UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
ACT OF 1934
For the fiscal year ended December 30, 2003
OR
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
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| (a) Report of Independent Registered Public Accounting Firm |
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December 30, 2003 and 2002 |
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For the Years Ended December 30, 2003 and 2002 |
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| (b) Exhibit 23 Consent of Independent Registered Public Accounting Firm | |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2003 and 2002, 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 the standards of the Public Company Accounting Oversight Board (United States). 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 Sierra Health Automatic Retirement Plan as of December 30, 2003 and 2002, 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 2003 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic 2003 financial statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
June 22, 2004
Page 1
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
Statements of Net Assets Available for Benefits as of
December 30, 2003 and 2002
2003 2002
-------------- -------------
ASSETS
INVESTMENTS AT FAIR VALUE:
Mutual Funds....................................................... $ 70,983,764 $ 51,370,416
Common/Collective Trust Funds...................................... 16,162,347 10,976,994
Company Stock...................................................... 8,808,512 4,635,981
Participant Loans ................................................. 1,475,360 1,397,626
-------------- -------------
Total Investments............................................. 97,429,983 68,381,017
-------------- -------------
RECEIVABLES:
Employer Contributions ............................................ 157,005 442,678
Employee Contributions ............................................ 248,397 225,119
-------------- -------------
Total Receivables............................................. 405,402 667,797
-------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS........................... $ 97,835,385 $ 69,048,814
============== =============
See Accompanying Notes to Financial Statements
Page 2
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
See Accompanying Notes to Financial Statements
Page 3 SIERRA HEATLH AUTOMATIC RETIREMENT PLAN 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 2003, participants may contribute
up to 25% of their earned compensation during each payroll period in which the
Employee is an eligible participant. The Company makes matching contributions
of 100% of a participant's contribution up to a maximum of 3% of the
participant's eligible 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 eligible 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 $2,000 in 2003. The
employer does not match the "catch up" contributions. 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 eligible 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. Page 4 Administrative Expenses - The
Plan's administrative expenses are allocated to participant accounts on an
annual basis. In addition, the Plan's sponsor paid $17,500 and $18,130 in plan expenses for
2003 and 2002, 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 reduce employer contributions. Total forfeitures used in 2003 were $64,579
and none of the forfeitures were used in 2002. 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. 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. The Trustee of the Plan holds
all assets. The Company match is made in cash and is invested based upon
employee selections. Reclassifications - Certain reclassifications have
been made to the 2002 financial statements in order to conform to 2003
presentation. Page 5 NOTE 3. INVESTMENTS Increase / (decrease) in the fair value of the Plan's
investments by type of investment is as follows: * Non-participant directed. Investments equal to 5% or more of the Plan's total net
assets available for benefits at December 30, 2003 and 2002 were: 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 five 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. Page 6 NOTE 6. EMPLOYER DIRECTED INVESTMENTS Information about the significant components of the changes in net assets
relating to the employer directed investments is as follows as of December 30,
2002: 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. Page 7
SIERRA HEALTH AUTOMATIC RETIREMENT PLAN
Page 8 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 Date: June 28, 2004 /s/ PAUL H. PALMER Page 9
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 30, 2003 and 2002
2003 2002
ADDITIONS: --------------- ---------------
Investment Income (Loss):
Interest and Dividends.................... $ 995,512 $ 908,943
Net Increase (Decrease) in Fair Value..... 19,857,450 (9,260,091)
--------------- ---------------
Net Investment Income (Loss)........ 20,852,962 (8,351,148)
--------------- ---------------
Contributions:
Employer.................................. 5,152,936 4,943,908
Participants.............................. 8,167,342 7,358,545
Rollovers................................. 247,307 404,887
--------------- ---------------
Total Contributions................. 13,567,585 12,707,340
--------------- ---------------
NET ADDITIONS......................... 34,420,547 4,356,192
--------------- ---------------
DEDUCTIONS:
Benefits Paid to Participants................ (5,551,596) (5,828,329)
Plan Expenses................................ (42,680) (34,606)
Other Deductions............................. (39,700) (15,394)
--------------- ---------------
Total Deductions.................... (5,633,976) (5,878,329)
--------------- ---------------
NET INCREASE (DECREASE)............... 28,786,571 (1,522,137)
NET ASSETS AVAILABLE FOR BENEFITS:
BEGINNING OF YEAR............... 69,048,814 70,570,951
--------------- ---------------
END OF YEAR..................... $ 97,835,385 $ 69,048,814
=============== ===============
Notes to Financial Statements
2003 2002
------------- ------------
Mutual Funds .............................................. $ 12,319,245 $(11,183,095)
Common/Collective Trust Funds ............................. 535,248 487,506
Common Stock .............................................. 7,002,957 1,425,606
Limited Partnerships....................................... 0 9,892 *
------------- ------------
Net Increase (Decrease)................................. $ 19,857,450 $ (9,260,091)
============= ============
2003 2002
------------ ------------
Van Kampen Equity Income Fund ...................................... $ 18,253,912 $ 15,124,233
Prudential Stable Value Fund ....................................... 16,162,347 10,976,997
Prudential Jennison Growth Fund .................................... 13,608,039 8,644,339
Davis NY Venture Fund .............................................. 9,201,049 5,097,584
Sierra Health Services Inc., Common Stock .......................... 8,808,512 4,635,981
PIMCO Total Return Fund............................................. 7,282,223 6,587,703
Prudential Jennison Equity Opportunity ............................. 5,944,829 4,144,288
2002
------------
Changes in Net Assets:
Net Increase...................................... $ 9,892
Transfers to Participant Directed Investments..... (347,992)
------------
Net Decrease................................ (338,100)
Net Assets:
Employer Directed, Beginning of Year.............. 338,100
------------
Employer Directed, End of Year.................... $ 0
============
Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 30, 2003
(a) (b) (c) (d)
Description of Investment Including
Indentity of Issue, Borrower, Rate of Interest, Collateral
Lessor, or Similar Party Par, or Maturity Date Current Value
----------------------------------------------- ------------------------------------ ------------
INVESTMENT FUNDS
--------------------
Davis NY Venture Fund.......................... Mutual Fund $ 9,201,049
* Dryden Short-term Coporate Bond Fund........... Mutual Fund 2,556,657
* Dryden Stock Index Fund........................ Mutual Fund 3,581,553
EuroPacific Growth Fund........................ Mutual Fund 3,087,950
Fidelity Advisor Small Cap Fund................ Mutual Fund 2,657,231
Franklin Balance Sheet Investment Fund......... Mutual Fund 4,293,316
Franklin US Government Securities.............. Mutual Fund 517,005
PIMCO Total Return Fund........................ Mutual Fund 7,282,223
* Prudential Jennison Equity Opportunity......... Mutual Fund 5,944,829
* Prudential Jennison Growth Fund................ Mutual Fund 13,608,039
* Prudential Stable Value Fund................... Common/Collective Trust 16,162,347
Van Kampen Equity Income Fund.................. Mutual Fund 18,253,912
* Sierra Health Services, Inc., Common Stock..... Company Stock 8,808,512
------------
95,954,623
PARTICIPANT LOANS
------------------
* Participant Loans.............................. Interest rates from 5.0% to 10.5%; 1,475,360
maturities from January 2003 ------------
through November 2021
Total Investments.............................. $ 97,429,983
============
*Party-in-interest
(Name of Plan)
Paul H. Palmer
Senior Vice President of Finance,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)