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 September 30, 1998
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 0-18902
Health Risk Management, Inc.
(Exact name of registrant as specified in its charter)
Minnesota 41-1407404
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10900 Hampshire Avenue South, Minneapolis, Minnesota 55438
(Address of principal executive offices, Zip Code)
(612) 829-3500
(Registrant's telephone 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 latest practicable date.
The number of shares of Common Stock par value $.01 per share, outstanding on
November 12, 1998 was 4,603,785.
<PAGE>
HEALTH RISK MANAGEMENT, INC.
INDEX
Part I. Financial Information Page Number
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- at September 30, 1998 and
June 30, 1998..................................................3
Consolidated Statements of Operations for the three months
ended September 30, 1998 and 1997..............................4
Consolidated Statements of Cash Flows for the three months
ended September 30, 1998 and 1997..............................5
Notes to Consolidated Financial Statements........................6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............9-12
Part II. Other Information
Item 1. Legal Proceedings.........................................13
Item 4. Submission of Matters to a Vote of Security Holders.......13
Item 6. Exhibits and Reports on Form 8-K..........................13
Signatures....................................................................14
Exhibit Index.................................................................15
<PAGE>
PART I. FINANCIAL INFORMATION
HEALTH RISK MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
September 30,
1998 June 30
(Unaudited) 1998
------------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $15,880 $20,624
Accounts receivable, less allowance for doubtful accounts of 14,744 11,019
$295 and $265 at September 30, 1998, and June 30, 1998, respectively
Deferred income taxes 900 900
Other 1,614 837
------- -------
Total current assets 33,138 33,380
Computer software costs, less accumulated amortization of $17,444 and $17,940 at 25,219 24,284
September 30, 1998, and June 30, 1998 respectively
Property and equipment, less accumulated depreciation of $13,783 and $14,299 at
September 30, 1998, and June 30, 1998 respectively 11,286 8,670
Other assets 4,087 4,180
------- -------
$73,730 $70,514
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,818 $ 2,125
Medical services payable 18,154 15,452
Accrued expenses 2,968 3,596
Unearned revenues 2,544 3,708
Current maturities of notes payable 4,298 4,429
Current portion of capitalized equipment leases 492 596
------- -------
Total current liabilities 33,274 29,906
Deferred income taxes 3,796 3,776
Long-Term portion of notes payable 2,065 2,313
Long-Term portion of capitalized equipment leases 659 734
Commitments
Shareholders' equity:
Undesignated shares, $.01 par value, 9,700,000 authorized, none issued Series A
preferred shares, $.01 par value, 300,000 authorized, none issued Common shares,
$.01 par value, 20,000,000 shares authorized, 4,603,785 and 4,583,694
issued and outstanding at September 30, 1998 and June 30, 1998, respectively
46 46
Additional paid-in capital 31,902 31,728
Retained earnings 1,988 2,011
------- -------
Total shareholders' equity 33,936 33,785
------- -------
$73,730 $70,514
======= =======
</TABLE>
<PAGE>
HEALTH RISK MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1998 1997
-------- --------
Revenues:
<S> <C> <C>
Health plan management services $ 18,911 $ 16,983
Managed care operations 29,789 --
Investment income 249 63
-------- --------
Total revenues 48,949 17,046
Operating expenses:
Cost of health plan management services 14,540 12,721
Cost of managed care operations 28,828 --
Selling, marketing and administration 5,396 2,991
Interest expense 183 121
-------- --------
Total operating expenses 48,947 15,833
Income before income taxes and cumulative
effect of accounting change 2 1,213
Income taxes 25 462
-------- --------
Income (loss) before cumulative effect
of accounting change (23) 751
Cumulative effect of accounting change,
net of income tax benefit of $1,342 -- (2,371)
-------- --------
Net loss $ (23) $ (1,620)
======== ========
Basic earnings per share:
Income (loss) before cumulative effect
of accounting change $ (.01) $ .17
Cumulative effect of accounting change -- (.53)
-------- --------
Net loss $ (.01) $ (.36)
======== ========
Diluted earnings per share:
Income (loss) before cumulative effect
of accounting change $ (.01) $ .16
Cumulative effect of accounting change
-- (.51)
-------- --------
Net loss $ (.01) $ (.35)
======== ========
Weighted average number of shares outstanding:
Basic 4,594 4,496
======== ========
Diluted 4,722 4,636
======== ========
</TABLE>
<PAGE>
HEALTH RISK MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------
1998 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (23) $ (1,620)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 823 746
Amortization 1,642 1,231
Cumulative effect of accounting change -- 2,371
Provision for deferred income taxes 20 459
Changes in operating assets and liabilities:
Accounts receivable (3,725) (1,377)
Other assets (850) (96)
Accounts payable 359 (448)
Medical services payable 2,702 --
Accrued expenses (628) (378)
Unearned revenues (1,164) (82)
-------- --------
Net cash provided by (used in) operating activities (844) 806
Cash flows from investing activities:
Property and equipment (1,105) (613)
Capitalized software (2,411) (2,160)
-------- --------
Net cash used in investing activities (3,516) (2,773)
Cash flows from financing activities:
Principal payments on notes payable (379) (314)
Principal payments on capital leases (179) (223)
Issuance of common shares 174 153
-------- --------
Net cash used in financing activities (384) (384)
-------- --------
Increase (decrease) in cash (4,744) (2,351)
Cash and cash equivalents at beginning of period 20,624 5,349
-------- --------
Cash and cash equivalents at end of period $ 15,880 $ 2,998
======== ========
</TABLE>
<PAGE>
HEALTH RISK MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited interim consolidated 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 June 30, 1998. Accordingly, footnote disclosures which would
substantially duplicate the disclosures contained in the June 30, 1998
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. These interim financial
statements should be read in conjunction with the annual financial
statements and the notes thereto.
2. Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes, the most significant of
which relates to incurred but not yet reported claims included in
medical services payable and performance bonus accruals included in
accounts receivable. Actual results could differ from such estimates.
3. Accounting Change
Effective July 1, 1997, the Company changed its method of accounting
for service revenue related to the Company's health plan management
services from a policy of revenue being generally recognized based on
an estimate of the services to be provided over the service period to a
policy under which revenue is recognized ratably over the contract
period. The change was made because management believes that the new
method will provide for consistent accounting methods for its health
plan management revenue services and the Company's new managed care
operations revenue, is more prevalent in the health management
industry, and will reduce the administrative burden.
The cumulative effect of the change in accounting principles as of July
1, 1997 resulted in a pre-tax, non-cash charge of $3,713,000 ($2,371,
000 after tax benefit of $.53 per share for basic and $.51 per share
for diluted) in the three months ended September 30, 1997. Income
before cumulative effect of accounting change and related basic and
diluted earnings per share for the three months ended September 30,
1997 would have been $572,000, $.13 and $.12, respectively, without the
accounting change compared to $751,000, $.17 and $.16 respectively,
with the accounting change.
<PAGE>
4. Computer software costs
September 30,
1998 June 30,
(Unaudited) 1998
------------ --------
(in thousands)
Computer software costs consist of the following:
Care Management Software
Cost $17,295 $17,268
Less accumulated amortization 6,802 7,391
------- -------
Net book value 10,493 9,877
Claim Administration Software
Cost 8,835 8,852
Less accumulated amortization 3,602 3,708
------- -------
Net book value 5,233 5,144
Guidelines, Protocols and Medical
Analysis Software
Cost 16,533 16,104
Less accumulated amortization 7,040 6,841
------- -------
Net book value 9,493 9,263
------- -------
Computer software costs $25,219 $24,284
======= =======
<PAGE>
5. Net Income (Loss) Per Common Share
The following table sets forth the computation of basic and diluted
earnings per share for the three month period ended September 30 (in
thousands, except per share data):
1998 1997
----------- -----------
Numerator:
Income (loss) before cumulative effect of
accounting change $ (23) $ 751
Cumulative effect of accounting change -- (2,371)
--------- ---------
Net loss $ (23) $ (1,620)
========= =========
Denominator:
Weighted-average shares-basic
Effect of dilutive stock options 4,594 4,496
Weighted-average shares-diluted 128 140
--------- ---------
4,722 4,636
========= =========
Basic earnings per share:
Income (loss) before cumulative effect of
accounting change $ (.01) $ .17
Cumulative effect of accounting change
-- (.53)
--------- ---------
Net loss $ (.01) $ (.36)
========= =========
Diluted earnings per share:
Income (loss) before cumulative effect of
accounting change $ (.01) $ .16
Cumulative effect of accounting change
-- (.51)
--------- ---------
Net loss $ (.01) $ (.35)
========= =========
6. Subsequent Event
On October 14, 1998, the Company announced that it signed a definitive
agreement to buy Oxford Health Plans (PA), Inc., a wholly-owned
subsidiary of Oxford Health Plans, Inc., for $10.4 million subject to
regulatory approvals. The purchase is expected to close by December 31,
1998.
7. Reclassification
Certain items in the financial statements for the three months ended
September 30, 1997 have been reclassified to conform to the 1998
presentations.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Overview
A majority of the Company's revenues consist of fees for health plan management
and managed care operations.
The Company's expenses are comprised of its cost of health plan management
services (consisting primarily of compensation of personnel, including nurses
and physicians, telephone expenses, depreciation and amortization, rent, costs
related to the Company's computer operations, costs related to customer service,
and costs related to development of new services), cost of managed care
operations (consisting primarily of the cost of medical services and
reinsurance, net of recoveries), selling, marketing and administration expenses
(including sales commissions, advertising, sales account management personnel,
bad debts, compensation and depreciation).
Results of Operations
The following table sets forth certain consolidated financial data as a
percentage of total revenues, as indicated, for the three months ended September
30, 1998 and 1997 and the fiscal year ended June 30, 1998.
Three Months Ended Year
September 30, Ended
------------------ June 30,
1998 1997 1998
----- ----- -----
Revenues 100.0% 100.0% 100.0%
===== ===== =====
Operating expenses:
Cost of health plan management services 76.9(1) 74.9(1) 76.8(1)
Cost of managed care operations 96.8(2) -- 97.6(2)
Selling, marketing and administration 11.0(3) 17.5(3) 15.4(3)
Interest expense 0.4(3) 0.7(3) 0.5(3)
----- ----- -----
Total operating expenses 100.0(3) 92.9(3) 97.7(3)
----- ----- -----
Income before income taxes and cumulative
effect of accounting change -- 7.1 2.3
Income taxes 0.1 2.7 0.9
----- ----- -----
Income before cumulative effect
of accounting change -- 4.4 1.4
Cumulative effect of accounting change
net of income tax -- (13.9) (2.5)
----- ----- -----
Net income (loss) 0.0% (9.5)% (1.1)%
===== ===== =====
(1) Computed as a % of health plan management revenues.
(2) Computed as a % of managed care operations revenues.
(3) Computed as a % of total revenues.
Total Revenues: Total revenues increased $31,903,000 (187%) from first quarter
of fiscal 1998 to fiscal 1999 (from $17,046,000 to $48,949,000). These increases
are primarily attributable to revenues from managed care operations which began
April 16, 1998, and increases in the number of clients and covered participants
enrolled in the Company's health plan management services, sales of additional
products to existing clients and increased sales of the QualityFIRST(R) Medical
Risk Management System.
<PAGE>
Following is a breakout of revenue:
<TABLE>
<CAPTION>
Three Months Ended Change
September 30
1998 1997 1998
----------- ----------- -----------
<S> <C> <C> <C> <C>
Health plan management services $18,911,000 $16,983,000 $1,928,000 11%
Managed care operations 29,789,000 0 29,789,000 N/A
Investment income 249,000 63,000 186,000 295%
----------- ----------- ----------- ----
Total revenues $48,949,000 $17,046,000 $31,903,000 187%
=========== =========== =========== ====
</TABLE>
Revenues for health plan management services increased 11% or $1,928,000, from
first quarter of fiscal 1998 to fiscal 1999 (increasing from $16,983,000 to
$18,911,000). This increase was the result of the growth of existing business
and new contracts entered into by the Company.
Revenues from the managed care operations were the result of obtaining in the
fourth quarter of fiscal 1998 the revenue from a client contract under which the
Company is at risk for the total medical services costs and receives a
significant portion of the total premium of an HMO. The Company did not have
this business in the first three quarters of fiscal 1998.
Investment income increased 295% or $186,000 from the first quarter of fiscal
1998 to fiscal 1999 (increasing from $63,000 to $249,000). This increase is the
result of higher levels of investments in the first quarter of fiscal 1999.
Cost of Health Plan Management Services: Cost of services increased 14% from the
first quarter of fiscal 1998 to fiscal 1999 (from $12,721,000 to $14,540,000).
As a percentage of health plan management revenues, cost of services increased
from 75% in the first quarter of fiscal 1998 to 77% in fiscal 1999. The increase
in fiscal 1999 of cost of services as a percentage of revenues was primarily due
to additional costs related to payroll and expenses for increased business,
including depreciation and amortization, the start up of a major client in April
1998, software design and year 2000 programming.
Cost of Managed Care Operations: The cost of managed care operations increased
by $28,828,000 in fiscal 1999 over fiscal 1998 due to the managed care
operations beginning in April 1998. As a percentage of managed care revenues,
this cost in the first quarter of fiscal 1999 was 97%.
Selling, Marketing and Administration: Selling, marketing and administration
expenses increased 80% from the first quarter of fiscal 1998 to fiscal 1999
(from $2,991,000 to $5,396,000). This expense as a percentage of total revenue
was 18% and 11% for the first quarter of fiscal 1998 and fiscal 1999,
respectively. The increases of $2,405,000 were due primarily to additional
staff, travel, commission, bad debts, insurance, training programs and amounts
allocated to the major client that started in April, 1998.
Interest Expense: Interest expense increased 51% from the first quarter of
fiscal 1998 to fiscal 1999 (from $121,000 to $183,000), and decreased as a
percentage of revenue from 0.7% to 0.4%.
Income Taxes: Income taxes decreased in fiscal 1999 from fiscal 1998 by
$437,000, or 95% (from $462,000 to $25,000). The decreases are due to lower
income before income taxes. It is expected that the 1999 fiscal year effective
tax rate will approximate the 39% rate of fiscal 1998.
Cumulative effect of accounting change: See Note 3 in the Notes to Consolidated
Financial Statements.
<PAGE>
Liquidity and Capital Resources
The Company's cash flows used in operations was $844,000 for the quarter ended
September 30, 1998 compared to cash flows provided by operations of $806,000 for
the quarter ended September 30, 1997. As of September 30, 1998, accounts
receivable of approximately $5,000,000 impacted cash flows from operations.
These receivables should be collected in the second quarter. During the quarter
ended September 30, 1997, cash flows from operations exceeded net income
primarily due to non-cash charges such as depreciation and amortization,
deferred income taxes, cumulative effect of the accounting change and changes in
operating assets and liabilities.
Cash has been used to invest in software and program enhancements and property
and equipment ($3,516,000 and $2,773,000 in the first quarter of fiscal 1999 and
fiscal 1998, respectively). HRM expects to continue to acquire property and
equipment and enhance software and products, but at lower rates in the second
half of fiscal 1999.
HRM also used approximately $558,000 and $537,000 in the first quarter of fiscal
1999 and fiscal 1998, respectively, to repay principal on notes payable and
capital leases. The Company received cash proceeds of $174,000 and $153,000 in
fiscal 1999 and fiscal 1998, respectively, from stock option exercises for
common stock by current or former employees and directors.
The Company's current ratio was 1.0 at September 30, 1998 and 1.1 at June 30,
1998. The Company had a working capital deficit of $136,000 at September 30,
1998 and working capital of $3,474,000 at June 30, 1998.
The Company had a net operating loss carryforward of approximately $14,500,000
for income tax purposes at June 30, 1998, which can be used to reduce taxable
income and reduce the current cash flow necessary to pay taxes.
The Company believes that its cash and cash flow from operations, together with
credit facilities which the Company has obtained, will be sufficient to finance
the Company's anticipated normal expansion in fiscal 1999. The Company has a
term loan and revolving loan (principal balance of $3,363,000 and $3,000,000,
respectively, as of September 30, 1998) with its bank and a revolving credit
facility expiring January 31, 1999, under which the Company may borrow an
additional $6,128,750 at September 30, 1998. The revolving credit and term loan
are secured by liens on the assets of the Company. In light of changes in the
Company's accounting policy and in the Company's core business, the Company did
not meet three covenants under its bank loan documents (namely; consolidated net
worth, consolidated leverage ratio and cosolidated cash flow leverage) at
September 30, 1998. Management has discussed these covenants with the bank and
has obtained a written waiver of the covenants through September 30, 1998.
Management is discussing new banking arrangements and covenants with the bank
for their approval relating to the previously announced acquisition.
Year 2000
The Company is reliant on technology to deliver its managed healthcare services.
If a computer system or software application used by the Company or a third
party dealing with the Company fails because of the inability of the system or
application to properly read the year "2000," the results could conceivably have
a material adverse effect on the Company.
Management has implemented and is monitoring a program to prepare the Company's
computer systems or software applications and external relationships for the
year 2000. Utilizing a national consulting firm, the Company has completed a
systematic survey of its hardware, software and facilities. A strategy for
achieving compliance for each system component has been prepared. Costs of the
Company's Year 2000 Project through June 30, 1999, are estimated at
approximately $1.4 million of which approximately $.7 million has been incurred
through September 30, 1998. The cost of the Year 2000 Project will be expensed
as incurred.
<PAGE>
The Company has targeted its Year 2000 compliance efforts to address the
critical systems that support and interface with the Company's clients and
vendors. The Company is in the process of requesting information from critical
vendors regarding their state of readiness. As of June 30, 1998, QualityFIRST(R)
is Year 2000 ready in that it processes four-digit year dates. The Company's
claims system is scheduled to complete Year 2000 testing in the Fall of 1998 and
the remediation of the care management system is scheduled to be completed in
the quarter ending June 30, 1999. There are expected to be ongoing maintenance
tasks which will continue into the year 2000. These tasks are not expected to be
significant.
Successful completion of the Company's Year 2000 Project is affected by many
factors, including but not limited to Year 2000 readiness of the Company's key
vendors and customers. The information contained in this statement is based on
management's best estimates. However, there can be no guarantee that these
estimates will be achieved, and actual results could differ materially from
those anticipated based on factors such as availability and cost of personnel
trained in this area, the ability to identify relevant computer codes, and the
impact of the Company's external relationships. The possible consequences of the
Company or its business partners not being fully Year 200 compliant include
temporary disruption to the delivery of services. The Company will be using
contingency plans already in place related to the backing up of information
systems and disaster recovery procedures. The Company will be developing
additional and/or supplemental contingency plans where necessary in an effort to
be prepared should a Year 2000 issue arise.
Forward Looking Statements
Forward looking statements in this report reflected as expectations, plans,
anticipations, prospects or future estimates are subject to the risks and the
uncertainties present in the Company's business and the competitive healthcare
market place where clients and vendors commonly experience mergers or
acquisitions, reconciliations, volume fluctuations, participant enrollment
fluctuations, fixed price contracts, contract disputes, contract modifications,
contract renewals and non-renewals, various business reasons for delaying
contract closings, and the operational challenges of matching case volume with
optimum staffing, having fully trained staff, having computer and telephonic
supported operations and managing turnover of key employees and outsourced
services to performance standards. While occurrences of these risks, and others
detailed in this report and the Company's other SEC reports, cannot be predicted
exactly, such occurrences can be expected to have an impact on the Company's
anticipated level of revenue growth or profitability.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 25, 1998, Keystone Mercy Health Plan filed a complaint, seeking
injunctive relief and unspecified damages, in U.S. District Court for the
Eastern District of Pennsylvania against the Company alleging the Company had
failed to perform services under a September 12, 1998 settlement agreement.
Keystone subsequently voluntarily dismissed its complaint and the parties
executed a Stipulation to Dismiss Without Prejudice that was approved by the
Court on October 30, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of the Company's shareholders was held on
Wednesday, July 8, 1998.
(b) Proxies for the Annual Meeting were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934, there was no
solicitation in opposition to management's nominees as listed in the proxy
statement, and all such nominees were elected.
(c) At the Annual Meeting the following matters were voted upon:
(i) The following persons were elcted as Class C Directors for
a three-year term:
Nominee Votes For Votes Withheld
Gary T. McIlroy 4,304,951 9,700
Ronald R. Hahn 4,306,801 7,850
Robert L. Montgomery 4,307,751 6,900
(ii) By a vote of 4,305,308 shares in favor, with 2,225 shares
against, 7,118 shares abstaining, the shareholders approved the selection of
Ernst & Young LLP as independent auditors for the current fiscal year.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 -- Financial Data Schedule (filed in electronic format
only)
(b) During the three months ended September 30, 1998, there was no
report filed on Form 8-K.
<PAGE>
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.
Health Risk Management, Inc.
Dated: November 16, 1998 By: /s/Gary T. McIlroy
Gary T. McIlroy, M.D.
Chief Executive Officer
Dated: November 16, 1998 By: /s/Thomas P. Clark
Thomas P. Clark
Chief Financial Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX
to
FORM 10-Q
For Quarter Ended September 30, 1998
HEALTH RISK MANAGEMENT, INC.
(SEC File No. 0-18902)
Exhibit
Number Exhibit Description
27 Financial Data Schedule (filed in electronic format only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS FROM THE REGISTRANT'S FORM 10-Q FOR THE QUARTER
ENDED 9-30-98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 15,880
<SECURITIES> 0
<RECEIVABLES> 14,744
<ALLOWANCES> 295
<INVENTORY> 0
<CURRENT-ASSETS> 33,138
<PP&E> 36,505
<DEPRECIATION> 31,227
<TOTAL-ASSETS> 73,730
<CURRENT-LIABILITIES> 33,274
<BONDS> 2,724
0
0
<COMMON> 46
<OTHER-SE> 33,890
<TOTAL-LIABILITY-AND-EQUITY> 73,730
<SALES> 48,949
<TOTAL-REVENUES> 48,949
<CGS> 0
<TOTAL-COSTS> 43,368
<OTHER-EXPENSES> 5,396
<LOSS-PROVISION> 38
<INTEREST-EXPENSE> 183
<INCOME-PRETAX> 2
<INCOME-TAX> 25
<INCOME-CONTINUING> (23)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
