-----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, HH7SLDfO0wohU1P7+PpA8wuVLyYfDtl0VfSh50oOYRpmnL4CCsNTciKICcos0eiS /6Xn+HC3o7RZQEefe7NR+w== 0000912057-96-024827.txt : 19961107 0000912057-96-024827.hdr.sgml : 19961107 ACCESSION NUMBER: 0000912057-96-024827 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRA MANAGED CARE INC CENTRAL INDEX KEY: 0000942136 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 042658593 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25856 FILM NUMBER: 96655175 BUSINESS ADDRESS: STREET 1: 312 UNION WHARF CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6173672163 MAIL ADDRESS: STREET 1: 312 UNION WHARF CITY: BOSTON STATE: MA ZIP: 02109 10-Q 1 10Q 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 SEPTEMBER 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE 0-25856 CRA MANAGED CARE, INC. (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2658593 (State or other jurisdiction of (I.R.S. employer identification No.) incorporation or organization) 312 UNION WHARF, BOSTON MASSACHUSETTS 02109 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (617) 367-2163 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 twelve months (or 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 / / At November 1, 1996, the registrant had outstanding an aggregate of 8,907,532 shares of its Common Stock, $.01 par value. CRA MANAGED CARE, INC. INDEX PAGE ---- PART I. FINANCIAL INFORMATION Balance Sheet at December 31, 1995 and September 30, 1996 (Unaudited) 3 Statements of Operations (Unaudited) for the Three and Nine Months 4 ended September 30, 1995 and 1996 Statements of Cash Flow (Unaudited) for the Nine Months Ended September 30, 1995 and 1996 5 Notes to Financial Statements (Unaudited) 6 Management's Discussion and Analysis of Financial Condition and Results of Operation 8 PART II. OTHER INFORMATION 11 Signature 12 EXHIBIT INDEX 13 -2- CRA MANAGED CARE, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 (UNAUDITED) DECEMBER SEPTEMBER ASSETS 31, 1995 30, 1996 ------ -------- --------- CURRENT ASSETS: Cash and cash equivalents $ 3,005,000 $33,585,000 Accounts receivable, less allowance for doubtful accounts of $430,000 and $1,119,000 respectively 26,380,000 32,395,000 Prepaid expenses 629,000 512,000 Prepaid taxes 319,000 1,173,000 ----------- ----------- Total current assets 30,333,000 67,665,000 PROPERTY AND EQUIPMENT, AT COST 11,732,000 17,714,000 Less: Accumulated depreciation and amortization 5,864,000 10,639,000 ----------- ----------- Net property and equipment 5,868,000 7,075,000 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED - 19,568,000 OTHER ASSETS 355,000 386,000 ----------- ----------- $36,556,000 $94,694,000 ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Revolving credit facilities $ 4,300,000 $ - Current portion of long-term debt 5,000,000 71,000 Accrued interest expense 18,000 - Accounts payable and accrued expenses 5,927,000 9,582,000 Accrued payroll and related 7,595,000 9,403,000 Accrued income taxes - - ----------- ----------- Total current liabilities 22,840,000 19,056,000 LONG-TERM PORTION OF CAPITAL LEASES - 6,000 LONG-TERM DEFERRED TAX LIABILITIES 2,056,000 2,422,000 STOCKHOLDERS' EQUITY: Common stock 74,000 89,000 Paid-in-capital 36,839,000 90,743,000 Retained deficit (25,253,000) (17,622,000) ----------- ----------- Total stockholders' equity 11,660,000 73,210,000 ----------- ----------- $36,556,000 $94,694,000 ----------- ----------- ----------- ----------- The accompanying notes are an integral part of these financial statements. -3- CRA MANAGED CARE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ --------------------------- 1995 1996 1995 1996 ----------- ----------- ----------- ------------ REVENUES $36,826,000 $46,048,000 $107,881,000 $131,032,000 COST OF SERVICES 30,843,000 37,812,000 90,600,000 107,981,000 ----------- ----------- ------------ ------------ GROSS PROFIT 5,983,000 8,236,000 17,281,000 23,051,000 GENERAL AND ADMINISTRATIVE EXPENSES 2,759,000 3,746,000 8,180,000 10,491,000 ----------- ----------- ------------ ------------ OPERATING INCOME 3,224,000 4,490,000 9,101,000 12,560,000 INTEREST (INCOME) EXPENSE, NET 251,000 (313,000) 2,260,000 212,000 ----------- ----------- ------------ ------------ INCOME BEFORE INCOME TAXES 2,973,000 4,803,000 6,841,000 12,348,000 PROVISION FOR INCOME TAXES 1,189,000 1,993,000 2,736,000 5,124,000 ----------- ----------- ------------ ------------ NET INCOME BEFORE EXTRAORDINARY ITEMS 1,784,000 2,810,000 4,105,000 7,224,000 LOSS ON RETIREMENT OF DEBT, NET OF TAXES OF $1,610,000 - - (2,460,000) - ----------- ----------- ------------ ------------ NET INCOME $ 1,784,000 $2,810,000 $ 1,645,000 $ 7,224,000 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ------------ EARNINGS PER SHARE: NET INCOME BEFORE EXTRAORDINARY ITEMS $0.24 $0.31 $0.66 $0.87 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ------------ LOSS ON RETIREMENT OF DEBT, NET OF - - ($0.40) - ----------- ----------- ------------ ------------ ----------- ----------- ------------ ------------ TAXES NET INCOME $0.24 $0.31 $0.26 $0.87 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ------------ WEIGHTED AVERAGE SHARES OUTSTANDING 7,351,000 9,084,000 6,223,000 8,261,000 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ------------
The accompanying notes are an integral part of these financial statements. -4- CRA MANAGED CARE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 1995 1996 ----------- ---------- CASH FLOWS FROM OPERATIONS: Net income $ 1,645,000 $ 7,224,000 Items not requiring cash: Depreciation and amortization 1,224,000 2,081,000 Amortization of deferred finance costs and debt discount 228,000 - Provision for doubtful accounts 50,000 183,000 Loss on retirement of debt 3,912,000 - Change in assets and liabilities: Accounts receivable (3,650,000) (4,266,000) Prepaid expenses, prepaid income taxes and deposits 131,000 (722,000) Accounts payable, accrued expenses and income taxes (2,656,000) 4,534,000 ----------- ------------ Cash flows from operations 884,000 9,034,000 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Focus and QMC3, net of cash acquired - (21,080,000) Purchase of property and equipment (1,628,000) (1,960,000) ----------- ------------ Cash flows used for investing activities (1,628,000) (23,040,000) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit facilities 5,000,000 24,700,000 Payments under revolving credit facilities (4,916,000) (29,000,000) Payments on Term Loan (16,250,000) - Payment on Senior Subordinated Notes (21,000,000) - Payment on the Junior Subordinated Notes - (5,000,000) Payment on Capital Leases - (31,000) Net proceeds from the sale of Common Stock 36,507,000 51,840,000 Proceeds from the sale of Common Stock under employee stock purchase plan and stock option plans - 2,077,000 ----------- ------------ Cash flows used for financing activities (659,000) 44,586,000 ----------- ------------ NET INCREASE IN CASH (1,403,000) 30,580,000 ----------- ------------ CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,197,000 3,005,000 ----------- ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $794,000 $33,585,000 ----------- ------------ ----------- ------------ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $2,589,000 $676,000 Income taxes paid $2,940,000 $4,893,000 The accompanying notes are an integral part of these financial statements. -5- CRA MANAGED CARE, INC. Notes to Financial Statements The accompanying unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments (all of which are of a normal recurring nature) which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. These financial statements do not include all disclosures associated with the annual financial statements and, accordingly, should be read in conjunction with the attached Management's Discussion and Analysis of Financial Condition and Results of Operation and the financial statements and footnotes for the year ended December 31, 1995 included in the Company's Form 10-K filed with the Securities and Exchange Commission on April 1, 1996 and the Company's Prospectus for the sale of 2,500,000 shares of Common Stock filed with the Securities and Exchange Commission on June 4, 1996. (1) ACQUISITIONS On October 23, 1995, the Company acquired Alta Pacific Corporation, a workers' compensation case management company with eight offices in the state of Washington, with revenues of approximately $3,000,000, in a pooling of interests for 136,150 shares of Common Stock, or approximately $2,900,000 in value, based upon the market value of the stock on the acquisition date. This acquisition was not material to the Company's financial statements and the Company restated its retained earnings as of the acquisition date to reflect the net assets of Alta Pacific Corporation. As such, the results for the three and nine months ended September 30, 1995 do not include the operating results of Alta Pacific Corporation. On April 2, 1996, the Company purchased Focus HealthCare Management, Inc. ("Focus") from United HealthCare Corporation for $21,000,000 in cash. Focus, based in Brentwood, Tennessee, has built and maintains one of the nation's largest workers' compensation PPO networks, and last year had annual revenues of approximately $9,900,000. In order to finance this acquisition, the Company and First Union Bank signed an amendment to expand the Company's borrowing capacity under the Credit Facility to $40,000,000 under similar terms and conditions. The acquisition of Focus has been accounted for by the Company as a purchase whereby the basis for accounting for Focus' assets and liabilities are based upon their fair values at the date of acquisition. The preliminary allocation of the purchase price to the assets and liabilities of Focus is as follows: Estimated purchase price including fees and expenses: $21,555,000 Purchase price allocated to: Current assets 1,795,000 Property and equipment 929,000 Other long term assets 5,000 Current liabilities (711,000) Long-term deferred tax liabilities (324,000) Long-term capital leases (39,000) ----------- Net assets acquired 1,655,000 ----------- Excess of cost over fair value of net assets acquired $19,900,000 ----------- ----------- The foregoing purchase price allocation is based upon preliminary information. The final purchase price allocation is contingent upon the final determination of the fair value of the net assets acquired on April 2, 1996, the date of acquisition. Based upon presently available information, the Company does not believe that the final purchase price allocation will materially differ from the preliminary allocation. -6- CRA MANAGED CARE, INC. Notes to Financial Statements (1) ACQUISITIONS (CONTINUED) On May 29, 1996, the Company acquired all the outstanding capital stock of QMC3, Inc. ("QMC3") in exchange for 230,441 shares of the Company's Common Stock in a pooling of interest transaction, which was valued at approximately $8,500,000 as of the date of the acquisition agreement. QMC3, based in Denver, Colorado, is a leading managed care services company serving the automobile liability insurance market, and has been instrumental in helping to obtain the passage of legislation in Colorado and New York enabling the mandatory direction of medical care for automobile accident victims. QMC3 had annual revenues in 1995 of approximately $2,000,000. This acquisition, which was accounted for as a pooling of interests, was not material to the Company's financial statements and the Company restated its retained earnings to reflect the net assets of QMC3. As such, the results for the three and nine months ended September 30, 1996 include the operating results of QMC3 subsequent to the acquisition date. On October 29, 1996, the Company purchased Prompt Associates, Inc. ("Prompt") for approximately $30,000,000 in cash. Prompt, which is based in Salt Lake City, Utah, is one of the leading providers of hospital bill audit services to the group health payor community for claims that fall outside of an indemnity carrier's, TPA's or HMO's network of hospital or outpatient facilities. Prompt had annual revenues of approximately $10,000,000 for the year ended December 31, 1995. In order to finance this acquisition, the Company will utilize approximately $25,000,000 of its existing cash supplemented by borrowings of approximately $5,000,000 under the Company's existing $40,000,000 Credit Facility. (2) SALE OF COMMON STOCK On June 7, 1996 and June 17, 1996, the Company completed the sale of 2,875,000 shares of its Common Stock, including the exercise of the underwriters' over- allotment option, at a price of $46.00 per share. Of the aggregate shares of Common Stock sold, 1,200,000 were sold for the account of the Company generating net proceeds to the Company of approximately $51,840,000 and 1,675,000 shares were sold for account of certain stockholders of the Company. The Company used approximately $29,000,000 of the net proceeds to repay borrowings under the expanded Credit Facility with First Union Bank. (3) SUPPLEMENTAL PRO FORMA EARNINGS Supplemental pro forma earnings per share has been calculated as if (i) the acquisition of Focus had been consummated at January 1, 1996, (ii) the Company repaid all its outstanding debt at the beginning of 1996 (including the additional borrowings of $21,000,000 to acquire Focus) utilizing the net proceeds of $51,840,000 from the sale of 1,200,000 shares of Common Stock in June, 1996 and (iii) the excess proceeds from the sale of Common Stock, after the repayment of debt, were invested in financial instruments generating a return of 6.0%. Supplemental pro forma revenue, net income and earnings per share for the nine months ended September 30, 1996 would have been $133,090,000 and $7,8660,000 and $0.88, respectively. The supplemental pro forma weighted average number of shares of 8,928,000 is the actual weighted average number of shares of Common Stock and Common Stock equivalents outstanding plus the impact of the 1,200,000 shares of Common Stock that were sold. (4) CREDIT FACILITY On April 28, 1995, the Company entered into the $25,000,000 Credit Facility with First Union Bank. On March 29, 1996, the Company and First Union Bank signed an amendment to expand the Company's borrowing capacity under the Credit Facility to $40,000,000 under similar terms and conditions in order to finance the acquisition of Focus. Interest on borrowings under the Credit Facility are payable, at the Company's option, at First Union Bank's prime rate plus an additional percentage of up to 0.375%, or LIBOR plus an additional percentage of up to 1.875%, depending on certain financial criteria. The Credit Facility contains customary covenants, including, without limitation, restrictions on the incurrence of indebtedness, the sale of assets, certain mergers and acquisitions, the payment of dividends on the Company's capital stock, the repurchase or redemption of capital stock, transactions with affiliates, investments, capital expenditures and changes in control of the Company. At September 30, 1996, there were no borrowings under the Credit Facility. -7- CRA MANAGED CARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND FOOTNOTES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31, 1995 CONTAINED IN THE COMPANY'S FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1996 AND THE COMPANY'S PROSPECTUS FOR THE SALE OF 2,500,000 SHARES OF COMMON STOCK FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996. REVENUES Revenues increased 25.0% in the third quarter of 1996 to $46,048,000 from $36,826,000 in the third quarter of 1995. Field case management revenues increased 14.4% in the third quarter of 1996 to $30,130,000 from $26,340,000 in the third quarter of 1995, while specialized cost containment revenues increased 51.8% in the third quarter of 1996 to $15,918,000 from $10,486,000 in the third quarter of 1995. Revenues increased 21.5% for the nine months of 1996 to $131,032,000 from $107,881,000 for the nine months of 1995. Field case management revenues increased 13.1% for the nine months of 1996 to $88,900,000 from $78,604,000 for the nine months of 1995 while specialized cost containment revenues increased 43.9% for the nine months of 1996 to $42,132,000 from $29,277,000 for the nine months of 1995. The field case management revenue growth is attributable to the acquisition of Alta Pacific Corporation in the fourth quarter of 1995, the opening of five offices during the first nine months of 1996 and growth in revenues from existing service locations. The specialized cost containment revenue growth is attributable to the acquisition of Focus on April 2, 1996 and QMC3 on May 29, 1996, the addition of 10 service locations during the first nine months of 1996, including the service locations associated with the Focus and QMC3 acquisitions, and continued growth in retrospective bill review and telephonic case management services in existing service locations. COST OF SERVICES Cost of services increased 22.6% in the third quarter of 1996 to $37,812,000 from $30,843,000 in the third quarter of 1995 due to an increase in revenues and the acquisition of Focus and QMC3. Cost of services as a percentage of revenue decreased to 82.1% in the third quarter of 1996 compared to 83.8% in the third quarter of 1995. Cost of services increased 19.2% for the nine months of 1996 to $107,981,000 from $90,600,000 for the nine months of 1995 due to an increase in revenues and the acquisition of Focus and QMC3. Cost of services as a percentage of revenue decreased to 82.4% for the nine months of 1996 compared to 84.0% for the nine months of 1995. This improvement in gross margins is primarily the result of productivity gains in field case management services coupled with a continued shift in the Company's revenue mix towards specialized cost containment services, especially retrospective bill review, which historically had higher gross profit margins than revenues derived from field case management services. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses increased 35.8% in the third quarter of 1996 to $3,746,000 from $2,759,000 in the third quarter of 1995, or 8.1% and 7.5% as a percentage of revenue for the third quarter of 1996 and 1995, respectively. General and administrative expenses increased 28.3% for the nine months of 1996 to $10,491,000 from $8,180,000 for the nine months of 1995, or 8.0% and 7.6% as a percentage of revenue for the nine months of 1996 and 1995, respectively. The increase in general and administrative expenses in 1996 primarily was due to increased expenditures for marketing initiatives, additional investments in the information technology group and the acquisition of Focus. INTEREST (INCOME) EXPENSE, NET Interest (income) expense, net decreased $564,000 in the third quarter of 1996 to interest income of $313,000 compared to interest expense of $251,000 in the third quarter of 1995. Interest expense, net decreased $2,048,000 for the nine months of 1996 to $212,000 from $2,260,000 for the nine months of 1995. The decrease in interest expense, net in 1996 was due primarily to the repayment of the Term Loan and Senior Subordinated Notes with the proceeds from the sale of Common Stock in May of 1995 and the investment of excess proceeds of the Company's from the sale of Common Stock in June of 1996, partially offset by interest expense on Credit Facility borrowings to finance the Focus acquisition in April of 1996 until these borrowings were repaid with a portion of the proceeds from the Company's sale of Common Stock in June of 1996. -8- CRA MANAGED CARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PROVISION FOR INCOME TAXES The Company's provision for income taxes for the first three and nine months of 1996 was $1,993,000 and $5,124,000, respectively, or an effective tax rate of 41.5%, compared to a tax provision for the three and nine months of 1995 of $1,189,000 and $2,736,000, respectively, or an effective tax rate of 40%. The Company expects to continue to provide for its taxes at the higher effective tax rate for the remainder of the year. LOSS ON RETIREMENT OF DEBT The Company used the net proceeds ($36,507,000) from the Company's initial public offering on May 10, 1995, supplemented by borrowings under the New Credit Facility ($5,000,000) to repay fully the Term Loan ($16,250,000) and the Former Revolving Credit Facility ($4,226,000) under the former loan agreement with First Union Bank and the Senior Subordinated Notes ($21,000,000) issued to Whitney and First Union. The early repayment of this debt resulted in the Company recording a loss on the retirement of debt of $2,460,000 comprised of the write-off of associated deferred finance costs ($1,772,000), debt discount on the Senior Subordinated Notes ($2,140,000) and fees associated with the termination of the interest rate swaps previously required by the former loan agreement ($158,000), offset by a tax benefit of $1,610,000. LIQUIDITY AND CAPITAL RESOURCES Cash flows generated from operations were $9,034,000 and $884,000 for the nine months of 1996 and 1995, respectively. During the first nine months of 1996, working capital used $454,000 of cash primarily due to an increase in accounts receivable of $4,266,000 and an increase in prepaid expenses of $722,000 offset by an increase in accounts payable and accrued expenses of $4,534,000. Accounts receivable increased due to continued revenue growth while prepaid income taxes increased due to the Company recording a tax benefit of approximately $1,082,000 due to the exercise of options. Accounts payable and accrued expenses increased due to the timing of payments. The Company used net cash of $21,080,000 in connection with the acquisitions of Focus and QMC3. The Company also used $1,960,000 of cash to purchase property and equipment during the first nine months of 1996, the majority of which was spent on new computer and software technology. On January 16, 1996 the Company retired the 10% Junior Subordinated Notes utilizing borrowings under the Credit Facility. On March 28, 1996, the Company and First Union Bank signed an amendment to expand the Company's borrowing capacity under the Credit Facility to $40,000,000 under similar terms and conditions in order to finance the acquisition of Focus which was purchased for $21,000,000 in cash. On June 4, 1996, and June 17, 1995, the Company sold an aggregate of 1,200,000 shares of its Common Stock, including the exercise of the underwriters' over- allotment option, at a price of $46.00 per share generating net proceeds to the Company of approximately $51,840,000. The Company used approximately $29,000,000 of the net proceeds to repay all of the outstanding borrowings under the expanded Credit Facility with First Union Bank. The Company believes that existing cash and cash flow generated from operations will be sufficient to fund the Company's working capital and capital expenditure requirements for at least the next twelve months. -9- CRA MANAGED CARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On October 29, 1996, the Company purchased Prompt Associates, Inc. ("Prompt") for approximately $30,000,000 in cash. Prompt, which is based in Salt Lake City, Utah, is one of the leading providers of hospital bill audit services to the group health payor community for claims that fall outside of an indemnity carrier's, TPA's or HMO's network of hospital or outpatient facilities. Prompt had annual revenues of approximately $10,000,000 for the year ended December 31, 1995. In order to finance this acquisition, the Company will utilize approximately $25,000,000 of its existing cash supplemented by borrowings of approximately $5,000,000 under the Company's existing $40,000,000 Credit Facility. -10- CRA MANAGED CARE, INC. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11 - Calculation of Shares Used in Determining Earnings Per Share (b) Reports on Form 8-K There were no reports filed on Form 8-K during the third quarter of 1996. -11- CRA MANAGED CARE, INC. SIGNATURE 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. CRA MANAGED CARE, INC. Date: November 5, 1996 By: /s/ Joseph F. Pesce . ---------------- ------------------------------ Joseph F. Pesce Vice President - Finance and Administration and Chief Financial Officer -12- CRA MANAGED CARE, INC. EXHIBIT INDEX PAGE 11(a) CRA Managed Care, Inc. - Calculation of Shares Used in Determining Earnings Per Share 14 -13- EX-11 2 EXHIBIT 11 EXHIBIT 11 CRA MANAGED CARE, INC. Calculation of Shares Used in Determining Earnings Per Share for the Three and Nine Months Ended September 30, 1995 and 1996 THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- --------------------- 1995 1996 1995 1996 --------- --------- --------- --------- Weighted average number of shares of common stock outstanding during the period 7,216,000 8,896,000 6,098,000 8,074,000 Common stock equivalents, under the treasury stock method 135,000 188,000 125,000 187,000 --------- --------- --------- --------- 7,351,000 9,084,000 6,223,000 8,261,000 --------- --------- --------- --------- --------- --------- --------- --------- -14- EX-27 3 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 0000942136 CRA MANAGED CARE, INC. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 33,585,000 0 33,514,000 1,119,000 0 67,665,000 17,714,000 10,639,000 94,694,000 19,056,000 6,000 0 0 89,000 73,121,000 94,694,000 0 131,032,000 0 107,981,000 10,491,000 183,000 212,000 12,348,000 5,124,000 7,224,000 0 0 0 7,224,000 0.87 0
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