UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
X
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number: 1-8865
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
SIERRA HEALTH SERVICES, INC.
2724 NORTH TENAYA WAY
LAS VEGAS, NEVADA 89128
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
TABLE OF CONTENTS
Page
----
(a) Independent Auditors' Report................................................. 1
Financial Statements:
Statements of Net Assets Available for Benefits at
December 30, 2002 and 2001............................................... 2
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 30, 2002 and 2001........................... 3
Notes to Financial Statements................................................ 4
Supplemental Schedule as of December 30, 2002:
Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year).... 8
Other schedules required by the Department of Labor's Rules and Regulations
for Reporting and Disclosure under the Employee Retirement Income Security
Act of 1974 are omitted because of the absence of conditions under which
they are required.
(b) Exhibit 23 Independent Auditors' Consent
Exhibit 99 Certification pursuant to 18 U.S.C. as adopted pursuant to
Section 906 of the Sarbanes-Oxley act of 2002
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of
Sierra Health Automatic Retirement Plan
We have audited the accompanying statements of net assets available for benefits
of Sierra Health Automatic Retirement Plan (the "Plan") as of December 30, 2002
and 2001, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 30, 2002
and 2001, and the changes in net assets available for benefits for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The schedule is the responsibility of the Plan's management. Such schedule
has been subjected to the auditing procedures applied in our audit of the basic
2002 financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic 2002 financial statements
taken as a whole.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
May 22, 2003
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
Statements of Net Assets Available for Benefits at
December 30, 2002 and 2001
2002 2001
---- ----
ASSETS
------
CASH AND CASH EQUIVALENTS......................................... $ - $ 5,360
---------- -----------
INVESTMENTS AT FAIR VALUE:
Mutual Funds...................................................... 51,370,416 55,824,024
Common/Collective Trust Funds..................................... 10,976,994 9,286,288
Company Stock..................................................... 4,635,981 3,196,710
Participant Loans................................................. 1,397,626 1,294,728
Limited Partnerships.............................................. - 283,100
---------- ----------
Total Investments............................................ 68,381,017 69,884,850
---------- ----------
RECEIVABLES:
Employer Contributions............................................ 442,678 413,911
Employee Contributions............................................ 225,119 211,830
Other Receivables................................................. - 55,000
---------- ----------
Total Receivables............................................ 667,797 680,741
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS................................. $69,048,814 $70,570,951
========== ==========
See Accompanying Notes to Financial Statements
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 30, 2002 and 2001
2002 2001
---- ----
ADDITIONS:
Investment Income / (Loss):
Interest and Dividends.................................... $ 908,943 $ 653,604
Net Decrease in Fair Value................................ (9,260,091) (3,194,368)
---------- ----------
Net Additions........................................ (8,351,148) (2,540,764)
---------- ----------
Contributions:
Employer.................................................. 4,943,908 4,621,583
Participants.............................................. 7,358,545 7,071,053
Rollovers................................................. 404,887 263,721
Other..................................................... - 7,199
---------- ----------
Total Contributions.................................. 12,707,340 11,963,556
---------- ----------
NET ADDITIONS................................................. 4,356,192 9,422,792
---------- ----------
DEDUCTIONS:
Benefits Paid to Participants................................. (5,828,329) (9,424,655)
Plan Expenses................................................. (8,775) (6,311)
Other Deductions.............................................. (41,225) -
---------- ----------
Total Deductions................................ (5,878,329) (9,430,966)
---------- ----------
NET DECREASE.................................................. (1,522,137) (8,174)
NET ASSETS AVAILABLE FOR BENEFITS:
BEGINNING OF YEAR.................................... 70,570,951 70,579,125
---------- ----------
END OF YEAR.......................................... $69,048,814 $70,570,951
========== ==========
See Accompanying Notes to Financial Statements
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
Notes to Financial Statements
NOTE 1. PLAN DESCRIPTION
General Description - The Sierra Health Automatic Retirement Plan (the "Plan")
is a qualified, defined contribution profit sharing/401(k) plan sponsored,
managed and administered by Sierra Health Services, Inc. (the "Company").
Prudential Financial serves as trustee of the Plan. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). A
brief description of certain Plan provisions, as amended, follows. Participants
should refer to the Plan agreement for a complete description of the Plan's
provisions.
Contributions - For 2002, participants may contribute up to 15% of their annual
compensation. The Company makes matching contributions of 100% of a
participant's contribution up to a maximum of 3% of the participant's annual
compensation. Participant contributions above 3% but not exceeding 9% are
matched 50% by the Company. The maximum Company contribution is 6% of a
participant's annual compensation. Participant and employer contributions are
subject to Internal Revenue Service ("IRS") limits. Company matches are
invested, based on participant selections, into the common trust funds. In
accordance with the Economic Growth and Tax Relief Reconciliation Act of 2001,
employees age 50 and older are permitted to make additional "catch up"
contributions not to exceed $1,000. The "catch up" contributions are not matched
by the employer.
Vesting - Participants are immediately vested in their voluntary contributions
and earnings thereon. Participants are also immediately vested in the Company
contribution made on their behalf up to 4% of the participant's annual
compensation. The remaining Company contribution vests based on years of
service--one-third per year of service--and is fully vested after three years of
service with the Company. If a participant becomes permanently disabled, their
account is 100% vested without regard to years of service.
Eligibility - All employees of the Company not covered by a collective
bargaining agreement become participants in the Plan after they have completed
one year of service and are age twenty-one or older. The Plan defines a year of
service as one in which the employee works at least 1,000 hours.
Participant Accounts - Each participant's account is credited with the
participant's contribution, the Company's matching contribution and allocations
of Plan earnings.
Payment of Benefits - Upon termination of employment, participants may elect to
receive a lump-sum payment of their vested account balance, one of several
annuity payment options or may transfer their vested account balance to a
tax-deferred account.
Termination of Plan - Although the Company has not indicated any intention to
terminate the Plan, or contributions thereto, it may do so at any time. Upon
termination or partial termination, each participant's account will become 100%
vested.
Income Taxes - In November 1995, the Plan received its latest determination
letter from the IRS stating that the Plan, as then designed, was in compliance
with the applicable requirements of the Internal Revenue Code ("IRC") and thus
exempt from income taxes. The Plan has been amended since receiving the
determination letter. However, the Plan administrator believes that the Plan is
currently designed and being operated in compliance with the applicable
requirements of the IRC. No provision for income taxes has been included in the
financial statements.
Administrative Expenses - Administrative expenses of the Plan are paid by either
the Plan or the Plan's sponsor, as provided in the Plan Document. Total Plan
expenses for 2002 and 2001 were $51,905 and $48,811, respectively, of which,
$43,130 and $42,500 were paid by the Plan's sponsor, respectively.
Investment in Company Stock - Investments in Company common stock are limited to
30 percent of employee elected deferrals and unlimited on employer match
amounts.
Forfeitures - Forfeited accrued benefits may be used to pay expenses incurred in
the basic administration of the Plan or to reduce employer contributions. In
2001, the Company used forfeitures in the amount of $90,590 to reduce employer
contributions. In 2002, the Company did not use any forfeitures to reduce
employer contributions.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The Plan's financial statements are prepared using the
accrual method of accounting and conform to the American Institute of Certified
Public Accountants' accounting and auditing guide, Audits of Employee Benefit
Plans. Accordingly, income is recorded in the period earned, expenses in the
period incurred and the purchase and sale of investments as of the trade date.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of net assets available for benefits and changes therein. Actual results
could differ from those estimates. The Plan utilizes various investment
instruments. Investment securities, in general, are exposed to various risks,
such as interest rate, credit, and overall market volatility. Due to the level
of risk associated with certain investment securities, it is reasonably possible
that changes in the values of investment securities will occur in the near term
and that such changes could materially affect the amounts reported in the
statements of net assets available for plan benefits.
Investments - Investments are stated at approximate fair market value. The fair
market value of equity and fixed income securities is determined principally
from quoted market prices. The fair market value of common trust funds is based
on the Plan's allocable interest in the fair market value of securities in those
funds. The fair value of Company stock is dictated by the daily value from the
New York Stock Exchange. The fair market value of the investment in limited
partnerships is based on third-party appraisals. Participant loans are valued at
cost plus accrued interest, which approximates fair value. Unrealized gains and
losses are recorded in the period in which they occur. All assets are held by
trustees of the Plan. The Company match is made in cash and is invested based
upon employee selections.
Reclassifications - Certain reclassifications have been made to the 2001
financial statements in order to conform to the 2002 presentation.
NOTE 3. INVESTMENTS
Increase / (decrease) in the fair value of the Plan's investments by type of
investment is as follows:
2002 2001
---- ----
Mutual Funds................................................ $(11,183,095) $(5,742,052)
Common/Collective Trust Funds............................... 487,506 495,241
Common Stock................................................ 1,425,606 1,997,443
Limited Partnerships........................................ 9,892* 55,000*
----------- ----------
Net Decrease........................................... $ (9,260,091) $(3,194,368)
=========== ==========
* Non-participant directed.
Investments equal to 5% or more of the Plan's total net assets available for
benefits at December 30, 2002 and 2001 were:
2002 2001
---- ----
Van Kampen Equity Income Fund............................... $15,124,233 $ 17,883,779
Prudential Stable Value Fund................................ 10,976,997 9,286,288
Prudential Jennison Growth Fund............................. 8,644,339 12,257,591
PIMCO Total Return Fund..................................... 6,587,703 3,571,467
Davis NY Venture Fund....................................... 5,097,584 5,378,999
Sierra Health Services Inc., Common Stock................... 4,635,981 **
Prudential Jennison Equity Opportunity ..................... 4,144,288 **
Dreyfus Midcap Value Fund................................... ** 7,471,941
** Balance does not represent 5% or more of net assets available for benefit at
the respective date.
NOTE 4. PAYMENT OF BENEFITS
Benefits are recorded when paid.
NOTE 5. PARTICIPANT LOANS RECEIVABLE
Participants may borrow from their fund accounts up to a maximum of $50,000 or
50% of their vested account balance, whichever is less. Participant loans
receivable are collateralized by vested account balances and are repaid through
payroll deductions over a term not exceeding 5 years. The term may be extended
if the proceeds are used for the purchase of a primary residence. The loans bear
interest at 1% over the prime commercial rate on the first day of the month in
which the loan is issued.
NOTE 6. EMPLOYER DIRECTED INVESTMENTS
Information about the net assets and the significant components of the changes
in net assets relating to the employer directed investments is as follows as of
December 30, 2002 and 2001:
2002 2001
---- ----
Net Assets:
Limited Partnerships.......................................... $ - $ 283,100
Other Receivables............................................. - 55,000
-------- ---------
Total Net Assets................................................ $ - $ 338,100
======== ========
Changes in Net Assets:
Net Increase.................................................. $ 9,892 $ 55,000
Transfers to Participant Directed Investments................. (347,992) (103,588)
-------- --------
Net Decrease.................................................. (338,100) (48,588)
Net Assets:
Employer Directed, Beginning of Year.......................... 338,100 386,688
-------- --------
Employer Directed, End of Year................................ $ - $ 338,100
======== ========
The Plan Sponsor was granted an exemption by the United States Department of
Labor, Pension and Welfare Benefits Administration, from the prohibited
transaction rules of ERISA and, was allowed to purchase from the Plan the
limited partnership units held in the Employer Directed Investment Program at
their fair market value. This purchase in the amount of $250,092, was completed
in March of 2002.
NOTE 7. RELATED PARTY TRANSACTION
Certain Plan investments are shares of mutual funds managed by Prudential, the
Plan's trustee, therefore these transactions qualify as party-in-interest
transactions.
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
From 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 30, 2002
(a) (b) (c) (d)
Description of Investment Including
-----------------------------------
Identity of Issue, Borrower, Collateral, Par, or Maturity Value
----------------------------- ----------------------------------
Maturity Date, Rate of Interest, Lessor, or Smiliar Party Current Value
--------------------------------- ------------------------ -------------
INVESTMENT FUNDS
----------------
Davis NY Venture Fund................................ Mutual Fund $ 5,097,584
Dreyfus Midcap Value Fund................................. Mutual Fund 2,031
EuroPacific Growth Fund................................... Mutual Fund 2,770,134
Franklin Balance Sheet Investment Fund.................... Mutual Fund 2,514,180
Franklin US Government Securities........................ Mutual Fund 264,176
John Hancock Small Cap Growth Fund........................ Mutual Fund 1,699,550
PIMCO Total Return Fund................................... Mutual Fund 6,587,703
* Prudential Jennison Equity Opportunity............... Mutual Fund 4,144,288
* Prudential Jennison Growth Fund ..................... Mutual Fund 8,644,339
* Prudential Short-Term Corporate Bond Fund............ Mutual Fund 2,450,949
* Prudential Stable Value Fund......................... Common/Collective Trust 10,976,997
* Prudential Stock Index Fund.......................... Mutual Fund 2,071,246
Van Kampen Equity Income ............................... Mutual Fund 15,124,233
* Sierra Health Services, Inc., Common Stock........... Company Stock 4,635,981
----------
$66,983,391
==========
PARTICIPANT LOANS
-----------------
Participant Loans............................................... $ 1,397,626
==========
* Party-in-interest
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
(Name of Plan)
Date: June 27, 2003 /s/ PAUL H. PALMER
----------------------
Paul H. Palmer
Senior Vice President of Finance,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)