-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hb5TeYwMuBtyWi8926gqA0RgS2pWcLTZKpgLLfJmirRgFNliIixwLLLLwJGrsA62 ewEVKTD1b/gW5zsmdKYDtQ== 0000950137-96-000702.txt : 19960517 0000950137-96-000702.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950137-96-000702 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTHCARE COMPARE CORP/DE/ CENTRAL INDEX KEY: 0000812910 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 363307583 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15846 FILM NUMBER: 96566022 BUSINESS ADDRESS: STREET 1: 3200 HIGHLAND AVE CITY: DOWNERS GROVE STATE: IL ZIP: 60515 BUSINESS PHONE: 7082417900 MAIL ADDRESS: STREET 2: 3200 HIGHLAND AVENUE CITY: DOWNERS GROVE STATE: IL ZIP: 60515 10-Q 1 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR { } 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 0-15846 ------- HealthCare COMPARE Corp. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 36-3307583 - ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 3200 Highland Avenue, Downers Grove, Illinois 60515 --------------------------------------------------- (Address of principal executive offices, Zip Code) (708) 241-7900 ------------------------------------------------ (Registrant's phone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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. The number of shares of Common Stock, par value $.01 per share, outstanding on May 8, 1996 was 34,962,385. 2 HealthCare COMPARE Corp. and Subsidiaries INDEX Part I. Financial Information Page Number ----------- Item 1. Financial Statements Consolidated Balance Sheets - Assets at March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . 3 Consolidated Balance Sheets - Liabilities and Stockholders' Equity at March 31, 1996 and December 31, 1995 . . . . . . 4 Consolidated Statements of Operations for the three months ended March 31, 1996 and 1995 . . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows for the three months ended March 31, 1996 and 1995 . . . . . . . . . . . . . . 6-7 Notes to Consolidated Financial Statements . . . . . . . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . 9-10 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 11 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Exhibit 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13-14 2 3 PART 1. FINANCIAL INFORMATION HEALTHCARE COMPARE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS March 31, 1996 December 31, 1995 -------------- ----------------- Current Assets: Cash and cash equivalents . . . . . . . . . . . . . . $ 89,735,000 $ 74,599,000 Short-term investments . . . . . . . . . . . . . . . . 65,278,000 70,634,000 Accounts receivable, less allowances for doubtful accounts of $2,921,000 and $2,807,000, respectively . . . . . . . . . . . 24,620,000 22,255,000 Other current assets . . . . . . . . . . . . . . . . . 10,496,000 6,434,000 ------------ ------------ Total current assets . . . . . . . . . . . . . . . . . 190,129,000 173,922,000 ------------ ------------ Long-Term Investments: Marketable securities . . . . . . . . . . . . . . . . 84,390,000 58,051,000 Other . . . . . . . . . . . . . . . . . . . . . . . . 18,163,000 18,086,000 ------------ ------------ 102,553,000 76,137,000 ------------ ------------ Property and Equipment: Buildings and improvements . . . . . . . . . . . . . . 33,928,000 32,885,000 Computer equipment and software . . . . . . . . . . . 31,074,000 29,358,000 Office furniture and equipment . . . . . . . . . . . . 17,865,000 17,643,000 ------------ ------------ 82,867,000 79,886,000 Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . (39,207,000) (36,472,000) ------------ ------------ Net property and equipment . . . . . . . . . . . . . . 43,660,000 43,414,000 ------------ ------------ Other Assets . . . . . . . . . . . . . . . . . . . . . . . 8,911,000 3,721,000 ------------ ------------ $345,253,000 $297,194,000 ============ ============
3 4 HEALTHCARE COMPARE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 1996 December 31, 1995 -------------- ----------------- Current Liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . $ 12,414,000 $ 7,149,000 Accrued expenses . . . . . . . . . . . . . . . . . . . . 10,891,000 9,649,000 Claims reserves . . . . . . . . . . . . . . . . . . . . 8,506,000 -- Income taxes payable . . . . . . . . . . . . . . . . . . 7,142,000 -- ------------ ------------ Total current liabilities . . . . . . . . . . . . . . . 38,953,000 16,798,000 Non-Current Liabilities . . . . . . . . . . . . . . . . . . . 110,000 126,000 ------------ ------------ Total liabilities . . . . . . . . . . . . . . . . . . . 39,063,000 16,924,000 ------------ ------------ Commitments and Contingencies . . . . . . . . . . . . . . . . -- -- Stockholders' Equity: Common stock . . . . . . . . . . . . . . . . . . . . . . 370,000 366,000 Additional paid-in capital . . . . . . . . . . . . . . . 117,348,000 104,961,000 Retained earnings . . . . . . . . . . . . . . . . . . . 229,008,000 210,070,000 Unrealized holding gain (loss) on marketable securities . . . . . . . . . . . . . . . . . . . . . (129,000) 242,000 Treasury stock, at cost . . . . . . . . . . . . . . . . (40,407,000) (35,369,000) ------------ ------------ Total stockholders' equity . . . . . . . . . . . . . . . 306,190,000 280,270,000 ------------ ------------ $345,253,000 $297,194,000 ============ ============
4 5 HEALTHCARE COMPARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, ---------------------------------- 1996 1995 -------- -------- Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $59,985,000 $51,381,000 ----------- ----------- Operating expenses: Cost of services . . . . . . . . . . . . . . . . . . . 17,842,000 16,657,000 Selling and marketing . . . . . . . . . . . . . . . . 7,240,000 6,191,000 General and administrative . . . . . . . . . . . . . . 3,393,000 2,757,000 Healthcare benefits . . . . . . . . . . . . . . . . . 830,000 -- Depreciation and amortization . . . . . . . . . . . . 2,760,000 2,649,000 Interest income, net . . . . . . . . . . . . . . . . . (2,852,000) (1,709,000) ----------- ----------- 29,213,000 26,545,000 ----------- ----------- Income before income taxes . . . . . . . . . . . . . . . . 30,772,000 24,836,000 Income taxes . . . . . . . . . . . . . . . . . . . . . . . (11,822,000) (10,063,000) ----------- ----------- Net income . . . . . . . . . . . . . . . . . . . . . . . . $18,950,000 $14,773,000 =========== =========== Weighted average common and common share equivalents . . . . . . . . . . . . . . . . 35,645,000 35,006,000 =========== =========== Net income per common share . . . . . . . . . . . . . . . . $ .53 $ .42 =========== ===========
5 6 HEALTHCARE COMPARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, ----------------------------------- 1996 1995 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers . . . . . . . . . . . . . . . . $57,692,000 $51,253,000 Cash paid to suppliers and employees . . . . . . . . . . . . (28,299,000) (24,089,000) Healthcare benefits paid . . . . . . . . . . . . . . . . . . (572,000) -- Interest received, net . . . . . . . . . . . . . . . . . . . 2,553,000 1,353,000 Income taxes paid, net . . . . . . . . . . . . . . . . . . . (1,380,000) (1,434,000) ----------- ----------- Net cash provided by operating activities . . . . . . . . . 29,994,000 27,083,000 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments . . . . . . . . . . . . . . . . . . (60,313,000) (36,505,000) Sales of investments . . . . . . . . . . . . . . . . . . . . 50,863,000 18,790,000 Acquisition of businesses, net of cash acquired . . . . . . (7,073,000) -- Purchase of property and equipment . . . . . . . . . . . . . (2,220,000) (2,163,000) ----------- ----------- Net cash used in investing activities . . . . . . . . . . . (18,743,000) (19,878,000) ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock . . . . . . . . . . . . . . . . . (5,038,000) (2,170,000) Proceeds from issuance of common stock . . . . . . . . . . . 8,923,000 3,979,000 ----------- ----------- Net cash provided by financing activities . . . . . . . . . 3,885,000 1,809,000 ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . 15,136,000 9,014,000 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . 74,599,000 29,412,000 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . $89,735,000 $38,426,000 =========== =========== SUPPLEMENTAL CASH FLOW DATA: Acquisition of businesses Fair value of assets acquired . . . . . . . . . . . . . . . $19,246,000 Cost in excess of net assets acquired . . . . . . . . . . . 3,123,000 Fair value of liabilities assumed . . . . . . . . . . . . . (11,204,000) Liabilities incurred for acquisition . . . . . . . . . . . . (4,092,000) ----------- Net cash paid . . . . . . . . . . . . . . . . . . . . . . . $ 7,073,000 ===========
6 7 HEALTHCARE COMPARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, ---------------------------------- 1996 1995 -------- --------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,950,000 $14,773,000 ----------- ----------- ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization . . . . . . . . . . . . . . . . 2,760,000 2,649,000 Change in provision for uncollectible receivables . . . . . . 114,000 (55,000) Amortization of bond premiums . . . . . . . . . . . . . . . . 425,000 282,000 Tax benefit from stock options exercised . . . . . . . . . . 3,468,000 1,013,000 Unrealized holding (gain) loss on marketable securities . . . . . . . . . . . . . . . . . . . . . . . . 239,000 (455,000) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . (288,000) 21,000 Changes in Assets and Liabilities, net of effects of acquired businesses: Accounts receivable . . . . . . . . . . . . . . . . . . . . . (2,479,000) (73,000) Other current assets . . . . . . . . . . . . . . . . . . . . 315,000 (504,000) Accounts payable and accrued expenses . . . . . . . . . . . . (201,000) 1,295,000 Claims reserves . . . . . . . . . . . . . . . . . . . . . . . (82,000) -- Income taxes payable . . . . . . . . . . . . . . . . . . . . 7,142,000 8,650,000 Non-current assets and liabilities . . . . . . . . . . . . . (369,000) (513,000) ----------- ----------- TOTAL ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . 11,044,000 12,310,000 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . $29,994,000 $27,083,000 =========== ===========
7 8 HEALTHCARE COMPARE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The unaudited financial statements herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements for the latest fiscal year ended December 31, 1995. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the December 31, 1995 audited financial statements have been omitted from these interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these interim financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. 2. On February 1, 1996, the Company acquired American Life and Health Insurance Company and its subsidiary, Cambridge Life Insurance Company, for approximately $11.2 million in cash, of which $7.1 million was paid at closing and $4.1 million will be paid when certain contingencies are resolved. The acquisition was accounted for by the purchase method and, accordingly, the results of operations of the acquired companies have been included in the accompanying consolidated financial statements from the date of acquisition. The estimated fair market value of net assets acquired was $8,042,000, net of cash acquired. The excess of purchase price over estimated fair market value has been allocated to goodwill which is being amortized on a straight-line basis over 20 years. The pro forma effects of these acquisitions on the consolidated results of the Company are not material. 3. The Company's investments in marketable securities which are classified as available for sale had a net unrealized loss in market value of $371,000, net of deferred income taxes, for the three months ended March 31, 1996. The net unrealized loss at March 31, 1996, included as a component of stockholders' equity, was $129,000, net of deferred income taxes. The Company's $10,000,000 investment in a limited partnership is carried at cost. The current value of the Company's interest in the limited partnership at March 31, 1996, as reported by the partnership, was $10,775,000. In the third quarter of 1995, the Company invested in another limited partnership which invests in equipment which is leased to third parties. This investment is accounted for on the equity method since the Company owns 20% of the limited partnership's assets. The Company's proportionate share of the partnership's income was $75,000 for the three months ended March 31, 1996 and is included in interest income. 4. Commitments and Contingencies Litigation: In April 1993, seven lawsuits were filed in the United States District Court for the Northern District of Illinois alleging violations of Federal securities laws by the Company and two of its executive officers. The plaintiffs alleged, among other things, that the defendants made false and misleading statements regarding the Company's financial prospects for 1993. In January 1996, the Seventh Circuit Court of Appeals reversed the District Court and dismissed all counts of the consolidated class action complaint. The plaintiffs have declined to appeal this ruling. 8 9 HEALTHCARE COMPARE CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) RESULTS OF OPERATIONS Revenues for the three months ended March 31, 1996 increased $8,604,000 (17%) from the comparable period of 1995. The Company's revenues consist of fees for cost management services provided under contracts which typically require clients to pay based upon a percentage of savings or on a predetermined contractual basis (fee-based revenue). The Company also derives revenues based on a fixed monthly fee for each participant, excluding covered dependents, in a client-sponsored health care plan (capitated revenue). As a result of the Company's acquisition of a life and health insurance company, the Company also derives an immaterial amount of premium revenue on life and health insurance contracts. The following table sets forth information with respect to the sources of the Company's revenues for the three months ended March 31, 1996 and 1995:
SOURCES OF REVENUE ($ in thousands) Three Months Ended March 31, ----------------------------------------------------------- 1996 % 1995 % -------- ----- -------- ----- PPO Services $46,101 77% $39,058 76% Fee Schedule Services 6,260 11% 4,404 8% Clinical Cost Management Services 5,473 9% 6,459 13% Net Premiums 1,381 2% -- -- Government Contract Services 770 1% 1,460 3% ------- ---- ------- ---- Total $59,985 100% $51,381 100% ======= ==== ======= ====
The growth in revenue during the three months ended March 31, 1996 from the comparable period of 1995 is primarily attributable to the expansion and development of the Company's PPO services. PPO revenue increased $7,043,000 (18%) from the same period of 1995. This growth is the result of new client additions and increased utilization of the PPO network by existing clients. Revenue from fee schedule services increased $1,856,000 (42%) for the three months ended March 31, 1996 from the comparable period in 1995 due to new client additions and increased revenue from several existing clients. Revenue from clinical cost management services decreased $986,000 (15%) for the three months ended March 31, 1996 from the comparable period in 1995. This decrease is due primarily to the loss of one client. Premium revenue was generated by the small health and life insurance companies acquired by the Company during the first quarter of 1996. Government contract revenue decreased $690,000 (47%) from the same period in 1995 due to the successful completion of the regional review portion of the Company's CHAMPUS contract. 9 10 HEALTHCARE COMPARE CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) Cost of services increased $1,185,000 (7%) for the three months ended March 31, 1996 from the comparable period of 1995. Cost of services consists primarily of salaries for personnel involved in PPO administration, development and expansion, utilization management programs, fee schedule and other cost management services offered by the Company. To a lesser extent, cost of services includes telephone expenses, facility expenses and information processing costs. The increase in these costs is primarily attributable to expenses incurred in the development of the Company's risk-based products. Selling and marketing costs increased $1,049,000 (17%) for the three months ended March 31, 1996 from the same period of 1995, primarily as a result of the hiring of additional sales personnel. To a lesser extent, the increase relates to commissions paid to agents and third party administrators by the Company's insurance subsidiaries. General and administrative costs for the three months ended March 31, 1996 increased $636,000 (23%) from the comparable period of 1995. This increase is primarily attributable to the general administrative expenses incurred by the Company's insurance entities. To a lesser extent, the increase relates to salaries and benefits incurred in the executive and administrative areas of the Company. Healthcare benefits represent losses incurred by the Company's insurance entities. The loss ratio (losses as a percent of premiums) was 60% for the first quarter of 1996. This ratio is consistent with management expectations. Depreciation and amortization expenses increased $111,000 (4%) for the three months ended March 31, 1996 from the comparable period of 1995. Depreciation expense as a percent of revenue remained constant at 5%. Interest income for the three months ended March 31, 1996 increased $1,143,000 (67%) from the same period in 1995 due to a 55% increase in the amount of cash equivalents and investments since March 31, 1995. Net income for the three months ended March 31, 1996, increased $4,177,000 (28%) from the comparable period of 1995. This increase is due primarily to the revenue growth as well as efficiencies achieved in the Company operations. LIQUIDITY AND CAPITAL RESOURCES The Company had $151,176,000 in working capital at March 31, 1996 compared with working capital of $157,124,000 at December 31, 1995. The decrease is primarily attributable to the purchase of the insurance subsidiaries, which had negative working capital of approximately $5,500,000 at the date of purchase. Cash equivalents and short- and long-term investments increased to $257,566,000 at March 31, 1996 from $221,370,000 at December 31, 1995, primarily as the result of cash provided by operating activities and, to a lesser extent, cash received upon the exercise of stock options. Through the first three months of the year, operating activities provided $29,994,000 of cash. The Company believes that its working capital, long-term investments, and cash generated from future operations will be sufficient to fund the Company's anticipated operations and expansion plans. 10 11 PART II Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 11 - Computation of Primary Earnings Per Common Share (b) Exhibit 11 - Computation of Fully Diluted Earnings Per Common Share 11 12 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. HealthCare COMPARE Corp. Dated: May 10, 1996 /s/James C. Smith --------------------------------------- James C. Smith President and Chief Executive Officer Dated: May 10, 1996 /s/Joseph E. Whitters --------------------------------------- Joseph E. Whitters Chief Financial Officer (Principal Financial and Accounting Officer) 12 EX-11 2 COMPUTATION OF EARNINGS 1 HEALTHCARE COMPARE CORP. AND SUBSIDIARIES EXHIBIT 11 COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE (UNAUDITED)
Three Months Ended March 31, ------------------------------------ 1996 1995 ----------- ---------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,950,000 $14,773,000 =========== =========== Weighted average number of common shares outstanding: Shares outstanding from beginning of period . . . . . . . . 34,635,000 34,034,000 Other issuances of common stock . . . . . . . . . . . . . . 258,000 148,000 Purchases of treasury stock . . . . . . . . . . . . . . . . (73,000) (48,000) Common Stock Equivalents: Additional equivalent shares issuable from assumed exercise of common stock options . . . . . . . . . 825,000 872,000 ----------- ----------- Weighted average common and common share equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 35,645,000 35,006,000 =========== =========== Net income per common share . . . . . . . . . . . . . . . . . . . $ .53 $ .42 =========== ===========
13 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 89,735 159,668 27,541 (2,921) 0 190,129 82,867 (39,207) 345,253 38,953 0 0 0 370 305,820 345,253 0 59,985 0 29,305 2,760 0 0 30,772 11,822 18,950 0 0 0 18,950 .53 .53
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