for-service dental
plan to the Arkansas market. The Company funded the cash portion of the
purchase with cash available from operations. The acquisition of AMDP and DDV
was accounted for using the purchase method of accounting with the results of
operations of the businesses acquired included from the effective date of the
acquisition. The acquisition resulted in excess of cost over fair value of
net assets acquired of $2.9 million, which will be amortized over 40 years.
The following is a summary of assets acquired, liabilities assumed, and
consideration paid in connection with the acquisition:
<TABLE>
<S> <C>
Fair value of assets acquired $ 3,385,733
Cash paid and fair value of stock issued
for assets acquired, net of cash acquired (1,613,767)
Acquisition costs paid (650,000)
-----------
Liabilities assumed $ 1,121,966
===========
</TABLE>
Unaudited pro forma results of operations of the Company for the three
months ended March 31, 1997 and 1996 are included below. Such pro forma
presentation has been prepared assuming that the AMDP and DDV acquisitions had
occurred as of January 1, 1997 and that the AMDP, DDV, Texas Dental, and
Dental Care acquisitions had occurred as of January 1, 1996, respectively.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
--------------- --------------
<S> <C> <C>
Revenues (in thousands) $ 38,145 $ 36,137
======== ========
Net income (in thousands) $ 2,816 $ 1,203
======== ========
Net income per common share $ 0.28 $ 0.12
======== ========
</TABLE>
The pro forma results include the historical accounts of the Company, and
historical accounts of the acquired businesses and pro forma adjustments
including the amortization of the excess purchase price over the fair value of
the net assets acquired, the amortization for the noncompete agreements, the
reduction of revenues for an intercompany management fee charged by Dental Care
to its subsidiary IHCS, the elimination of consulting costs incurred by Dental
Care under various contractual arrangements with related entities of Dental
Care which were terminated upon the Company's purchase of Dental Care, and the
applicable income tax effects of these adjustments. The pro forma results of
operations are not necessarily indicative of actual results which may have
occurred had the operations of the acquired companies been combined in prior
periods.
8
<PAGE> 9
3. CONTINGENT LIABILITIES
American Prepaid Professional Services, Inc. ("American Prepaid") and its
Florida subsidiary, American Dental Plan, Inc., are currently defendants to a
civil complaint filed by three participating dentists (one of which has since
withdrawn) who have entered into Participating Dentist Agreements with various
subsidiaries of the Company ("Subsidiaries"). The complaint alleges a breach
of contract and seeks damages based on the failure of each Subsidiary to make
capitation payments to the participating dentists for the period of time
between when affected subscribers enroll and the time at which the subscribers
select a dentist. The plaintiffs are attempting to bring the suit as a class
action. In an order issued July 22, 1996, the trial court ruled that the case
could not proceed as a class action. The plaintiffs have appealed this order
denying class certification.
The Company believes its interpretation and administration of the
Participating Dentist Agreements are correct and, therefore, is vigorously
defending the suit. While the ultimate outcome of this lawsuit cannot at this
time be predicted with certainty, management does not expect that this matter
will have a material adverse effect on the consolidated financial position,
cash flows or results of operations of the Company.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto, and with the Company's
audited financial statements and notes thereto for the fiscal year ended
December 31, 1996.
Three months ended March 31, 1997 and 1996
Revenues increased by $6.4 million, or 20.6%, to $37.8 million in the first
quarter of 1997 from $31.4 million in the first quarter of 1996. This increase
was primarily attributable to a net increase of $4.8 million, or 15.6%, in
subscriber premiums to $35.6 million in the first quarter of 1997 from $30.8
million in the first quarter of 1996. The acquisition of Dental Care in May
1996 provided $3.7 million of the increase. Internal growth of the Company's
existing subscriber base accounted for the remaining $1.1 million increase.
Other revenue increased by $1.6 million, or 296.9%, to $2.2 million in the
first quarter of 1997 from $0.6 million in the first quarter of 1996. The
increase was primarily attributable to $1.4 million of Dental Care third party
administrator fees and management fees recorded in the first quarter of 1997
following the May 1996 Dental Care acquisition. The balance of the increase in
other revenue was mainly due to revenues associated with dental practice
management. It is anticipated that dental practice management revenues will
increase in future quarters to the extent that the Company's newly organized
dental practice management company ("Dental Health Management, Inc.") is
successful.
Dental care providers' fees and claims costs increased $3.0 million, or
18.6%, to $19.5 million in the first quarter of 1997 from $16.5 million in the
first quarter of 1996. Dental care providers' fees represent capitation
payments paid to panel dentists under the Company's managed dental care plans.
Under managed dental care plans, capitation payments to panel dentists from
premiums paid by subscribers are fixed under the participating dental agreement
regardless of the extent of services provided. Dental claim costs represent
amounts payable to dental care providers under the dental indemnity insurance
plans. Dental care providers' fees and claims costs increased to 54.8% from
53.5% of subscriber premiums in the first quarter of 1997 and 1996,
respectively, due mainly to the acquisition of Dental Care, which incurred
dental care providers' fees and claims costs equal to 61.4% of its subscriber
premiums.
Commission expense increased $159,000, or 5.3%, to $3.2 million in the
first quarter of 1997 from $3.0 million in the first quarter of 1996. As a
percentage of subscriber premiums, commissions decreased to 8.9% of subscriber
premiums in the first quarter of 1997 from 9.8% in the first quarter of 1996.
This decrease was caused primarily by the acquisition of Dental Care, which had
commission expense equal to 1.0% of subscriber premiums. Historically, Dental
Care has relied more heavily on its direct sales forces than on independent
agents, resulting in lower commissions as a percentage of revenues compared to
the Company's other subsidiaries.
General and administrative expenses increased $1.1 million, or 16.1%, to
$7.9 million in the first quarter of 1997 from $6.8 million in the first
quarter of 1996. As a percentage of revenues, this expense decreased to 20.8%
in the first quarter of 1997 from 21.6% in the first quarter of 1996. This
decrease as a percentage of revenues was due to cost savings realized from the
consolidation of acquired operations. Texas Dental, acquired in first quarter
of 1996, increased general and administrative costs in the first quarter of
1996. By the first quarter of 1997, redundant personnel and overhead costs had
been reduced relating to both the Texas Dental acquisition which took place in
January 1996, and the Dental Care acquisition, which took place in May 1996.
Depreciation and amortization expense increased $274,000, or 26.2%, to $1.3
million in the first quarter of 1997 from $1.0 million in the first quarter of
1996. Amortization of goodwill increased $261,000 principally due to the
additional goodwill amortization recorded following the Dental Care
acquisition.
10
<PAGE> 11
Interest expense increased $662,000 to $708,000 in the first quarter of
1997 from $46,000 in the first quarter of 1996. During the first quarter of
1997, the Company had approximately $38.0 million in outstanding borrowings,
which arose in May 1996 with the acquisition of Dental Care. Interest expense
in the first quarter of 1996 consists of fees on the unused line of credit
facility and amortization of capitalized loan fees. Any future acquisitions
may cause the Company to incur additional indebtedness under its revolving
credit facility or otherwise.
In the first quarter of 1997, the Company's effective income tax rate
increased to 45.1% compared to 43.1% in the first quarter of 1996. The
increase was primarily attributable to additional nondeductible goodwill
amortization recorded in the first quarter of 1997 following the recent
acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash in the three months ended March
31, 1997 was generated by operating activities. The primary uses of cash for
the period were repayments of the Company's line of credit, purchases of
property and equipment, and the acquisitions of American Dental Plan, Inc.
("AMDP") and Diamond Dental & Vision, Inc. ("DDV").
Cash flows from operating activities were $1.5 million and $2.6
million for the three months ended March 31, 1997 and 1996, respectively. Cash
flows from operations consist primarily of subscriber premiums and investment
income net of capitation payments to panel dentists, claims paid, brokers' and
agents' commissions, general and administrative expenses, and income tax
payments. The Company receives premium payments in advance of anticipated
capitation payments and claims and invests cash balances in excess of current
needs in interest-bearing accounts.
Cash used in investing activities was $1.6 million and $23.5 million
for the three months ended March 31, 1997 and 1996, respectively. The
decrease in cash used during the three months ended March 31, 1997 relates
primarily to decrease in cash used for acquisitions. In the three months
ending March 31, 1997, $0.5 million was used for the acquisition of AMDP and
DDV, compared to $23.0 million used to acquire Texas Dental in the three
months ended March 31, 1996. The $0.6 million increase in capital expenditures
during the first quarter of 1997 relates primarily to purchases of leasehold
improvements and dental equipment for the Company's dental office management
business, and telephone and computer purchases. It is anticipated that capital
expenditures will continue an upward trend to the extent that the Company's
dental office management business is successful, resulting in the opening of
new dental offices.
Cash flows used in financing activities in the three months ended
March 31, 1997 were $3.1 million, representing $3.7 million repayment of the
Company's revolving line of credit net of a $0.6 million income tax benefit
realized from the exercise of nonqualified stock options. In the three months
ending March 31, 1996, financing activities provided $4.0 million of cash flow,
consisting almost entirely of borrowings under the Company's line of credit
The line of credit proceeds were used to payoff intercompany borrowings to
regulated subsidiary companies at quarter-end.
On June 30, 1995, the Company obtained a reducing revolving $35
million line of credit (the "Credit Facility") from banks. The Credit Facility
was subsequently amended to increase the available line of credit to $65
million. The Credit Facility as amended requires, beginning at the end of
three and one-half years from the date of closing, a 33% reduction per year in
available and outstanding borrowings. Outstanding indebtedness under the
Credit Facility bears interest, at the Company's option, at a rate equal to the
prime rate plus up to 1/4% or LIBOR plus up to 1 3/4%, with the margin over the
prime rate and LIBOR decreasing as the ratio of consolidated debt to EBITDA
decreases. Currently, borrowings under the Credit Facility bear interest at
the LIBOR-based rate. The Credit Facility prohibits payment of dividends and
other distributions and restricts or prohibits the Company from making certain
acquisitions, incurring indebtedness, incurring liens, disposing of assets or
making investments, and requires it to maintain certain financial ratios on an
ongoing basis. The Credit Facility is collateralized by pledges of the stock
of the Company's direct and indirect subsidiaries. The Company had $38.0
million of borrowings outstanding as of March 31, 1997 under the Credit
Facility.
11
<PAGE> 12
The Company believes that cash flow generated by operations will be
sufficient to fund its normal working capital needs and capital expenditures
for at least the next twenty-four months because cash receipts are principally
premium revenue received prior to expected capitation payments and claims for
dental services and the Company's operations are not capital intensive.
Historically, the Company's operations have not been capital intensive;
however, the Company's recent initiative in the establishment of dental offices
through its subsidiary operation, Dental Health Management, Inc., will present
capital needs, the extent of which is indeterminate. Additional financing,
under the Credit Facility or otherwise, would be required in connection with an
acquisition or acquisitions which the Company may consummate in the future.
Under applicable insurance laws of most states in which the Company
conducts business, the Company's subsidiary operating in the particular state
is required to maintain a minimum level of net worth and reserves. The Company
may be required from time to time to invest funds in one or more of its
subsidiaries to meet regulatory capital requirements. Applicable laws
generally limit the ability of the Company's subsidiaries to pay dividends to
the extent that required regulatory capital would be impaired, and dividend
payments are further restricted under the Credit Facility.
RECENTLY ISSUED ACCOUNTING STANDARDS
During the first quarter of 1996, the Company adopted the provisions
of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." Implementing the requirements of SFAS No. 121 did not have a material
impact on the financial position, results of operations, or cash flows of the
Company.
Also during the first quarter of 1996, the Company adopted the
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." In
accordance with the provisions of SFAS No. 123, the Company has chosen to
continue to apply the accounting provisions of Accounting Principles Board
(APB) No. 25, "Accounting for Stock Issued to Employees," to its stock-based
employee compensation arrangements. Implementing the disclosure provisions of
SFAS No. 123 which supersede the disclosure requirements of APB No. 25 did not
have any material effect on the Company's financial position, results of
operations, or cash flows.
The Financial Accounting Standards Board has issued Statement of
financial Accounting Standards ("SFAS") No. 128, "Earnings per Share."
This statement establishes standards for computing and presenting
earnings per share ("EPS") and applies to entities with publicly held common
stock or potential common stock. This Statement simplifies the standards for
computing earnings per share previously found in APB Opinion No. 15, "Earnings
Per Share," and make them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and requires
a reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to Opinion 15.
This Statement is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods; earlier
application is not permitted. This Statement requires restatement of all
prior-period EPS data presented. Implementing the requirements of SFAS No.
128 is not anticipated to have a material impact on the financial position,
results of operations, earnings per share, or cash flows of the Company.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in the Company's Form 10-K for the period
ending December 31, 1996, the Company's wholly owned subsidiary, American
Prepaid Professional Services, Inc. ("American Prepaid") and its Florida
subsidiary, American Dental Plan, Inc. are currently defendants to a civil
complaint filed by three participating dentists (one of which has since
withdrawn) who have entered into Participating Dentist Agreements with various
subsidiaries of the Company ("Subsidiaries"). No material developments with
regard to that action which have taken place since the previous report. See
"Notes to Consolidated Unaudited Financial Statements -- Contingent
Liabilities."
The Company is not a party to any other material legal proceeding.
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
None.
13
<PAGE> 14
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.
COMPDENT CORPORATION
Date: May 14, 1997 By: /s/ Sharon S. Graham
_____________________________
Sharon S. Graham Treasurer
and Chief Financial Officer
(Signing as duly authorized
officer and chief financial
officer)
14
<PAGE> 15
EXHIBIT INDEX
EX-27 Financial Data Schedule (for SEC use only).
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 25,911
<SECURITIES> 0
<RECEIVABLES> 4,154
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,307
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0
0
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</TABLE>
