-----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, T7ez9+LZVtyLx3TVDOC5d28QD1Y9DKse4a2vbncl2uJp+TjlFKI4Qhgt5iFSVfAu OPZmfR7SrOsHnHq8b5w/Xg== 0000950169-96-000117.txt : 19960515 0000950169-96-000117.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950169-96-000117 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCIA INC CENTRAL INDEX KEY: 0000935001 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 521407998 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25378 FILM NUMBER: 96564489 BUSINESS ADDRESS: STREET 1: 300 EAST LOMBARD ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4103327532 MAIL ADDRESS: STREET 1: 300 EAST LOMBARD ST CITY: BALTIMORE STATE: MD ZIP: 21202 10-Q 1 HCIA INC. 10-Q 36196.1 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 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 0-25378 HCIA Inc. (Exact name of registrant as specified in its charter) Maryland 52-1407998 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification Number) 300 East Lombard Street, Baltimore, Maryland 21202 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 410 332-7532 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 report(s)0, 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 registrant's classes of common stock, at April 30, 1996. Class: Common Stock Number of Shares: 8,989,607 Part 1. Item 1. Financial Statements HCIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND DECEMBER 31, 1995 (in thousands) March 31, Dec 31, 1996 1995 ASSETS (Unaudited) Current assets: Cash and cash equivalents...................... $ 4,359 $ 3,190 Short-term investments......................... 20,582 23,280 Trade accounts receivable, net of allowance for doubtful accounts of $542 in 1996 and $454 in 1995...................................... 18,222 16,623 Prepaid expenses and other current assets...... 2,858 2,236 -------- ------- Total current assets.......................... 46,021 45,329 Furniture and equipment, net..................... 6,356 6,576 Computer software costs, net..................... 12,297 11,012 Other intangible assets, net..................... 42,813 42,338 Deferred tax asset, net.......................... 2,940 3,090 Other............................................ 777 56 -------- ------- Total assets.................................. $111,204 $108,401 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................ $ 1,222 $ 732 Accrued salaries, benefits and other liabilities................................... 4,121 4,222 Capital lease obligations....................... 125 174 Notes payable................................... 1,529 2,265 Income taxes payable............................ 1,694 1,098 Deferred revenue................................ 2,281 1,167 -------- -------- Total current liabilities..................... 10,972 9,658 Notes payable................................... 699 699 -------- -------- Total liabilities............................. 11,671 10,357 -------- -------- Stockholders' equity: Common stock-$.01 par value;15,000,000 shares authorized; 8,989,607 issued and outstanding as of March 31, 1996........................... 90 90 Additional paid-in capital....................... 103,147 102,882 Accumulated deficit.............................. (3,662) (4,953) Cumulative unrealized (depreciation)/appreciation of short-term investments...................... (22) 44 Cumulative effect of currency translation adjustment..................................... (20) (19) -------- ------ Total stockholders' equity................... 99,533 98,044 ------- ------ Total liabilities and stockholders' equity....... $111,204 $108,401 ======= ======= See accompanying notes to consolidated financial statements. Page 1 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended March 31, 1996 and 1995 (in thousands, except per share data) (Unaudited) 1996 1995 Revenue............................................ $14,229 $8,749 Salaries, wages and benefits....................... 6,686 4,542 Other operating expenses........................... 3,303 2,479 Depreciation....................................... 518 262 Amortization....................................... 1,792 1,029 ------- ------ Operating income............................. 1,930 437 Interest income.................................... 282 176 Interest expense................................... (83) (25) ------- ------ Income before income taxes and minority interest in income of consolidated subsidiaries.............................. 2,129 588 Provision for income taxes......................... (838) (238) Minority interest in income of consolidated subsidiaries..................................... - (7) ------- ------ Net income.................................. $1,291 $ 343 ======= ======= Net income per share............................... $ 0.14 $ 0.05 ======= ======= Shares used in per share calculation............... 9,460 6,508 ======= ======= See accompanying notes to consolidated financial statements. Page 2 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY Year ended December 31, 1995 and the three months ended March 31, 1996 (in thousands)
Cumulative Unrealized Cumulative Appreciation/ Effect of Additional (Depreciation) of Currency Total Common Paid-in Accumulated Short-term Translation Stockholders' Stock Capital Deficit Investments Adjustment Equity BALANCE AT DECEMBER 31, 1994 $54 $36,876 $(2,548) $ -- $(11) $34,371 ------- -------- --------- ---------- -------- --------- Sale of common stock to the public 36 66,006 -- -- -- 66,042 Net loss -- -- (2,405) -- -- (2,405) Effect of currency translation adjustment -- -- -- -- (8) (8) Unrealized appreciation of short-term investments -- -- -- 44 -- 44 ------- -------- --------- ---------- -------- --------- BALANCE AT DECEMBER 31, 1995 90 102,882 (4,953) 44 (19) 98,044 ------- -------- --------- ---------- --------- ---------- Exercise of stock options -- 265 -- -- -- 265 Net income -- -- 1,291 -- -- 1,291 Effect of currency translation adjustment -- -- -- -- (1) (1) Unrealized (depreciation) of short-term investments -- -- -- (66) -- (66) ------- --------- --------- ---------- --------- ---------- BALANCE AT MARCH 31, 1996 (unaudited) $ 90 $103,147 $(3,662) $ (22) $ (20) $99,533 ======== ========= ========= ========= ========== ===========
See accompanying notes to consolidated financial statements. Page 3 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended March 31, 1996 and 1995 (in thousands) (Unaudited) 1996 1995 Cash flows from operating activities: Net income .......................................... $ 1,291 $ 343 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................. 2,310 1,291 Deferred tax provision......................... 150 - Changes in operating assets and liabilities: Accounts receivable......................... (1,263) 174 Income taxes payable........................ 596 209 Prepaid expenses............................ (553) (169) Accounts payable............................ 403 808 Accrued salaries, benefits and other liabilities............................... (317) 147 Deferred revenue............................ 1,114 531 Minority interest........................... - 7 -------- ------- Net cash provided by operating activities............................. 3,731 3,341 --------- ------- Cash flows from investing activities: Purchases of furniture and equipment................. (892) (678) Cost of acquisitions, net of cash acquired........... (613) (520) Computer software purchased or capitalized........... (2,095) (961) Other intangible assets purchased or capitalized..... (352) (258) Purchases of short-term investments.................. (15,112) - Proceeds from disposals of short-term investments.... 17,744 - Other................................................ (721) (12) -------- ------- Net cash used in investing activities.. (2,041) (2,429) Cash flows from financing activities: Proceeds from exercise of stock options.............. 265 - Proceeds from public offerings....................... - 25,753 Repayments of notes payable.......................... (736) - Repayments of related party borrowings............... - (1,300) Principal payments on capital leases................. (49) (37) -------- ------ Net cash provided by (used in) financing activities................ (520) 24,416 --------- ------ Impact of currency fluctuations on cash and cash equivalents.............................................. (1) (11) --------- ------ Increase in cash and cash equivalents...................... 1,169 25,317 Cash & cash equivalents - beginning of period.............. 3,190 696 -------- ------ Cash & cash equivalents - end of period.................... $ 4,359 $26,013 ======== ====== Supplemental cash flow information - cash paid during period for interest $ 65 $ - ======== ======= - cash paid during period for income taxes $ 93 $ - ======== ======= See accompanying notes to consolidated financial statements. Page 4 HCIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 (Unaudited) (1) Basis of Presentation The accompanying unaudited interim financial statements of the Company have been prepared in accordance with generally accepted accounting principles. In the opinion of management, these statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's financial position, results of operations, changes in stockholders' equity and cash flows for the periods presented. The results of operations for the three month period ended March 31, 1996 may not be indicative of the results that may be expected for the full year ending December 31, 1996. These financial statements and notes should be read in conjunction with the financial statements and notes included in the audited consolidated financial statements of the Company for the year ended December 31, 1995 as contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (No. 0-25378). (2) Cash Equivalents As of March 31, 1996, cash equivalents consist of highly liquid securities with original maturities of three months or less at the date acquired by the Company. The Company's short term investments consist of preferred stocks, variable rate debenture bonds and municipal bonds. Page 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three months ended March 31, 1996 compared to three months ended March 31, 1995 Revenue. Revenue for the three months ended March 31,1996 was $14.2 million, an increase of $5.5 million or 63% over the three months ended March 31, 1995. The increase was primarily the result of a 77% increase in revenue from the sale of Decision Support Systems. Revenue from the sale of Decision Support Systems represented 83% of the revenue for the three months ended March 31, 1996 and Syndicated Products represented the remaining 17% of revenue. The increase in Decision Support Systems revenue was primarily the result of the Company's continued success in expanding its customer relationships in the provider and supplier markets, and as a result of the acquisitions of Datis Corporation ("Datis") and the CHAMP unit of William M. Mercer, Incorporated, ("CHAMP") both of which occurred after March 31, 1995. Salaries, Wages and Benefits. Salaries, wages and benefits decreased to 47% of revenue for the three months ended March 31, 1996 from 52% for the three months ended March 31, 1995. This decrease was a result of the continued leveraging of the Company's historical investments in technology and basic infrastructure as revenue increased. Other Operating Expenses. Other operating expenses, which include occupancy, travel, and marketing expenses, decreased to 23% of revenue for the three months ended March 31, 1996 from 28% for the three months ended March 31, 1995. This decrease was a result of certain of these expenses growing at a slower rate than revenue. Depreciation and Amortization. Depreciation and amortization increased to 16% of revenue for the three months ended March 31,1996 from 15% for the three months ended March 31, 1995. This increase was a result of the additional amortization associated with the acquisitions of Datis and CHAMP as well as depreciation of other acquired assets. Interest Income and Expense. Net interest income was $199,000 for the three months ended March 31, 1996 compared with net interest income of $151,000 for the three months ended March 31, 1995. This increase was the result of a higher invested balance in 1996. Income Taxes. The Company's effective tax rate was 39.4% for the three months ended March 31, 1996 compared with 40.5% for the three months ended March 31, 1995. The decrease was the result of a portion of the Company's investments being placed in tax-exempt securities, as well as the tax benefit associated with the exercise of certain non-qualified stock options. This decrease was partially offset by an increase in non-deductible goodwill. Page 6 Liquidity and Capital Resources In May 1995, the Company entered into a line of credit agreement with a bank providing for a borrowing capacity of $4.0 million. Borrowings bear interest at a fluctuating rate equal to the Bank's prime rate plus .25%. The Company also pays a commitment fee on the average daily unused portion of the line of credit at a rate of .25% per annum. Borrowings are collateralized by the Company's accounts receivable. There were no borrowings under the line of credit as of March 31, 1996. The line of credit agreement expires on January 2, 1997. Page 7 PART II Other Information Item 5. Other Information In May 1996, approximately 4.2 million shares of common stock of the Company were sold by AMBAC Inc. in a registered public offering. In connection with the offering, the Company granted the underwriters a 30-day option to purchase 415,951 shares of common stock at $51.00 per share. As of the date of this report 261,951 shares had been exercised. The Company did not receive any of the proceeds from the sale of the shares by AMBAC Inc. Item 6. Exhibits and Reports on Form 8-K (a) The following are annexed as exhibits: Exhibit Number Description 11 Statement Re: Computation of earnings per share. (b) Reports on Form 8-K None Page 8 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. HCIA Inc. (Registrant) Date: May 13, 1996 By: ___________________________ Barry C. Offutt Senior Vice President and Chief Financial Officer (principal financial officer) Page 9 EXHIBIT INDEX Exhibit Number Page 11 Statement Re: Computation of earnings per share 11 Page 10 EX-11 2 EXHIBIT 11 Exhibit 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (In Thousands Except Per Share Amounts) Primary (1) Fully Diluted(1) (In thousands, except per share data) Three months ended March 31, 1996 Weighed average shares outstanding...... 8,968 N/A Effect of dilutive common stock equivalents........................... 492 ---------- Weighted average shares outstanding for EPS purposes...................... 9,460 Net income.............................. $1,291 ---------- Net income per share (2)................ $0.14 ========== (1) As of March 31, 1996, options to purchase 698,558 shares of common stock were outstanding. In the calculation of primary net income per share, these options were included in the average number of common shares outstanding using the treasury stock method based on the average price of the common stock for the period. As the price of the Company's common stock as of March 31, 1996 was less than the average price for the three month period ended March 31, 1996, the fully diluted earnings per share calculation for the three month period is not applicable. (2) In accordance with Accounting Principle Board Opinion No. 15, any reduction of less than 3% need not be considered dilutive. Accordingly, the consolidated statements of operations reflect net income per share and the weighted average number of shares used in the calculation on a primary basis only. Page 11 EX-27 3 EXHIBIT 27
5 As the price of the Company's common stock as of March 31, 1996 was less than the average price for the three month period ended March 31, 1996, the fully diluted earnings per share for the three month period is not applicable, but because of Edgar rules we are required to file with a zero. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 4,359 20,582 18,222 0 0 46,021 6,356 0 111,204 10,972 0 0 0 90 99,443 99,533 14,229 14,229 0 12,299 0 0 (199) 2,129 838 0 0 0 0 1,291 .14 0
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