<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 0-15846
HealthCare COMPARE Corp.
(Exact name of registrant as specified in its charter)
Delaware
36-3307583
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3200 Highland Avenue, Downers Grove, Illinois 60515
(Address of principal executive offices, Zip Code)
(708) 241-7900
(Registrant's phone number, including area code)
__________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
The number of shares of Common Stock, par value $.01 per share, outstanding on
May 10, 1995 was 34,215,986.
<PAGE> 2
HealthCare COMPARE Corp. and Subsidiaries
INDEX
Part I. Financial Information Page Number
Item 1. Financial Statements
Consolidated Balance Sheets - Assets at March 31, 1995
and December 31, 1994 . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - Liabilities and
Stockholders' Equity at March 31, 1995 and December
31, 1994 . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations for the three
months ended March 31, 1995 and 1994 . . . . . . . . 5
Consolidated Statements of Cash Flows for the three
months ended March 31, 1995 and 1994 . . . . . . . . 6-7
Notes to Consolidated Financial Statements . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 9-11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit 11 . . . . . . . . . . . . . . . . . . . . . . . . . . 14-15
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS March 31, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 38,426,000 $ 29,412,000
Investments - available for sale . . . . . . . . . . . 52,244,000 37,043,000
Accounts receivable, less allowances for
doubtful accounts of $3,819,000
and $3,874,000, respectively . . . . . . . . . . . 24,514,000 24,386,000
Other current assets . . . . . . . . . . . . . . . . . 3,457,000 2,953,000
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . 118,641,000 93,794,000
------------ ------------
Long-Term Investments:
Available for sale . . . . . . . . . . . . . . . . . . 65,577,000 62,229,000
Investment partnership - at cost . . . . . . . . . . . 10,000,000 10,000,000
------------ ------------
75,577,000 72,229,000
------------ ------------
Property and Equipment:
Buildings and improvements . . . . . . . . . . . . . . 32,332,000 31,940,000
Computer equipment and software . . . . . . . . . . . 26,081,000 25,236,000
Office furniture and equipment . . . . . . . . . . . . 16,784,000 16,235,000
------------ ------------
75,197,000 73,411,000
Less accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . . (30,383,000) (28,111,000)
------------ ------------
Net property and equipment . . . . . . . . . . . . . . 44,814,000 45,300,000
------------ ------------
Other Assets . . . . . . . . . . . . . . . . . . . . . . . 4,260,000 3,686,000
------------ ------------
$243,292,000 $215,009,000
============ ============
</TABLE>
3
<PAGE> 4
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 4,581,000 $ 4,938,000
Accrued expenses . . . . . . . . . . . . . . . . . . . . 11,258,000 9,606,000
Income taxes payable . . . . . . . . . . . . . . . . . . 9,456,000 806,000
------------- -------------
Total current liabilities . . . . . . . . . . . . . . . 25,295,000 15,350,000
Non-Current Liabilities . . . . . . . . . . . . . . . . . . . 163,000 102,000
------------- -------------
Total liabilities . . . . . . . . . . . . . . . . . . . 25,458,000 15,452,000
------------- -------------
Stockholders' Equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . 362,000 360,000
Additional paid-in capital . . . . . . . . . . . . . . . 94,788,000 89,798,000
Unrealized holding loss on securities . . . . . . . . . (253,000) (935,000)
Retained earnings . . . . . . . . . . . . . . . . . . . 158,306,000 143,533,000
Treasury stock, at cost . . . . . . . . . . . . . . . . (35,369,000) (33,199,000)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . . 217,834,000 199,557,000
------------ ------------
$243,292,000 $215,009,000
============ ============
</TABLE>
4
<PAGE> 5
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1995 1994
------------ -----------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $51,381,000 $42,995,000
----------- -----------
Operating expenses:
Cost of services . . . . . . . . . . . . . . . . . . . 16,657,000 15,628,000
Selling and marketing . . . . . . . . . . . . . . . . 6,191,000 5,269,000
General and administrative . . . . . . . . . . . . . . 2,757,000 2,659,000
Depreciation and amortization . . . . . . . . . . . . 2,649,000 2,315,000
Interest income, net . . . . . . . . . . . . . . . . . (1,709,000) (1,189,000)
----------- -----------
26,545,000 24,682,000
----------- -----------
Income before income taxes . . . . . . . . . . . . . . . . 24,836,000 18,313,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . . (10,063,000) (7,234,000)
----------- -----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $14,773,000 $11,079,000
=========== ===========
Weighted average common and
common share equivalents . . . . . . . . . . . . . . . . 35,006,000 35,732,000
========== ==========
Net income per common share . . . . . . . . . . . . . . . . $ .42 $ .31
============= =============
</TABLE>
5
<PAGE> 6
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers . . . . . . . . . . . . . . . . $ 51,253,000 $ 43,181,000
Cash paid to suppliers and employees . . . . . . . . . . . . (24,089,000) (23,301,000)
Interest received, net . . . . . . . . . . . . . . . . . . . 1,353,000 1,531,000
Income taxes paid, net . . . . . . . . . . . . . . . . . . . (1,434,000) (2,750,000)
------------ ------------
Net cash provided by operating activities . . . . . . . . . 27,083,000 18,661,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments . . . . . . . . . . . . . . . . . . (36,505,000) (37,121,000)
Sales of investments . . . . . . . . . . . . . . . . . . . . 18,790,000 22,451,000
Purchase of property and equipment . . . . . . . . . . . . . (2,163,000) (2,124,000)
------------ ------------
Net cash used in investing activities . . . . . . . . . . . (19,878,000) (16,794,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock . . . . . . . . . . . . . . . . . (2,170,000) --
Proceeds from issuance of common stock . . . . . . . . . . . 3,979,000 2,169,000
------------ ------------
Net cash provided by financing activities . . . . . . . . . 1,809,000 2,169,000
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . 9,014,000 4,036,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . 29,412,000 23,425,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . $ 38,426,000 $ 27,461,000
=========== ===========
</TABLE>
6
<PAGE> 7
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1995 1994
------------ -----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,773,000 $11,079,000
----------- -----------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization . . . . . . . . . . . . . . . . 2,649,000 2,315,000
Provisions for uncollectible accounts receivable . . . . . . (55,000) 326,000
Amortization of bond premiums . . . . . . . . . . . . . . . . 282,000 330,000
Tax benefit from stock options and unrealized
holding loss on marketable securities . . . . . . . . . . . 558,000 --
Loss on sale of investments . . . . . . . . . . . . . . . . . 21,000 125,000
Changes in Assets and Liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . (73,000) (65,000)
Other current assets . . . . . . . . . . . . . . . . . . . . (504,000) (84,000)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . (574,000) 4,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . (357,000) (988,000)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . 1,652,000 1,125,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . 8,650,000 4,484,000
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 61,000 10,000
----------- ------------
TOTAL ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . 12,310,000 7,582,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . $27,083,000 $18,661,000
=========== ===========
</TABLE>
7
<PAGE> 8
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited financial statements herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission. The accompanying interim financial statements have been
prepared under the presumption that users of the interim financial
information have either read or have access to the audited financial
statements for the latest fiscal year ended December 31, 1994.
Accordingly, footnote disclosures which would substantially duplicate the
disclosures contained in the December 31, 1994 audited financial statements
have been omitted from these interim financial statements. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are
adequate to make the information presented not misleading, it is suggested
that these interim financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
Annual Report on Form 10-K.
2. The Company's investments in marketable securities which are classified as
available-for-sale had a net gain in market value of $682,000, net of
deferred income taxes, during the quarter ended March 31, 1995. The net
unrealized loss at March 31, 1995 is $253,000, net of deferred income
taxes. The Company's $10,000,000 investment in a limited partnership is
carried at cost. The current value of the Company's share in the limited
partnership at March 31, 1995 was $9,125,000.
8
<PAGE> 9
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED)
RESULTS OF OPERATIONS
Revenues for the three months ended March 31, 1995 increased
$8,386,000 (20%) from the comparable period of 1994. The Company's revenues
consist of fees for cost management services provided under contracts which
typically require clients to pay based upon a percentage of savings or on a
predetermined contractual basis (fee-based revenue). The Company also derives
revenues based on a fixed monthly fee for each participant, excluding covered
dependents, in a client-sponsored health care plan (capitated revenue). The
fee varies based upon the programs selected. Fee-based revenue has increased
substantially from 1989 to the present as COMPARE has significantly expanded
its PPO networks and to a lesser extent entered into contracts with various
departments and agencies of the Federal Government.
The following tables set forth information with respect to the types
and sources of the Company's revenues for the three months ended March 31, 1995
and 1994:
<TABLE>
<CAPTION>
TYPES OF REVENUE
($ in thousands)
Three Months Ended March 31,
--------------------------------------------------------
1995 % 1994 %
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Fee-based Revenue $45,277 88% $36,201 84%
Capitated Revenue 6,104 12% 6,794 16%
------- --- ------- ---
Total $51,381 100% $42,995 100%
======= === ======= ===
</TABLE>
<TABLE>
<CAPTION>
SOURCES OF REVENUE
($ in thousands)
Three Months Ended March 31,
--------------------------------------------------------
1995 % 1994 %
-------- ----- -------- -----
<S> <C> <C> <C> <C>
PPO Services $39,058 76% $31,793 74%
Utilization Management
Services 6,459 13 6,354 15
Fee Schedule Services 4,404 8 3,178 7
Government Contract
Services 1,460 3 1,670 4
------- --- ------- ---
Total $51,381 100% $42,995 100%
======= === ======= ===
</TABLE>
9
<PAGE> 10
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED) (CONT'D.)
The growth in revenue during the three months ended March 31, 1995 from the
comparable period of 1994 is primarily attributable to the expansion and
development of the Company's PPO services. PPO revenue increased $7,265,000
(23%) from the same period of 1994. Revenue from utilization management (U/M)
services increased $105,000 (2%) for the three months ended March 31, 1995 from
the comparable period in 1994. Revenue from fee schedule services increased
$1,226,000 (39%) for the three months ended March 31, 1995 from the comparable
period in 1994 due to new client additions and to increased revenue from
several existing clients the most significant being General Motors which added
additional states for these services. Government contract revenue decreased
$210,000 (13%) from the comparable period in 1994 due to a relative shift of
the use of resources in this area to new contract proposal activity which is
not recoverable under the Company's current cost reimbursement contract.
Cost of services increased $1,029,000 (7%) for the three months ended March
31, 1995 from the comparable period of 1994. Cost of services consists
primarily of salaries for personnel involved in PPO administration, development
and expansion, utilization management programs, fee schedule and other cost
management services offered by the Company. To a lesser extent, cost of
services includes telephone expenses, facility expenses and information
processing costs. The largest component of the increase in these costs during
the three months ended March 31, 1995 was operating expenses associated with
the expansion and development of PPO networks in various locations. In
addition, the Company incurred significant expenditures for the expansion of
various PPO support functions, including data processing, provider relations
and claims repricing.
Selling and marketing costs increased $922,000 (17%) for the three months
ended March 31, 1995 from the comparable period of 1994, primarily as a result
of the hiring of additional sales personnel.
General and administrative costs for the three months ended March 31, 1995
increased $98,000 (4%) from the comparable period of 1994. This increase is
primarily attributable to increased professional services being provided to
the Company.
Depreciation and amortization expenses increased $334,000 (14%) for the
three months ended March 31, 1995 from the comparable period of 1994,
principally as a result of shortening the useful life of certain computer
hardware and software in order to reflect current estimated useful lives and
plans for replacement.
Interest income for the three months ended March 31, 1995 increased
$520,000 (44%) from the comparable period in 1994 due to a significant increase
in the amount of cash equivalents and investments and a general increase in
interest rates.
Primarily as a result of the growth in revenues from the Company's PPO
services at a more rapid pace than related expenses, total operating expenses
as a percentage of revenue for the three months ended March 31, 1995 decreased
to 52% from 57% for the comparable period of 1994.
10
<PAGE> 11
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED) (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES
The Company had $93,346,000 in working capital at March 31, 1995 compared
with working capital of $78,444,000 at December 31, 1994. Cash equivalents and
short- and long-term investments increased to $166,247,000 at March 31, 1995
from 138,684,000 at December 31, 1994, primarily as the result of cash provided
by operating activities and, to a lesser extent, cash received upon the
exercise of stock options. Through the first three months of the year,
operating activities provided $27,083,000 of cash with $2,170,000 being
utilized to repurchase shares of the Company's common stock.
The Company believes that its working capital, long-term investments, and
cash generated from future operations will be sufficient to fund the Company's
anticipated operations and expansion plans.
11
<PAGE> 12
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Primary Earnings Per Common Share
(b) Exhibit 11 - Computation of Fully Diluted Earnings Per Common Share
12
<PAGE> 13
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.
HealthCare COMPARE Corp.
Dated: May 11, 1995 /s/James C. Smith
------------------------------------
James C. Smith
President and Chief Executive Officer
Dated: May 11, 1995 /s/Joseph E. Whitters
------------------------------------
Joseph E. Whitters
Chief Financial Officer
(Principal Financial and Accounting
Officer)
13
<PAGE> 1
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
(UNAUDITED)
________________________________________________________________________________
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,773,000 $11,079,000
=========== ===========
Weighted average number of common shares
outstanding:
Shares outstanding from beginning of period . . . . . . . . 34,034,000
35,033,000
Other issuances of common stock . . . . . . . . . . . . . . 148,000 98,000
Purchases of treasury stock . . . . . . . . . . . . . . . . (48,000) --
Common Stock Equivalents:
Additional equivalent shares issuable from
assumed exercise of common stock options . . . . . . . . . 872,000 601,000
----------- -----------
Weighted average common and common share
equivalents . . . . . . . . . . . . . . . . . . . . . . . 35,006,000 35,732,000
========== ==========
Net income per common share . . . . . . . . . . . . . . . . . . . $ .42 $ .31
============= ============
</TABLE>
14
<PAGE> 2
HEALTHCARE COMPARE CORP. AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
(UNAUDITED)
________________________________________________________________________________
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,773,000 $11,079,000
=========== ===========
Weighted average number of common shares
outstanding:
Shares outstanding from beginning of period . . . . . . . . 34,034,000 35,033,000
Other issuances of common stock . . . . . . . . . . . . . . 148,000 98,000
Purchases of treasury stock . . . . . . . . . . . . . . . . (48,000) --
Common Stock Equivalents:
Additional equivalent shares issuable from
assumed exercise of common stock options . . . . . . . . . 902,000 601,000
----------- -----------
Weighted average common and common share
equivalents . . . . . . . . . . . . . . . . . . . . . . . 35,036,000 35,732,000
========== ==========
Net income per common share . . . . . . . . . . . . . . . . . . . $ .42 $ .31
============= ============
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 38,426
<SECURITIES> 117,821
<RECEIVABLES> 28,333
<ALLOWANCES> (3,819)
<INVENTORY> 0
<CURRENT-ASSETS> 118,641
<PP&E> 75,197
<DEPRECIATION> (30,383)
<TOTAL-ASSETS> 243,292
<CURRENT-LIABILITIES> 25,295
<BONDS> 0
<COMMON> 362
0
0
<OTHER-SE> 217,472
<TOTAL-LIABILITY-AND-EQUITY> 243,292
<SALES> 0
<TOTAL-REVENUES> 53,090
<CGS> 0
<TOTAL-COSTS> 25,605
<OTHER-EXPENSES> 2,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,836
<INCOME-TAX> 10,063
<INCOME-CONTINUING> 14,773
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,773
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
