-----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, UsGxBUptraqcIUbT0z6F+baoXFHdgdN9xdz5QFYh71uubRGc65+FDnAQ6d4Qhr9u V9MevMywj1Ts9YTo5ssFNg== 0000950169-97-000732.txt : 19970815 0000950169-97-000732.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950169-97-000732 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97661605 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. FORM 10-Q 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 June 30, 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 August 1, 1997: Class: Common Stock Number of Shares: 11,848,288 HCIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1997 AND DECEMBER 31, 1996 (in thousands) Part 1 Item 1. Financial Statements
1997 1996 (Unaudited) ASSETS Current assets: Cash and cash equivalents........................................................... $ 6,134 $ 13,302 Short-term investments.............................................................. - 510 Trade accounts receivable, net of allowance for doubtful accounts of $1,812 in 1997 and $1,042 in 1996............................................. 37,076 32,122 Prepaid expenses and other current assets........................................... 4,055 3,886 Income tax receivable............................................................... 121 339 Deferred compensation funds held in trust........................................... 4,329 5,321 -------- -------- Total current assets............................................................. 51,715 55,480 Furniture and equipment, net.......................................................... 14,798 12,188 Computer software costs, net.......................................................... 25,534 20,425 Other intangible assets, net.......................................................... 111,880 115,601 Net deferred tax asset................................................................ 16,529 17,074 Other................................................................................. 130 123 Deferred compensation funds held in trust............................................. 2,305 2,305 -------- -------- Total assets..................................................................... $222,891 $223,196 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................................................... $ 2,286 $ 1,315 Accrued salaries, benefits and other liabilities.................................... 7,837 8,078 Notes payable....................................................................... 561 1,718 Deferred revenue.................................................................... 1,542 2,052 Acquired deferred compensation liability............................................ 4,329 5,321 -------- -------- Total current liabilities........................................................ 16,555 18,484 Acquired deferred compensation liability............................................ 2,305 2,305 -------- -------- Total liabilities................................................................ 18,860 20,789 -------- -------- Stockholders' equity: Common stock-$.01 par value; 50,000,000 shares authorized; issued and outstanding 11,848,288 as of June 30, 1997 and 11,781,458 as of December 31, 1996.................................................................. 118 118 Additional paid-in capital............................................................ 250,853 249,591 Accumulated deficit................................................................... (46,866) (47,220) Cumulative unrealized appreciation of short-term investments.......................... 14 4 Cumulative effect of currency translation adjustment.................................. (88) (86) -------- -------- Total stockholders' equity....................................................... 204,031 202,407 -------- -------- Total liabilities and stockholders' equity............................................ $222,891 $223,196 ======== ========
See accompanying notes to consolidated financial statements. Page 1 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended June 30, 1997 and 1996 (in thousands, except per share data) (Unaudited)
1997 1996 Revenue............................................................... $19,238 $16,489 Salaries, wages and benefits.......................................... 10,537 6,871 Other operating expenses.............................................. 6,366 3,514 Depreciation.......................................................... 1,012 572 Amortization.......................................................... 3,995 1,923 Write-off of acquired in-process research and development costs....... - 4,372 ------- ------- Operating loss.................................................. (2,672) (763) Interest income....................................................... 105 284 Interest expense...................................................... 101 60 ------- ------- Loss before income taxes....................................... (2,668) (539) Benefit for income taxes.............................................. (494) (212) ------- ------- Net loss....................................................... $(2,174) $ (327) ======= ======= Net loss per share.................................................... $ (0.18) $ (0.04) ======= ======= Shares used in per share calculation.................................. 11,837 9,153 ======= =======
See accompanying notes to consolidated financial statements. Page 2 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Six months ended June 30, 1997 and 1996 (in thousands, except per share data) (Unaudited)
1997 1996 Revenue............................................................... $44,963 $30,718 Salaries, wages and benefits.......................................... 21,411 13,558 Other operating expenses.............................................. 12,421 6,816 Depreciation.......................................................... 1,944 1,090 Amortization.......................................................... 7,735 3,716 Write-off of acquired in-process research and development costs....... - 4,372 ------- ------- Operating loss.................................................. 1,452 1,166 Interest income....................................................... 286 566 Interest expense...................................................... 199 142 ------- ------- Income before income taxes..................................... 1,539 1,590 Provision for income taxes............................................ 1,185 626 ------- ------- Net income..................................................... $ 354 $ 964 ======= ======= Net income per share.................................................. $ 0.03 $ 0.10 ======= ======= Shares used in per share calculation.................................. 12,147 9,549 ======= =======
See accompanying notes to consolidated financial statements. Page 3 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Year ended December 31, 1996 and the six months ended June 30, 1997 (in thousands)
Cumulative Unrealized Appreciation/ (Depreciation) of Additional Paid-in Short-term Common Stock Capital Accumulated Deficit Investments ------------ ------------------- ------------------- ----------------- BALANCE AT DECEMBER 31, 1995 $ 90 $ 102,882 $ (4,953) $ 44 --------------------------------------------------------------------------------- Exercise of stock options -- 638 -- -- Sale of common stock to the public 23 116,233 -- -- Tax benefits related to exercise of stock options -- 1,128 -- -- Issuance of stock in connection with an acquisition 5 28,710 -- -- Net loss -- -- (42,267) -- Effect of currency translation adjustment -- -- -- -- Unrealized depreciation of short- term investments -- -- -- (40) --------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1996 $ 118 $ 249,591 $ (47,220) $ 4 --------------------------------------------------------------------------------- Exercise of stock options -- 574 -- -- Tax benefits related to exercise of stock options -- 688 -- -- Net income -- -- 354 -- Effect of currency translation adjustment -- -- -- -- Unrealized appreciation of short- term investments -- -- -- 10 --------------------------------------------------------------------------------- BALANCE AT JUNE 30, 1997 (Unaudited) $ 118 $ 250,853 $ (46,866) $ 14 =================================================================================
Cumulative Effect of Currency Translation Total Stockholders' Adjustment Equity -------------------- ------------------- BALANCE AT DECEMBER 31, 1995 $ (19) $ 98,044 ------------------------------------------------ Exercise of stock options -- 638 Sale of common stock to the public -- 116,256 Tax benefits related to exercise of stock options -- 1,128 Issuance of stock in connection with an acquisition -- 28,715 Net loss -- (42,267) Effect of currency translation adjustment (67) (67) Unrealized depreciation of short- term investments -- (40) ------------------------------------------------ BALANCE AT DECEMBER 31, 1996 $ (86) $ 202,407 ------------------------------------------------ Exercise of stock options -- 574 Tax benefits related to exercise of stock options -- 688 Net income -- 354 Effect of currency translation adjustment (2) (2) Unrealized appreciation of short- term investments -- 10 ------------------------------------------------ BALANCE AT JUNE 30, 1997 (Unaudited) $ (88) $ 204,031 ================================================
See accompanying notes to consolidated financial statements. Page 4 HCIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 1997 and 1996 (in thousands) (Unaudited)
1997 1996 Cash flows from operating activities: Net income........................................................................ $ 354 $ 964 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................................... 9,679 4,806 Write-off of acquired in-process research and development costs............. - 4,372 Income tax benefit related to stock options................................. 688 - Deferred tax provision...................................................... 545 (386) Changes in operating assets and liabilities: Accounts receivable...................................................... (4,739) (6,767) Income taxes payable/receivable.......................................... 242 315 Prepaid expenses and other current assets................................ (52) (485) Accounts payable......................................................... 971 336 Accrued salaries, benefits and other liabilities......................... (660) (110) Deferred revenue......................................................... (625) 629 -------- -------- Net cash provided by operating activities........................... 6,403 3,674 -------- -------- Cash flows from investing activities: Purchases of furniture and equipment.............................................. (4,515) (2,369) Cost of acquisitions, net of cash acquired........................................ (104) (6,782) Computer software purchased or capitalized........................................ (7,824) (5,517) Other intangible assets purchased or capitalized.................................. (1,056) (820) Purchases of short-term investments............................................... - (45,329) Proceeds from disposals of short-term investments................................. 520 48,781 Other............................................................................. (7) (812) -------- -------- Net cash used in investing activities............................... (12,986) (12,848) -------- -------- Cash flows from financing activities: Proceeds from exercise of stock options........................................... 574 503 Proceeds from public offerings.................................................... - 12,758 Repayments of notes payable....................................................... (1,157) (804) Principal payments on capital leases.............................................. - (81) -------- -------- Net cash (used) provided in financing activities................... (583) 12,376 -------- -------- Impact of currency fluctuations on cash and cash equivalents............................ (2) (5) -------- -------- (Decrease) Increase in cash and cash equivalents........................................ (7,168) 3,197 Cash & cash equivalents - beginning of period........................................... 13,302 3,190 -------- -------- Cash & cash equivalents - end of period................................................. $ 6,134 $ 6,387 ======== ======== Supplemental cash flow information - cash paid during period for interest............... $ 169 $ 72 ======== ======== - cash paid during period for income taxes........... $ 351 $ 699 ======== ========
See accompanying notes to consolidated financial statements. Page 5 HCIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 June 30, 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 June 30, 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 (1) June 30, 1997 June 30, 1996 Basic loss per share ($0.18) ($0.04) Diluted loss per share ($0.18) ($0.04) Six months Ended June 30, 1997 June 30, 1996 Basic earnings per share $0.03 $0.11 Diluted earnings per share $0.03 $0.10 (1) As the Company had a loss for the three months ended June 30, 1997 and June 30, 1996, the diluted loss per share is the same as the basic loss per share. Page 6 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Six months ended June 30, 1997 compared to six months ended June 30, 1996 REVENUE. Revenue for the six months ended June 30, 1997 was $45.0 million, an increase of $14.2 million or 46% over the six months ended June 30, 1996. The increase was primarily the result of a 62% increase in revenue from the sale of Decision Support Systems offset by a 16% decrease in revenue from the sale of Syndicated Products. Revenue from the sale of Decision Support Systems represented 88% of revenue for the six months ended June 30, 1997 and Syndicated Products represented the remaining 12% of revenue. The increase in Decision Support Systems revenue was the result of the acquisition of LBA Healthcare Management, Inc. ("LBA") and the Company's continued success in expanding its customer relationships in the supplier and provider markets. SALARIES, WAGES AND BENEFITS. Salaries, wages and benefits increased to 48% of revenue for the six months ended June 30, 1997 from 44% for the six months ended June 30, 1996. The increase was primarily the result of the Company establishing staffing levels in anticipation of a higher revenue level than achieved in the three months ended June 30, 1997. OTHER OPERATING EXPENSES. Other operating expenses, which include occupancy, travel and consulting expenses, increased to 28% of revenue for the six months ended June 30, 1997 from 22% for the six months ended June 30, 1996. This increase was a result of the Company establishing levels for certain of these expenses, primarily consulting and occupancy, in anticipation of a higher revenue level than achieved in the three months ended June 30, 1997. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to 22% of revenue for the six months ended June 30, 1997 from 16% for the six months ended June 30, 1996. This increase was primarily a result of the additional amortization and depreciation associated with the acquisitions of HealthChex, Inc., Response Healthcare Information Management, Inc. ("Response"), and LBA. WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT COSTS. In connection with the acquisition of Response, the Company acquired Response's ongoing research and development activities. At the time of the acquisition the Company recorded a one-time $4.4 million charge resulting from the write-off of the acquired research and development costs. INTEREST INCOME AND EXPENSE. Net interest income was $87,000 for the six months ended June 30, 1997 compared with net interest income of $424,000 for the six months ended June 30, 1996. This change was the result of a lower invested balance in 1997. INCOME TAXES. The Company's effective tax rate was 77.0% for the six months ended June 30, 1997 compared with 39.4% for the six months ended June 30, 1996. This higher rate results from the effect of the increase in non-deductible goodwill associated with the acquisition of Response and LBA on the Company's tax provision. Page 7 Three months ended June 30, 1997 compared to three months ended June 30, 1996 REVENUE. Revenue for the three months ended June 30, 1997 was $19.2 million, an increase of $2.8 million or 17% over the three months ended June 30, 1996. The increase was primarily the result of a 29% increase in revenue from the sale of Decision Support Systems offset by a 25% decrease in revenue from the sale of Syndicated Products. Revenue from the sale of Decision Support Systems represented 85% of revenue for the three months ended June 30, 1997 and Syndicated Products represented the remaining 15% of revenue. The increase in Decision Support Systems revenue was primarily the result of the acquisition of LBA. SALARIES, WAGES AND BENEFITS. Salaries, wages and benefits increased to 55% of revenue for the three months ended June 30, 1997 from 42% for the three months ended June 30, 1996. The increase was primarily the result of the Company establishing staffing levels in anticipation of a higher revenue level than achieved. OTHER OPERATING EXPENSES. Other operating expenses, which include occupancy, travel and consulting expenses, increased to 33% of revenue for the three months ended June 30, 1997 from 21% for the three months ended June 30, 1996. This increase was a result of the Company establishing levels for certain of these expenses, primarily consulting and occupancy, in anticipation of a higher revenue level than achieved. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to 26% of revenue for the three months ended June 30, 1997 from 15% for the three months ended June 30, 1996. This increase was primarily a result of the additional amortization and depreciation associated with the acquisitions of HealthChex, Inc., and LBA. WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT COSTS. In connection with the acquisition of Response, the Company acquired Response's ongoing research and development activities. At the time of the acquisition the Company recorded a one-time $4.4 million charge resulting from the write-off of the acquired research and development costs. INTEREST INCOME AND EXPENSE. Net interest income was $4,000 for the three months ended June 30, 1997 compared with net interest income of $224,000 for the three months ended June 30, 1996. This change was the result of a lower invested balance in 1997. INCOME TAXES. The Company's effective tax rate was 18.5% for the three months ended June 30, 1997 compared with 39.3% for the three months ended June 30, 1996. This lower rate results from the effect of the increase in non-deductible goodwill associated with the acquisition of LBA and the effects of inter-period tax allocation on the Company's tax provision. Page 8 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 June 30, 1997, the Company was in compliance with all such financial covenants and had a maximum borrowing capacity of approximately $33 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 9 PART II Other Information Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held at 10:00 a.m., Baltimore time, on May 7, 1997 at the corporate headquarters of the Company. The stockholders elected all of the Company's nominees for director, authorized an amendment to the 1994 Stock and Incentive Plan, and approved the appointment of KPMG Peat Marwick LLP as the Company's independent auditors for 1997. The votes were as follows: 1. Election of Directors --------------------- NOMINEE FOR WITHHELD ------- --- -------- W. Grant Gregory 8,353,446 30,387 Phillip B. Lassiter 8,352,846 30,978 Carl J. Schramm 8,353,844 29,989 2. Amendment to the 1994 Stock and Incentive Plan ---------------------------------------------- FOR AGAINST ABSTAIN NONVOTED --- ------- ------- -------- 4,330,479 2,886,242 31,093 2,136,447 3. Appointment of KPMG Peat Marwick LLP ------------------------------------ FOR AGAINST ABSTAIN --- ------- ------- 8,364,537 10,572 9,152 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 The following report on Form 8-K was filed in connection with the dividend declaration of one preferred share purchase right for each share of the Company's common stock, outstanding on the close of business on April 24,1997. Form 8-K - Dated April 23, 1997 The following report on Form 8-K was filed in connection with the issuance of shares of the Company's Common Stock to five former shareholders of CHKS Limited, a wholly-owned subsidiary of the Company, under the Company's promissory notes issued to these individuals as partial payment for their interests in CHKS. Form 8-K - Dated May 6, 1997 Page 10 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: August 14, 1997 By: ----------------------- Barry C. Offutt Senior Vice President and Chief Financial Officer (principal financial officer) Page 11 EXHIBIT INDEX Exhibit Number Page - -------------- ---- 11 Statement Re: Computation of earnings per share 13 Page 12 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 June 30, 1997 - -------------------------------- Weighted average shares outstanding.......................... 11,837 N/A Effect of dilutive common stock equivalents.................. - ------- Weighted average shares outstanding for EPS purposes......... 11,837 Net loss..................................................... ($2,174) ------- Net loss per share (2)....................................... ($0.18) ======= Six months ended June 30, 1997 - ------------------------------ Weighted average shares outstanding.......................... 11,819 11,819 Effect of dilutive common stock equivalents.................. 328 405 ------- ------ Weighted average shares outstanding for EPS purposes......... 12,147 12,224 Net income................................................... 354 354 ------- ------ Net income per share (2)..................................... $0.03 $0.03 ======= ======
(1) As of June 30, 1997, options to purchase 1,419,941 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 June 30, 1997 was in excess of the average price for the six months ended June 30, 1997, the number of shares used to calculate net income per share on a fully diluted basis is increased as using the treasury stock method with the period end price results in a higher number of shares deemed outstanding. As the Company had a loss for the three months ended June 30, 1997, the 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 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1997 JUN-30-1997 6,134 0 37,076 0 0 51,715 14,798 0 222,891 16,555 0 0 0 118 203,913 222,891 44,963 44,963 0 43,511 0 0 (87) 1,539 1,185 0 0 0 0 354 0.03 0
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