Delta Dental Analysis
-
Upload
shane-nath -
Category
Documents
-
view
137 -
download
0
Transcript of Delta Dental Analysis
![Page 1: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/1.jpg)
Edan Carignan, Caroline Rashidi, Shane Nath
Enterprise Resource Planning Computer System Upgrade
Sponsor: Mr. Gary Radine
![Page 2: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/2.jpg)
Agenda❖ Company Summary
❖ Project Summary
❖ Project Constraints
❖ Financing The Project Using 100% Cash
❖ Maximum Debt
❖ Delayed Completion
❖ Delayed Layoffs
❖ Re-Upgrade of Project
❖ Possible Outcomes
❖ Recommendation
❖ Q&A
![Page 3: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/3.jpg)
Company Summary❖ Non-profit organization founded in 1954
❖ Largest dental plan system in the US
❖ 39 members covering all 50 states
❖ Enrollment and gross revenues doubled by CEO Mr. Gary Radine
![Page 4: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/4.jpg)
Project Summary❖ Best method of implementing ERP system
❖ 35 page report
❖ 5 detailed scenarios
❖ Possible outcomes of each scenario
❖ Recommendation to Delta Dental
Delay of ERP Implementation
Edan
All Cash Max Debt Delayed Layoffs
Shane
Re-Upgrade Possible Outcomes
Caroline
![Page 5: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/5.jpg)
Project Constraints❖ Cash surplus cannot go below $200
million
❖ Only method of raising capital is a 3-year loan
❖ Loan amount limited to $80 million
❖ $20 million annual cash inflow
❖ Management prefers the funding to be from cash flow from operations and borrowings from the bank
![Page 6: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/6.jpg)
Financing using 100% Cash❖ Policy to not go below $200
million in cash reserves
❖ $106 million project cost
❖ Risks
❖ Leverage will decrease $75
$150
$225
$300
Cash Su
rplus
Project C
ost
Cash SurplusProject CostCash Reserve Limit
![Page 7: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/7.jpg)
Financing using 100% Cash
Comparable Companies Leverage Ratio (L/A)United Healthcare (UNH) 0.61Wellpoint (WLP) [acquired by Anthem] 0.63Aetna (AET) 0.72CIGNA Corp. (CI) 0.80Humana (HUM) 0.60Centene Corp. (CNC) 0.70Health Net, Inc. (HNT) 0.71WellCare Health Plans (WCG) 0.67Healthspring (HS) [acquired by Cigna] 0.47Molina Healthcare (MOH) 0.77
Average 0.67
0.18
0.35
0.53
0.70
Delta Dental Top 10
0.670.54
![Page 8: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/8.jpg)
Maximum DebtPros
❖ More Liquid Cash
❖ Current Low Interest Rates
Cons
❖ Risk of Default
❖ Drop in Credit Rating
![Page 9: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/9.jpg)
Maximum Debt
A.M Bests’ BCAR Model
❖ Business Profile
❖ Operating Performance
❖ Balance Sheet Strength
![Page 10: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/10.jpg)
Delayed Completion of Project
59%41%
Exceed Budget
53% 47%
Take Longer
49% 51%
Receive Anticipated Benefits
![Page 11: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/11.jpg)
Delayed Completion of Project
ERP Evaluation TeamPoorly Defined Requirements
Change in Management During Implementation
Choosing a Vendor Based Solely On Sales Pitch
Lack of Employee Training
Reason Solution
Involve more employees than ERP Evaluation Team
Spend time understanding your specific needs
Invest in comprehensive training programs
![Page 12: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/12.jpg)
Delayed LayoffsScenario ❖ Originally 400 layoffs in
year 4❖ Delay of 200 employees
for 2 extra years
Reasons ❖ Project delayed❖ System is not as efficient
❖ Employee adjustment time
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6Cash Surplus $300,000 $397,850 $417,850 $369,500 $403,750 $433,250Cash from Operations $20,000 $20,000 $20,000 $20,000 $20,000 $20,000Borrowed Capital $33,216 -$33,216FTE Reductions $9,500 $14,250 $9,500 $4,750
Total $353,216 $417,850 $414,134 $403,750 $433,250 $458,000
![Page 13: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/13.jpg)
Delayed LayoffsShort Term Effects ❖ Pay extra $28.5 million
Long Term Effects ❖ Fear of layoffs❖ Employee Morale
Decreases❖ Workplace Productivity
Decreases
Outcome ❖ Layoffs are necessary❖ Extra money is spent❖ Fear within employees is set
$28.5 million
![Page 14: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/14.jpg)
Re-Upgrade of ProjectTechnological Revolution ❖ Significant investments in computer upgrades ❖ Opportunities in infrastructure and application development
To Stay Competitive ❖ Keep and increase market share ❖ Appropriate response to competitors
![Page 15: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/15.jpg)
Possible Outcomes❖ Invest in marketing❖ Invest in mobile platform❖ Invest in research and risk management❖ Lower insurance premiums❖ Invest in money-market securities
![Page 16: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/16.jpg)
Recommendation❖ Balloon payment and FTE
layoffs happen concurrently
❖ Strict layoff policy
❖ ERP Evaluation Team
❖ After successful project, Delta Dental should invest in the previously mentioned possible outcomes
68%
32%
Debt Cash
![Page 17: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/17.jpg)
Questions?
![Page 18: Delta Dental Analysis](https://reader033.fdocuments.net/reader033/viewer/2022051520/58ede24a1a28ab88668b4581/html5/thumbnails/18.jpg)
Thank You