-----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, EGi1dYhEYzppuw3ADa8AS0ubXW0HyScq6XWczFgdy1y5/GcQtYRiM/ZRYhe7Yjm0 nshkt3dCAmulbL5HeqhMJQ== 0000950169-97-000415.txt : 19970515 0000950169-97-000415.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950169-97-000415 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCIA INC CENTRAL INDEX KEY: 0000935001 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] 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: 97603943 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. 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, 1997 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) 895-7470 ----------------------- 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)), 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 May 1, 1997: Class: Common Stock Number of Shares: 11,883,656 -------------- HCIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND DECEMBER 31, 1996 (in thousands) Part 1 Item 1. Financial Statements
1997 1996 (Unaudited) Current assets: Cash and cash equivalents.......................................... $ 9,339 $ 13,302 Short-term investments............................................. -- 510 Trade accounts receivable, net of allowance for doubtful accounts of $1,251 in 1997 and $1,042 in 1996.............................. 37,978 32,122 Prepaid expenses and other current assets.......................... 3,435 3,886 Income tax receivable.............................................. 125 339 Deferred compensation funds held in trust.......................... 5,321 5,321 -------- -------- Total current assets.............................................. 56,198 55,480 Furniture and equipment, net......................................... 13,247 12,188 Computer software costs, net......................................... 23,287 20,425 Other intangible assets, net......................................... 113,567 115,601 Net deferred tax asset............................................... 15,860 17,074 Other................................................................ 123 123 Deferred compensation funds held in trust............................ 2,305 2,305 -------- -------- Total assets...................................................... $224,587 $223,196 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................................... $ 2,202 $ 1,315 Accrued salaries, benefits and other liabilities.................... 6,595 8,078 Notes payable....................................................... 534 1,718 Deferred revenue.................................................... 1,666 2,052 Acquired deferred compensation liability ........................... 5,321 5,321 -------- -------- Total current liabilities......................................... 16,318 18,484 Acquired deferred compensation liability............................ 2,305 2,305 -------- -------- Total liabilities................................................. 18,623 20,789 -------- -------- Stockholders' equity: Common stock-$.01 par value;50,000,000 shares authorized; issued and outstanding 11,833,656 as of March 31, 1997 and 11,781,458 as of December 31, 1996................... 118 118 Additional paid-in capital........................................... 250,602 249,591 Accumulated deficit.................................................. (44,692) (47,220) Cumulative unrealized appreciation of short-term investments ........ 40 4 Cumulative effect of currency translation adjustment ................ (104) (86) -------- -------- Total stockholders' equity....................................... 205,964 202,407 -------- -------- Total liabilities and stockholders' equity........................... $224,587 $223,196 ======== ========
See accompanying notes to consolidated financial statements. Page 1 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended March 31, 1997 and 1996 (in thousands, except per share data) (Unaudited) 1997 1996 Revenue.............................................. $25,725 $14,229 Salaries, wages and benefits ........................ 10,875 6,686 Other operating expenses ............................ 6,054 3,303 Depreciation ........................................ 932 518 Amortization ........................................ 3,740 1,792 ------- ------- Operating income .............................. 4,124 1,930 Interest income ..................................... 181 282 Interest expense .................................... 98 83 ------- ------- Income before income taxes ................... 4,207 2,129 Provision for income taxes .......................... 1,679 838 ------- ------- Net income................................... $ 2,528 $ 1,291 ======= ======= Net income per share................................. $ 0.21 $ 0.14 ======= ======= Shares used in per share calculation ................ 12,259 9,460 ======= ======= See accompanying notes to consolidated financial statements. Page 2 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Year ended December 31, 1996 and the three months ended March 31, 1997 (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, 1995 90 102,882 (4,953) 44 (19) 98,044 ------ ---------- ----------- ----------------- ----------- ------------ Exercise of stock options -- 638 -- -- -- 638 Sale of common stock to the public 23 116,233 -- -- -- 116,256 Tax benefits related to exercise of stock options -- 1,128 -- -- -- 1,128 Issuance of stock in connection with an acquisition 5 28,710 -- -- -- 28,715 Net loss -- -- (42,267) -- -- (42,267) Effect of currency translation adjustment -- -- -- -- (67) (67) Unrealized depreciation of short- term investments -- -- -- (40) -- (40) ------ ---------- ----------- ----------------- ----------- ------------ BALANCE AT DECEMBER 31, 1996 $ 118 $249,591 $(47,220) $ 4 $(86) $202,407 ------ ---------- ----------- ----------------- ----------- ------------ Exercise of stock options -- 453 -- -- -- 453 Tax benefits related to exercise of stock options -- 558 -- -- -- 558 Net income -- -- 2,528 -- -- 2,528 Effect of currency translation adjustment -- -- -- 36 -- 36 Unrealized depreciation of short- term investments -- -- -- -- (18) (18) ------ ---------- ----------- ----------------- ----------- ------------ BALANCE AT MARCH 31, 1997 (Unaudited) $118 $250,602 $(44,692) $ 40 $(104) $205,964 ====== ========== ============ ================== =========== ============
See accompanying notes to consolidated financial statements. Page 3 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended March 31, 1997 and 1996 (in thousands) (Unaudited) 1997 1996 Cash flows from operating activities: Net income.......................................... $ 2,528 $ 1,291 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................. 4,672 2,310 Income tax benefit related to stock options... 558 -- Deferred tax provision........................ 1,214 150 Changes in operating assets and liabilities: Accounts receivable........................ (5,856) (1,263) Income taxes payable/receivable............ 214 596 Prepaid expenses and other current assets.. 451 (553) Accounts payable........................... 887 403 Accrued salaries, benefits and other liabilities.............................. (1,483) (366) Deferred revenue........................... (386) 1,114 ------- --------- Net cash provided by operating activities.......................... 2,799 3,682 ------- --------- Cash flows from investing activities: Purchases of furniture and equipment................ (1,991) (892) Cost of acquisitions, net of cash acquired.......... -- (613) Computer software purchased or capitalized.......... (4,095) (2,095) Other intangible assets purchased or capitalized.... (473) (352) Purchases of short-term investments................. -- (15,112) Proceeds from disposals of short-term investments... 546 17,744 Other............................................... -- (721) ------- -------- Net cash used in investing activities.......................... (6,013) (2,041) ------- -------- Cash flows from financing activities: Proceeds from exercise of stock options............. 453 265 Repayments of notes payable......................... (1,184) (736) ------- -------- Net cash used in financing activities......................... (731) (471) ------- -------- Impact of currency fluctuations on cash and cash equivalents............................................. (18) (1) ------- -------- Increase(Decrease) in cash and cash equivalents ......... (3,963) 1,169 Cash & cash equivalents - beginning of period............. 13,302 3,190 ------- -------- Cash & cash equivalents - end of period................... $ 9,339 $ 4,359 ======= ======== Supplemental cash flow information - cash paid during period for interest....... $ 111 $ 65 ======= ======== - cash paid during period for income taxes... $ 306 $ 93 ======= ======== See accompanying notes to consolidated financial statements. Page 4 HCIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 (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 condition, results of operations, changes in stockholders' equity and cash flows for the periods presented. The results of operations for the period ended March 31, 1997 may not be indicative of the results that may be expected for the full year ending December 31, 1997. 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, 1996 as contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (1934 Act File No. 0-25378). (2) Cash Equivalents As of March 31, 1997, cash equivalents consist of highly liquid securities with original maturities of three months or less at the date acquired by the Company. (3) New Accounting Standard In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share," ("SFAS No. 128") which becomes effective December 15, 1997. Early adoption of SFAS No. 128 is not permitted. Under SFAS No. 128, the Company will be required to disclose basic earnings per share (with the principal difference from current disclosure being that common stock equivalents will not be considered in the compilation for basic earnings per share) and diluted earnings per share. The pro forma computation of earnings per share, under SFAS No. 128 is as follows. Three Months Ended ---------------------------------- March 31, 1997 March 31, 1996 -------------- -------------- Basic Earnings Per Share $0.21 $0.14 Diluted Earnings Per Share $0.21 $0.14 Page 5 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three months ended March 31, 1997 compared to three months ended March 31, 1996 Revenue. Revenue for the three months ended March 31, 1997 was $25.7 million, an increase of $11.5 million or 81% over the three months ended March 31, 1996. The increase was primarily the result of a 97% increase in revenue from the sale of Decision Support Systems. Revenue from the sale of Decision Support Systems represented 91% of revenue for the three months ended March 31, 1997 and Syndicated Products represented the remaining 9% 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 supplier and provider markets, and as a result of the acquisition of LBA Healthcare Management, Inc. ("LBA"). Salaries Wages and Benefits. Salaries, wages and benefits decreased to 42% of revenue for the three months ended March 31, 1997 from 47% for the three months ended March 31, 1996. The 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, increased to 24% of revenue for the three months ended March 31, 1997 from 23% for the three months ended March 31, 1996. This increase was a result of certain of these expenses, primarily marketing and travel, growing at a faster rate than revenue. Depreciation and Amortization. Depreciation and amortization increased to 18% of revenue for the three months ended March 31, 1997 from 16% for the three months ended March 31, 1996. This increase was a result of the additional amortization and depreciation associated with the acquisitions of HealthChex, Inc., Response Healthcare Information Management, Inc., and LBA. Interest Income and Expense. Net interest income was $83,000 for the three months ended March 31, 1997 compared with net interest income of $199,000 for the three months ended March 31, 1996. This change was the result of a lower invested balance in 1997. Income Taxes. The Company's effective tax rate was 39.9% for the three months ended March 31, 1997 compared with 39.4% for the three months ended March 31, 1996. This higher rate was due to an increase in non-deductible goodwill. Page 6 Liquidity and Capital Resources The Company maintains a $50 million (subject to certain borrowing limitations) revolving line of credit with First Union National Bank of North Carolina ("First Union") for general corporate purposes including future acquisitions and working capital requirements. Borrowings under this line are collateralized by substantially all of the Company's assets, and bear interest at varying rates based on an index tied to First Union's prime rate or LIBOR. The Company is required to pay a commitment fee on the average daily unused portion of the facility at a rate from 0.25% to 0.375% per annum, depending on the Company's debt/cash flow ratio. The credit facility also contains financial covenants applicable to HCIA, including debt/cash flow ratios and ratios of debt to capital. As of March 31, 1997, the Company was in compliance with all such financial covenants and had a maximum borrowing capacity of $50 million, and there were no borrowings outstanding under the facility. The credit facility reduces to $37.5 million in July 1999, $25 million in July 2000 and expires on July 31, 2001. Page 7 PART II Other Information 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. 27 Financial Data Schedule (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 14, 1997 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 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, 1997 Weighed average shares outstanding............ 11,800 N/A Effect of dilutive common stock equivalents... 459 ------- Weighted average shares outstanding for EPS purposes ............................... 12,259 Net income ................................... $ 2,528 ------- Net income per share (2) ..................... $0.21 ======= (1) As of March 31, 1997, options to purchase 1,554,929 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, 1997 was less than the average price for the three months ended March 31, 1997, fully diluted earnings per share is not applicable. (2) In accordance with Accounting Principles 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 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 MAR-31-1997 9,339 0 37,978 0 0 56,198 13,247 0 224,587 16,318 0 0 0 118 205,846 224,587 25,725 25,725 0 21,601 0 0 (83) 4,207 1,679 0 0 0 0 2,528 0.21 0
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