-----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, VejoB/sKsaMoY73r1CoQWYbaSpkEg9oG8dskHQknmkEjs+QRbHhlX7NWAvWsAQva F/Jt3yh51Z43PhJTj/EQ1g== 0000892569-99-000398.txt : 19990215 0000892569-99-000398.hdr.sgml : 19990215 ACCESSION NUMBER: 0000892569-99-000398 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORVEL CORP CENTRAL INDEX KEY: 0000874866 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 330282651 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19291 FILM NUMBER: 99534816 BUSINESS ADDRESS: STREET 1: 2010 MAIN STREE STREET 2: SUITE 1020 CITY: IRVINE STATE: CA ZIP: 92714 BUSINESS PHONE: 9498511473 MAIL ADDRESS: STREET 1: 2010 MAIN STREET STREET 2: SUITE 1020 CITY: IRVINE STATE: CA ZIP: 92614 FORMER COMPANY: FORMER CONFORMED NAME: FORTIS CORP DATE OF NAME CHANGE: 19600201 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1998 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended December 31, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For this transition period from _________________ to _________________ Commission file number O-19291 CORVEL CORPORATION (Exact name of registrant as specified in its charter) Delaware 33-0282651 - --------------------------------- --------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 2010 Main Street, Suite 1020 Irvine, CA 92614 - --------------------------------- ---------- (Address of principal executive office) (zip code) Registrant's telephone number, including code: (949) 851-1473 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 [ ] The number of shares outstanding of the registrant's Common Stock, $0.0001 Par Value, as of December 31, 1998 was 4,067,000 shares. 2 CORVEL CORPORATION TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - March 31, 1998 (audited) and December 31, 1998 (unaudited)- Page 3 of 15 Consolidated Statements of Income -- Three months ended December 31, 1997 and 1998 (both unaudited) - Page 4 of 15 Consolidated Statements of Income -- Nine months ended December 31, 1997 and 1998 (both unaudited) - Page 5 of 15 Consolidated Statements of Cash Flows -- Nine months ended December 31, 1997 and 1998 (both unaudited) - Page 6 of 15 Notes to Consolidated Financial Statements (unaudited) - December 31, 1998 - Page 7 of 15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Pages 8 through 13 of 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings - Page 14 of 15 Item 2. Changes in Securities - Page 14 of 15 Item 3. Defaults upon Senior Securities - Page 14 of 15 Item 4. Submission of Matters to a Vote of Security Holders - Pages 14 of 15 Item 5. Other Information - Page 14 of 15 Item 6. Exhibits and Reports on Form 8-K - page 14 of 15 Page 2 of 15 3 Part I - Financial Information Item 1. Financial Statements CORVEL CORPORATION CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998 AND DECEMBER 31, 1998
March 31, 1998 December 31, 1998 -------------- ----------------- (audited) (unaudited) ASSETS Current Assets Cash and cash equivalents $ 8,430,000 $ 7,029,000 Accounts receivable, net 25,633,000 30,811,000 Prepaid taxes and expenses 736,000 439,000 Deferred income taxes 2,376,000 2,050,000 ------------ ------------ Total current assets 37,175,000 40,329,000 ------------ ------------ Property and Equipment, Net 16,542,000 17,222,000 Other Assets 6,774,000 6,987,000 ------------ ------------ TOTAL ASSETS $ 60,491,000 $ 64,538,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 6,078,000 $ 4,993,000 Accrued liabilities 6,371,000 6,473,000 ------------ ------------ Total current liabilities 12,449,000 11,466,000 ------------ ------------ Deferred income taxes 2,271,000 2,649,000 Stockholders' Equity Common stock -- -- Paid-in-capital 30,615,000 31,960,000 Treasury Stock, (731,000 shares at March 31, 1998 and 849,000 shares at December 31, 1998) (21,727,000) (26,101,000) Retained earnings 36,883,000 44,564,000 ------------ ------------ Total stockholders' equity 45,771,000 50,423,000 ------------ ------------ TOTAL LIABILITIES AND EQUITY $ 60,491,000 $ 64,538,000 ============ ============
See accompanying notes to consolidated financial statements. Page 3 of 15 4 CORVEL CORPORATION INCOME STATEMENT FISCAL YEAR ENDING FISCAL MARCH 31, 1999 THIRD QUARTER ENDING DECEMBER 31, 1998
Three months ending December 31, --------------------------------- 1997 1998 ----------- ----------- REVENUES $35,558,000 $42,030,000 Cost of Revenues 28,963,000 34,676,000 ----------- ----------- Gross profit 6,595,000 7,354,000 General and administrative expenses 2,732,000 3,122,000 ----------- ----------- Income before income taxes 3,863,000 4,232,000 Income tax provision 1,468,000 1,608,000 ----------- ----------- NET INCOME $ 2,395,000 $ 2,624,000 =========== =========== EARNINGS PER SHARE: Basic $ .58 $ .65 =========== =========== Diluted $ .56 $ .64 =========== =========== WEIGHTED AVERAGE SHARES: Basic 4,154,000 4,064,000 Diluted 4,274,000 4,121,000
See accompanying notes to consolidated financial statements. Page 4 of 15 5 CORVEL CORPORATION INCOME STATEMENT FISCAL YEAR ENDING FISCAL MARCH 31, 1999 NINE MONTHS ENDING DECEMBER 31, 1998
Nine months ending December 31, -------------------------------- 1997 1998 ------------ ------------ REVENUES $104,265,000 $122,056,000 Cost of Revenues 84,728,000 100,344,000 ------------ ------------ Gross profit 19,537,000 21,712,000 General and administrative expenses 8,164,000 9,325,000 ------------ ------------ Income before income taxes 11,373,000 12,387,000 Income tax provision 4,322,000 4,706,000 ------------ ------------ NET INCOME $ 7,051,000 $ 7.681,000 ============ ============ EARNINGS PER SHARE: Basic $ 1.67 $ 1.88 ============ ============ Diluted $ 1.63 $ 1.86 ============ ============ WEIGHTED AVERAGE SHARES: Basic 4,211,000 4,081,000 Diluted 4,314,000 4,138,000
See accompanying notes to consolidated financial statements. Page 5 of 15 6 CORVEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED DECEMBER 31, 1997, AND 1998
Nine months ended December 31, ------------------------------- 1997 1998 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 7,051,000 7,681,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,335,000 4,108,000 Changes in operating assets and liabilities Accounts receivable (2,663,000) (5,178,000) Prepaid taxes and expenses 1,143,000 297,000 Accounts payable (262,000) (1,085,000) Accrued liabilities 1,389,000 102,000 Income taxes payable (45,000) 704,000 Other assets (749,000) (213,000) ------------ ----------- Net cash provided by operating activities 9,199,000 6,416,000 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (5,686,000) (4,788,000) ------------ ----------- Net cash used in investing activities (5,686,000) (4,788,000) ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES Purchase of Treasury Stock (9,510,000) (4,374,000) Sale of common and exercise of stock options and related tax benefits 1,412,000 1,345,000 ------------ ----------- Net cash provided by financing activities (8,098,000) (3,029,000) ------------ ----------- INCREASE (DECREASE) IN CASH: (4,585,000) (1,401,000) Cash and cash equivalents at beginning 15,665,000 8,430,000 ------------ ----------- Cash and cash equivalents at end $ 11,080,000 7,029,000 ============ ===========
See accompanying notes to consolidated financial statements. Page 6 of 15 7 CORVEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 (UNAUDITED) A. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended December 31, 1998 are not necessarily indicative of the results that may be expected for the year ended March 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended March 31, 1998 included in the Company's registration statement on Form 10-K. B. Earnings per Share Earnings per common and common equivalent shares were computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the quarter. For calculation of the common and common equivalent shares, see Exhibit 11 included herein. Page 7 of 15 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The following table contains certain financial data as a percentage of revenues:
Three months ended Dec. 31: 1997 1998 --------------------------- ------ ------ Revenues 100.0% 100.0% Cost of services 81.5 82.5 ------ ------ Gross profit 18.5 17.5 ------ ------ General and administrative 7.7 7.4 ------ ------ Income from operations 10.8 10.1 ------ ------ Income tax provision 4.1 3.9 ------ ------ NET INCOME 6.7% 6.2% ====== ======
Nine months ended Dec. 31: 1997 1998 -------------------------- ------ ------ Revenues 100.0% 100.0% Cost of services 81.3 82.2 ------ ------ Gross profit 18.7 17.8 ------ ------ General and administrative 7.8 7.6 ------ ------ Income from operations 10.9 10.2 ------ ------ Income tax provision 4.1 3.9 ------ ------ NET INCOME 6.8% 6.3% ====== ======
Revenues for the three months ended December 31, 1998 increased by $6.4 million to $42.0 million, an increase of 18% over the $35.6 million revenue for the comparable period in the prior fiscal year. The increase in revenues is primarily attributable to a 23% increase in patient management revenue along with a 12% increase in provider revenues. Case management revenue grew to $24.8 million from $20.1 million in the prior year, an increase of $4.7 million. The increase in patient management is primarily due to a few national case management contracts, which the company was awarded during the past year. Revenues for the nine months ended December 31, 1998 increased by $17.8 million to $122.1 million, an increase of 17% over the $104.3 million revenue for the comparable period in the prior fiscal year. The increase in revenues is primarily attributable to a 22% increase in patient management revenue along with an 11% increase in provider revenues. Case management revenue grew to $71.0 million from $58.2 million in the prior year, an increase of $12.8 million. The increase in patient management is primarily due to a few national case management contracts, which the company was awarded during the past year. Page 8 of 15 9 Cost of revenues for the three months ended December 31, increased from 81.5% of revenues in 1997 to 82.5% of revenue for the three months ended December 31, 1998. Cost of revenues for the nine months ended December 31 increased from 81.3% of revenues in 1997 to 82.2% of revenue for the nine months ended December 31, 1998. Both of the cost of revenues percentage noted above increased primarily due to a higher growth rate in the patient management business compared to the growth in the provider programs business. The patient management business has a greater cost of revenue percentage than that in the provider program business. Additionally, both of the Company's businesses were under greater pricing pressure than in prior years. General and administrative expenses as a percentage of revenues decreased from 7.8% for the nine months ending December 31, 1997, to 7.6% for the nine months ending December 31, 1998. This decline in this percentage is due to the growth in the Company's revenue slightly exceeded the growth in general and administrative expenses. General and administrative expenses as a percentage of revenues for the quarter ending December 31, 1998 declined to 7.4% from 7.7% for the same quarter in the prior year. LIQUIDITY AND CAPITAL RESOURCES The Company has funded its operations and capital expenditures primarily from cash flow from operations. During the nine months ending December 31, 1998, net working capital increased by $4.2 million, from $24.7 million at March 31, 1998 to $28.9 million at December 31, 1998. This increase was primarily due to the increase in accounts receivable by $5.2 million, from $25.6 million to $30.8 million. As of December 31, 1998, the Company had $5.2 million in cash, primarily in short-term highly-liquid investments with maturities of 90 days or less. The Company has historically required substantial capital to fund the growth of its operations, particularly working capital to fund the growth in accounts receivable. The Company believes, however, that the cash balance at December 31, 1998 along with anticipated internally generated funds will be sufficient to meet the Company's expected cash requirements for at least the next twelve months. As of December 31, 1998, the Company had no interest bearing debt. YEAR 2000 INFORMATION SYSTEMS ISSUES Certain computer programs written with two digits rather than four to define the applicable year may experience problems handling dates near the end of and beyond the year 1999 (Year 2000 failure dates). This may cause computer applications to fail or provide erroneous results unless corrective action is taken. The Company has developed a plan to address the Year 2000 issue and, in doing so, will incur internal staff costs as well as external consulting and other expenses related to infrastructure enhancements necessary to prepare its systems for the new century. A strategy for achieving compliance for each system component has been prepared. Costs of the Company's Year 2000 Project are estimated to be approximately $2.4 million of which approximately $1.3 million has been incurred through December 31, 1998. The cost of the Year 2000 Project will be expensed as incurred. Page 9 of 15 10 With respect to Information Technology (IT) systems, our Year 2000 plan encompasses computer application systems, including those for client-server, minicomputer, and personal computer environments; and IT infrastructure, including hardware, operating system software, network technology, and voice and data communications. All of the Company proprietary systems development methodologies assure that core functions like date comparisons, date sorts, and elapsed-day calculations are standardized in shared-code libraries and/or utilities. This reduces the number of instances of redundant code to be reviewed and certified for Year 2000 compliance. The Company is currently conducting full system tests in a simulated post-2000 environment. It is anticipated that the certified versions of these systems will be fully implemented in all operating sites by June 30, 1999. Interoperability tests with clients' systems, if needed, commenced in the third quarter of 1998. Data formats used in EDI transmissions, unless specifically requested by the client, are Year 2000 compliant. Non-IT Systems The Company's non-IT systems are primarily comprised of systems typically found in commercial office buildings including, electrical, fire alarm and suppression, security, HVAC and elevator systems. The inventory phase for non-IT systems at the Company's major facilities in is complete. The Company is currently at the beginning of the assessment phase for its non-IT systems. As part of the assessment phase, the Company is communicating with the owners/landlords of office spaces which the Company leases to determine the Year 2000 readiness of such office space. At this time, the Company has not received any notice of non-compliance problems from landlords. The Company is also communicating with its significant vendors to determine their Year 2000 readiness and, when possible, obtain written assurances that the Year 2000 problem will not materially adversely effect their ability to continue to provide supplies or services to the Company. Each of the foregoing IT and non-IT programs are being conducted in phases, described as follows: INVENTORY or AWARENESS PHASE -- Identify hardware, software, processes or devices that use or process date information. ASSESSMENT PHASE -- Identify Year 2000 date processing deficiencies and related implications. PLANNING and VALIDATION PHASE -- Determine for each deficiency an appropriate solution and budget. Schedule resources and develop testing plans. Validate the recommended solution with testing. IMPLEMENTATION PHASE -- Implement designed solutions. Conduct systems testing. The plan also includes a control element intended to ensure that changes to IT and non-IT systems do not introduce Year 2000 issues. The Company's bill review product for Windows is presently Year 2000 compatible as well as the case management software. The Company's bill review software which runs on VMS is nearing the completion of the validation testing phase with implementation scheduled prior to the end of the June 1999 quarter. Page 10 of 15 11 The Company's software for its accounts receivable, accounts payable and general ledger is presently Year 2000 compatible and the billing software is nearing the completion of the validation testing phase with implementation scheduled prior to the end of the June 1999 quarter. Review of the non-IT systems is in the assessment phase with implementation scheduled prior to the end of the September 1999 quarter. The plan as provides for contingency plans and related cost estimates, as additional information becomes available. Our Year 2000 Plan is subject to modification and is revised periodically as additional information is developed. The Company currently believes that its Year 2000 Plan will be completed in all material respects prior to the anticipated Year 2000 failure dates. Successful completion of the Company's 2000 Project is affected by many factors, including but not limited to Year 2000 readiness of the Company's key vendors and customers. The information contained in this statement is based on management's best estimates. However, there can be no guarantee that these estimated will be achieved, and actual results could differ materially from those anticipated based on factors such as availability and cost of personnel trained in this area, the ability to identify relevant computers codes, and the impact of the Company's external relationships. The possible consequences of the Company or its business partners not being fully Year 2000 compliant include temporary disruption to the delivery of services. The Company will be using contingency plans already in place related to the backing up of information systems and disaster recovery procedures. The Company will be developing additional and/or supplemental contingency plans where necessary in an effort to be prepared should a Year 2000 issue arise. CAUTIONARY STATEMENT REGARDING RISK FACTORS Certain statements contained in the Company's Annual Report on Form 10-K for the year ended March 31, 1998, Quarterly Report on Form 10-Q for the quarter ending September 30, 1998, as well as the Company's Annual Report for the year ending March 31, 1998, such as statements concerning the development of new services, possible legislative changes, and other statements contained herein regarding matters that are not historical facts, are forward-looking statements (as such term is defined in the Securities Act of 1933, as amended). Because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Past financial performance is not necessarily a reliable indicator of future performance, and investors should not use historical performance to anticipate results or future period trends. Factors that could cause actual results to differ materially include, but are not limited to, those discussed below. In addition, reference is made to the Company's most recent annual report for the fiscal year ending March 31, 1998. Page 11 of 15 12 POTENTIAL ADVERSE IMPACT OF GOVERNMENT REGULATION. Many states, including a number of those in which the Company transacts business, have licensing and other regulatory requirements applicable to the Company's business. Approximately half of the states have enacted laws that require licensing of businesses which provide medical review services. Some of these laws apply to medical review of care covered by workers' compensation. These laws typically establish minimum standards for qualifications of personnel, confidentiality, internal quality control, and dispute resolution procedures. These regulatory programs may result in increased costs of operation for the Company, which may have an adverse impact upon the Company's ability to compete with other available alternatives for health care cost control. In addition, new laws regulating the operation of managed care provider networks have been adopted by a number of states. These laws may apply to managed care provider networks having contracts with the Company or to provider networks which the Company may organize. To the extent the Company is governed by these regulations, it may be subject to additional licensing requirements, financial oversight and procedural standards for beneficiaries and providers. Regulation in the health care and workers' compensation fields is constantly evolving. The Company is unable to predict what additional government regulations, if any, affecting its business may be promulgated in the future. The Company's business may be adversely affected by failure to comply with existing laws and regulations, failure to obtain necessary licenses and government approvals or failure to adapt to new or modified regulatory requirements. Proposals for health care legislative reforms are regularly considered at the federal and state levels. To the extent that such proposals affect workers' compensation, such proposals may adversely affect the Company's business and results of operations. In addition, changes in workers' compensation laws or regulations may impact demand for the Company's services, require the Company to develop new or modified services to meet the demands of the marketplace or modify the fees that the Company may charge for its services. One of the proposals which has been considered is 24-hour health coverage, in which the coverage of traditional employer-sponsored health plans is combined with workers' compensation coverage to provide a single insurance plan for work-related and non-work-related health problems. Incorporating workers' compensation coverage into conventional health plans may adversely affect the market for the Company's services. POSSIBLE LITIGATION AND LEGAL LIABILITY. The Company, through its utilization management services, makes recommendations concerning the appropriateness of providers' medical treatment plans of patients throughout the country, and it could share in potential liabilities for adverse medical consequences. The Company does not grant or deny claims for payment of benefits and the Company does not believe that it engages in the practice of medicine or the delivery of medical services. There can be no assurance, however, that the Company will not be subject to claims or litigation related to the grant or denial of claims for payment of benefits or allegations that the Company engages in the practice of medicine or the delivery of medical services. In addition, there can be no assurance that the Company will not be subject to other litigation that may adversely affect the Company's business or results of operations. The Company maintains professional liability insurance and such other coverages as the Company believes are reasonable in light of the Company's experience to date. There can be no assurance, however, that such insurance will be sufficient or available in the future at reasonable cost to protect the Company from liability. COMPETITION. The Company faces competition from large insurers, health maintenance organizations ("HMOs"), preferred provider organizations ("PPOs"), third party administrators and other managed health care companies. The Company believes that, as managed care techniques continue to gain acceptance in the workers' compensation marketplace, CorVel's competitors will increasingly consist of nationally focused workers' compensation managed care service companies, insurance companies, HMOs and other significant providers of managed care products. Legislative reforms in some states permit employers to designate health plans such as HMOs and PPOs to cover workers' compensation claimants. Because many health plans have the ability to manage medical costs for workers' compensation claimants, such legislation may intensify competition in the market served by the Company. Many of the Company's current and potential competitors are significantly larger and have greater financial and marketing resources than those of the Company, and there can be no assurance that the Company will continue to maintain its existing performance or be successful with any new products or in any new geographical markets it may enter. Page 12 of 15 13 CHANGES IN MARKET DYNAMICS. Legislative reforms in some states permit employers to designate health plans such as HMOs and PPOs to cover workers' compensation claimants. Because many health plans have the capacity to manage health care for workers' compensation claimants, such legislation may intensify competition in the market served by the Company. Within the past few years, several states have experienced decreases in the number of workers' compensation claims and the average cost per claim which have been reflected in workers' compensation insurance premium rate reductions in those states. The Company believes that declines in workers' compensation costs in these states are due principally to intensified efforts by payors to manage and control claim costs, to improved risk management by employers and to legislative reforms. If declines in workers' compensation costs occur in many states and persist over the long-term, they may have an adverse impact on the Company's business and results of operations. DEPENDENCE UPON KEY PERSONNEL. The Company is dependent to a substantial extent upon the continuing efforts and abilities of certain key management personnel. In addition, the Company faces competition for experienced employees with professional expertise in the workers' compensation managed care area. The loss of, or the inability to attract, qualified employees could have a material adverse effect on the Company's business and results of operations. RISKS RELATED TO GROWTH STRATEGY. The Company's strategy is to continue its internal growth and, as strategic opportunities arise in the workers' compensation managed care industry, to consider acquisitions of, or relationships with, other companies in related lines of business. As a result, the Company is subject to certain growth-related risks, including the risk that it will be unable to retain personnel or acquire other resources necessary to service such growth adequately. Expenses arising from the Company's efforts to increase its market penetration may have a negative impact on operating results. In addition, there can be no assurance that any suitable opportunities for strategic acquisitions or relationships will arise or, if they do arise, that the transactions contemplated thereby could be completed. If such a transaction does occur, there can no assurance that the Company will be able to integrate effectively any acquired business into the Company. In addition, any such transaction would be subject to various risks associated with the acquisition of businesses, including the financial impact of expenses associated with the integration of businesses. There can be no assurance that any future acquisition or other strategic relationship will not have an adverse impact on the Company's business or results of operations. If suitable opportunities arise, the Company anticipates that it would finance such transactions, as well as its internal growth, through working capital or, in certain instances, through debt or equity financing. There can be no assurance, however, that such debt or equity financing would be available to the Company on acceptable terms when, and if, suitable strategic opportunities arise. During the past fiscal year, the Company has made efforts to increase its presence and revenue in the group health market with moderate success. Managed care in this market is more mature than managed care in workers' compensation and has numerous large competitors, primarily health maintenance organizations. The Company has limited experience in the group health market. There is no assurance that the Company will be successful in this market. The Company expects that a considerable amount of its future growth will depend on its ability to process and manage claims data more efficiently and to provide more meaningful healthcare information to customers and payors of healthcare. There is no assurance that the Company will be able to develop, license or otherwise acquire software to address these market demands as well or as timely as its competitors. POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's Common Stock following this offering may be highly volatile. Factors such as variations in the Company's revenues, earnings and cash flow, general market trends in the workers' compensation managed care market, and announcements of innovations by the Company or its competitors could cause the market price of the Common Stock to fluctuate substantially. In addition, the stock market has in the past experienced price and volume fluctuations that have particularly affected companies in the health care and managed care markets resulting in changes in the market price of the stock of many companies which may not have been directly related to the operating performance of those companies. Page 13 of 15 14 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS - The Company is involved in litigation arising in the normal course of business. The Company believes that resolution of these matters will not result in any payment that, in the aggregate, would be material to the financial position or financial operations of the Company. ITEM 2 - CHANGES IN SECURITIES - None. ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None. ITEM 5 - OTHER INFORMATION - None. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - None. 11 Computation of Per Share Earnings 27 Financial Data Schedule SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CORVEL CORPORATION By: V. Gordon Clemons -------------------------------- V. Gordon Clemons, Chairman of the Board, Chief Executive Officer, and President By: Richard J. Schweppe -------------------------------- Richard J. Schweppe, Chief Financial Officer February 11, 1999 Page 14 of 15 EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 CORVEL CORPORATION COMPUTATION OF PER SHARE EARNINGS Shares used in per share calculations were determined as follows:
Three months ended Dec. 31, -------------------------- 1997 1998 ---------- ---------- Weighted shares for basic earnings per share computation 4,154,000 4,064,000 Net effect of dilutive common stock options 120,000 57,000 ---------- ---------- Weighted shares for diluted earnings per share 4,274,000 4,121,000 ========== ========== NET INCOME $2,395,000 $2,624,000 ========== ========== BASIC EARNINGS PER SHARE $ .58 $ .65 ========== ========== DILUTED EARNINGS PER SHARE $ .56 $ .64 ========== ==========
Nine months ended Dec. 31, -------------------------- 1997 1998 ---------- ---------- Weighted shares for basic earnings per share 4,211,000 4,081,000 Net effect of dilutive common stock options 103,000 57,000 ---------- ---------- Weighted shares for diluted earnings per share 4,314,000 4,138,000 ========== ========== NET INCOME $7,051,000 $7,681,000 ========== ========== BASIC EARNINGS PER SHARE $ 1.67 $ 1.88 ========== ========== DILUTED EARNINGS PER SHARE $ 1.63 $ 1.86 ========== ==========
EX-27 3 FINANCIAL DATA SCHEDULE
5 9-MOS MAR-31-1999 APR-01-1998 DEC-31-1998 7,029,000 0 33,347,000 2,536,000 0 40,329,000 38,680,000 21,458,000 64,528,000 11,466,000 0 0 0 31,960,000 18,463,000 50,423,000 0 122,056,000 0 109,669,000 0 0 0 12,387,000 4,706,000 7,681,000 0 0 0 7,681,000 1.88 1.86 FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
-----END PRIVACY-ENHANCED MESSAGE-----