SafeGuard Says Results of Last 3 Quarters Overstated

SafeGuard Health Enterprises Inc. said its results for the third quarter and its previous two quarters were overstated by a “material” amount and will have to be restated.

The Aliso Viejo dental benefits marketing company said in a press release Friday that it is working to determine the adjustments needed to restate its results properly for the periods and will report them once available.

The company also expects to restate its results for 1997 and 1998 and certain quarters in those years to correct the accounting treatment of transactions related to discontinued dental office operations.

SafeGuard said that its 1998 and 1997 annual financial statements should not be relied upon and that it will issue restated results after they have been audited.

As a result of the 1999 restatements, the company said it expects to be unable to comply with lending requirements under its current debt agreements.

Previously this year, SafeGuard had reported earnings of $79,000, or 2 cents a share, on revenue of $25.4 million, for the third quarter ended Sept. 30. For the second quarter, the company had reported a loss from continuing operations of $7 million, or $1.48 a share, on revenue of $25 million. For the first quarter, SafeGuard reported operating earnings of $391,000, or 8 cents a share, on revenue of $24.7 million.

SafeGuard, which trades on the over-the-counter Bulletin Board, is discussing the situation with lenders and with an investor group that agreed to make a $40-million investment in the company.

The company’s stock closed Monday at $3.19 a share, down 19 cents from Friday.