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, 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)
8000 West 78th Street, Minneapolis, Minnesota 55439
(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
May 11, 1998 was 4,578,694.
<PAGE>
HEALTH RISK MANAGEMENT, INC.
INDEX
Part I. Financial Information Page Number
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- at March 31, 1998 and
June 30, 1997..................................................3
Consolidated Statements of Net Income for the three
months ended March 31, 1998 and 1997 and the
nine months ended March 31, 1998 and 1997......................4
Consolidated Statements of Cash Flows for the nine months
ended March 31, 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 6. Exhibits and Reports on Form 8-K..........................13
Signatures....................................................................14
Exhibit Index.................................................................15
Exhibit 11....................................................................16
<PAGE>
PART I. FINANCIAL INFORMATION
HEALTH RISK MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
March 31,
1998 June 30,
(Unaudited) 1997
----------------- ---------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 4,086 $ 5,349
Accounts receivable-net of allowance for doubtful accounts of
$265 and $260 at March 31, 1998 and June 30, 1997, respectively 6,960 5,257
Unbilled receivables 7,284 7,110
Deferred income taxes 335 350
Other 1,063 989
--------- ---------
Total current assets 19,728 19,055
Computer software costs, net of amortization of $16,459 and $12,782
at March 31, 1998 and June 30, 1997, respectively 22,952 20,385
Property and equipment less accumulated depreciation of $13,454 and
$11,103 at March 31, 1998 and June 30, 1997, respectively 8,884 9,215
Contract rights, net of amortization of $1,038 and $914 at March 31,
1998 and June 30, 1997, respectively 772 893
Other assets 2,108 2,175
--------- ---------
$ 54,444 $ 51,723
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,654 $ 1,645
Accrued expenses 2,678 3,018
Unearned revenues 3,818 3,826
Current maturities of notes payable 1,429 1,134
Current portion of capitalized equipment leases 705 854
--------- ---------
Total current liabilities 10,284 10,477
Deferred income taxes 4,553 3,715
Long-term portion of notes payable 2,670 2,166
Long-term portion of capitalized equipment leases 825 1,321
Commitments
Shareholders' equity:
Undesignated shares, $.01 par value, 9,750,000 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,4,560,189
and 4,478,245 shares issued and outstanding at March 31, 1998 and
June 30, 1997, respectively 46 45
Additional paid-in capital 31,625 30,945
Retained earnings 4,441 3,054
--------- ---------
Total shareholders' equity 36,112 34,044
--------- ---------
$ 54,444 $ 51,723
========= =========
</TABLE>
<PAGE>
HEALTH RISK MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------------- ----------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 17,133 $ 16,058 $ 51,514 $ 46,050
----------- ----------- --------- ----------
Operating expenses:
Cost of services 11,251 9,896 33,599 27,703
Depreciation and amor-
tization, principally 2,202 1,898 6,287 5,475
cost of services
Selling and marketing 1,921 1,784 5,109 5,640
Administration 1,417 1,278 4,120 3,991
Merger costs -- 390 -- 390
----------- ----------- --------- ----------
Total operating expenses 16,791 15,246 49,115 43,199
----------- ----------- --------- ----------
Operating income 342 812 2,399 2,851
Other income (expense):
Interest income 72 42 208 117
Interest expense (130) (140) (357) (402)
----------- ----------- --------- ----------
Total other income (expense) (58) (98) (149) (285)
----------- ----------- --------- ----------
Income before income taxes 284 714 2,250 2,566
Provision for income taxes:
Current 4 5 10 15
Deferred 110 271 853 978
----------- ----------- --------- ----------
Total income taxes 114 276 863 993
----------- ----------- --------- ----------
Net income $ 170 $ 438 $ 1,387 $ 1,573
=========== ============ ========= ==========
Net income per common share:
Basic $ .04 $ .10 $ .31 $ .37
=========== ============ ========= ==========
Diluted $ .04 $ .10 $ .30 $ .36
=========== ============ ========= ==========
Weighted average number of common
and common equivalent shares
outstanding:
Basic 4,522 4,296 4,507 4,233
=========== ============ ========= ==========
Diluted 4,655 4,466 4,628 4,417
=========== ============ ========= ==========
</TABLE>
<PAGE>
HEALTH RISK MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------------------
1998 1997
----------------- ---------------
Cash flows from operating activities::
<S> <C> <C>
Net income $ 1,387 $ 1,573
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,354 2,006
Amortization 3,933 3,469
Provision for deferred income tax 853 978
Changes in operating assets and liabilities:
Accounts receivable (1,703) 545
Unbilled receivables (174) (1,636)
Other assets (142) (343)
Accounts payable 100 (384)
Accrued expenses (340) (288)
Unearned revenues (8) 702
------------ -------------
Net cash provided by operating activities 6,260 6,622
Cash flows from investing activities:
Acquisition of assets, net of cash acquired -- (139)
Property and equipment, net of disposals (2,114) (1,984)
Capitalized software (6,244) (5,210)
------------ -------------
Net cash used in investing activities (8,358) (7,333)
Cash flows from financing activities:
Proceeds from notes payable 1,750 1,275
Principal payments on notes payable (951) (944)
Principal payments on capital leases (645) (759)
Issuance of common shares 681 3,234
------------ -------------
Net cash provided in financing activities 835 2,806
------------ -------------
Increase (decrease) in cash (1,263) 2,095
Cash and cash equivalents at beginning of period 5,349 3,347
------------ -------------
Cash and cash equivalents at end of period $ 4,086 $ 5,442
============ =============
Supplemental disclosures:
Interest paid $ 357 $ 402
Income taxes paid 15 12
Equipment acquired under capital lease -- 400
</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,
1997. Accordingly, footnote disclosures which would substantially duplicate
the disclosures contained in the June 30, 1997 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. Computer software costs
<TABLE>
<CAPTION>
March 31,
1998 June 30,
(Unaudited) 1997
------------------- --------------------
(in thousands)
Computer software costs consist of the following:
Computer Software (AutoPILOTTM)
<S> <C> <C>
Cost $ 15,732 $ 12,932
Less accumulated amortization 6,727 5,177
---------- -------------
Net book value 9,005 7,755
Claim Administration Software
Cost 8,515 7,601
Less accumulated amortization 3,499 2,913
---------- -------------
Net book value 5,016 4,688
Guidelines, Protocols and Medical
Analysis Software
Cost 15,164 12,634
Less accumulated amortization 6,233 4,692
---------- -------------
Net book value 8,931 7,942
---------- -------------
Computer software costs $ 22,952 $ 20,385
========== =============
</TABLE>
<PAGE>
Amortization of these costs was as follows for the nine month period
ended March 31, 1998 and the year ended June 30, 1997.
Nine Months Ended Year Ended
March 31, 1998 June 30,
(Unaudited) 1997
-------------------- -------------
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Computer Software (AutoPILOTTM) $ 1,550 $ 1,791
Claim Administration Software 586 735
Guidelines, Protocols and Medical
Analysis Software 1,541 1,617
----------- -----------
Amortization Expense $ 3,677 $ 4,143
----------- -----------
</TABLE>
3. Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement No. 128, "Earnings Per Share." Statement 128 replaced
the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary,
restated to conform to the Statement 128 requirements.
4. Segment Reporting
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments
of an Enterprise and Related Information" (SFAS No. 131) which is
effective for fiscal years beginning after December 15, 1997.
Accordingly, the Company plans to adopt SFAS No. 131 in the fiscal
year ending June 30, 1999. SFAS No. 131 requires that a publicly-held
company report financial and descriptive information about its
operating segments in financial statements issued to shareholders for
interim and annual periods. SFAS No. 131 also requires additional
disclosures with respect to products and services, geographic areas of
operation, and major customers. While the Company has reported under
SFAS No. 14 that it is engaged in only one industry segment, namely,
managed healthcare services, it has not yet determined the segment or
other disclosure impacts of SFAS No. 131. Since SFAS No. 131 deals
only with footnote disclosures, it will not have any impact on the
consolidated financial results or financial condition of the Company.
5. Comprehensive Income
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income" (SFAS No. 130) which is effective for fiscal years beginning
after December 15, 1997. Accordingly, the Company plans to adopt SFAS
No. 130 in the fiscal year ending June 30, 1999. SFAS No. 130
establishes standards for the reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. The adoption of SFAS No. 130 is not expected to have a
significant impact on the Company.
<PAGE>
6. Accounting for Computer Software Developed For or Obtained For Internal Use
In March 1998, the AICPA issued SOP 98-1 "Accounting for Computer
Software Developed For or Obtained For Internal Use" (the SOP) which
is effective for the Company beginning on July 1, 1999. The SOP will
require the capitalization of certain costs incurred after the date of
adoption in connection with developing or obtaining software for
internal use. The Company currently capitalizes internal-use software
related to its AutoPILOT software and Claim Administration Software.
The Company has not yet assessed the impact of all of the SOP's
provisions.
<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 services provided under
contracts obligating clients to pay a fixed monthly charge for each covered
employee or member based on anticipated case volume experience, a percentage of
savings, a transaction or case fee, or on an hourly basis. In addition, each new
client is typically charged a one-time set-up fee to cover the related set-up
costs incurred by the Company. Such revenue is recognized as services rendered
under each contract.
The Company's expenses are comprised of its cost of services (consisting
primarily of compensation of personnel, including nurses and physicians,
telephone expenses, rent, costs related to the Company's computer operations,
costs related to customer service, and costs related to the development of new
services), selling and marketing expenses (including sales commissions,
advertising and account management personnel), general and administration
expenses (including bad debts and compensation of personnel in the corporate,
finance, human resources, and general administration departments) and
depreciation and amortization (primarily capitalized leased equipment and
software costs).
Results of Operations
The following table sets forth certain consolidated financial data as a
percentage of total revenue for the three months and the nine months ended March
31, 1998 and 1997 and the fiscal year ended June 30, 1997.
<TABLE>
<CAPTION>
Three Months Nine Months Year
Ended Ended Ended
March 31, March 31, June 30,
------------------------ -------------------------- -------------
1998 1997 1998 1997 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Operating expenses:
Cost of services 65.6% 61.6% 65.2% 60.2% 60.0%
Depreciation and amortization,
principally cost of services 12.9% 11.8% 12.2% 11.9% 12.2%
Selling and marketing 11.2% 11.1% 9.9% 12.2% 11.7%
Administration 8.3% 8.0% 8.0% 8.7% 9.1%
Merger costs 0.0% 2.4% 0.0% 0.8% 0.6%
--- --- --- --- ---
Total operating expenses: 98.0% 94.9% 95.3% 93.8% 93.6%
---- ---- ---- ---- ----
Operating income 2.0% 5.1% 4.7% 6.2% 6.4%
Other income (expense):
Interest income 0.4% 0.2% 0.4% 0.3% 0.3%
Interest expense (0.8)% (0.9)% (0.7)% (0.9)% (0.9)%
---- ---- ---- ---- ----
Total other income (expense) (0.4)% (0.7)% (0.3)% (0.6)% (0.6)%
Income before taxes 1.6% 4.4% 4.4% 5.6% 5.8%
Income taxes (0.6)% (1.7)% (1.7)% (2.2)% (2.2)%
---- ---- ---- ----- -----
Net income 1.0% 2.7% 2.7% 3.4% 3.6%
==== ==== ==== ==== ====
</TABLE>
<PAGE>
Revenues: Revenues for the three months and the nine months ended March 31, 1998
increased $1,075,000 (7%) and $5,464,000 (12%), respectively, over the
corresponding periods of the prior year. This increase is primarily attributable
to net increases in the number of clients and covered participants enrolled in
the Company's healthcare management services and sales of additional services to
existing clients.
Following is the approximate breakout of revenue by class of similar service
categories:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, Change March 31, Change
--------------------- --------------------- ----------------------- ---------------
1998 1997 Amount % 1998 1997 Amount %
---- ---- ------ - ---- ---- ------ -
Care review
<S> <C> <C> <C> <C> <C> <C> <C> <C>
and case management $ 7,043 $ 6,478 $ 565 9% $ 22,587 $ 18,369 $ 4,218 23%
Price control 1,073 1,041 32 3% 2,921 3,281 (360) (11)%
Claim administra-
tion services 6,981 6,590 391 6% 19,991 18,563 1,428 8%
Information
management 2,036 1,949 87 4% 6,015 5,837 178 3%
----- ----- ----- - ------ ------ ----- --
$ 17,133 $ 16,058 $ 1,075 7% $ 51,514 $ 46,050 $ 5,464 12%
====== ====== ===== = ====== ====== ===== ==
</TABLE>
There are variations in revenue by class because clients purchasing services may
choose all or a portion of these services, and this varies from client to client
and period to period.
Revenues for care review and case management services increased 9%, or $565,000
from the third quarter of fiscal 1997 to fiscal 1998 (from $6,478,000 to
$7,043,000), and increased 23%, or $4,218,000, from the first nine months of
fiscal 1997 to fiscal 1998 (from $18,369,000 to $22,587,000). The increase in
fiscal 1998 was mainly the result of added revenues in the HMO area..
Revenues for price control services increased 3%, or $32,000, from the third
quarter of fiscal 1997 to fiscal 1998 (from $1,041,000 to $1,073,000), and
decreased 11%, or $360,000, from the first nine months of fiscal 1997 to fiscal
1998 (from $3,281,000 to $2,921,000). The decrease in the first nine months of
fiscal 1998 was mainly the result of a decrease in the customer base using the
negotiation and bill review services
Revenues for claim administration services increased 6%, or $391,000, from the
third quarter of fiscal 1997 to fiscal 1998 (from $6,590,000 to $6,981,000), and
increased 8%, or $1,428,000 from the first nine months of 1997 to fiscal 1998
(from $18,563,000 to $19,991,000) because of an increased interest in the
Company's comprehensive services.
Information management revenues increased 4%, or $87,000, from the third quarter
of fiscal 1997 to fiscal 1998 (from $1,949,000 to $2,036,000), and increased 3%,
or $178,000, from the first nine months of fiscal 1997 to 1998 (from $5,837,000
to $6,015,000).
Cost of Services: Cost of services increased 14% from the third quarter of
fiscal 1997 to fiscal 1998 (from $9,896,000 to $11,251,000) and increased as a
percentage of revenues from 62% to 66%. Cost of services increased 21% from the
first nine months of fiscal 1997 to fiscal 1998 (from $27,703,000 to
$33,599,000) and increased as a percentage of revenues from 60% to 65%. The
second and third quarter costs were increased significantly because of HMO
business beginning in April, 1998.
<PAGE>
Depreciation and Amortization: Depreciation and amortization expenses increased
16% from the third quarter of fiscal 1997 to fiscal 1998 (from $1,898,000 to
$2,202,000), and increased as a percentage of revenues from 12% to 13%.
Depreciation and amortization expenses increased 15% from the first nine months
of fiscal 1997 to 1998 (from $5,475,000 to $6,287,000), but remained unchanged
as a percentage of revenues at 12%. The increase was primarily the result of
depreciation on additional computer, telephone and office equipment and
amortization of additional software. Approximately 92% of depreciation and
amortization expenses are related to cost of services.
Selling and Marketing: Selling and marketing expenses increased 8% from the
third quarter of fiscal 1997 to fiscal 1998 (from $1,784,000 to $1,921,000) but
remained unchanged as a percentage of revenues at 11%. Selling and marketing
expenses decreased 9% from the first nine months of fiscal 1997 to fiscal 1998
(from $5,640,000 to $5,109,000) and decreased as a percentage of revenues from
12% to 10%. The increase in the third quarter of fiscal 1998 over fiscal 1997
was due primarily to increased marketing, sales and account management
personnel, sales commissions and travel expenses.
Administration: Administration expenses increased 11% from the third quarter of
the fiscal 1997 to fiscal 1998 (from $1,278,000 to $1,417,000) and remained
unchanged as a percentage of revenues at 8%. Administration expenses increased
from the first nine months of fiscal 1997 to 1998 (from $3,991,000 to
$4,120,000), and decreased as a percentage of revenues from 9% to 8%. The
administration expenses in fiscal 1997 and fiscal 1998 relate to staff and other
expenses, including salaries, bad debts, training and insurance.
Merger Costs: The third quarter of fiscal 1997 included a one-time charge of
$390,000 for the write-off of costs related to the termination of the merger
agreement with HealthPlan Services Corporation.
Interest: Interest income was $72,000 and $42,000 for the third quarter of
fiscal 1998 and fiscal 1997, respectively, and increased as a percentage of
revenues from 0.2% to 0.4%. Interest income was $208,000 and $117,000 for the
first nine months of fiscal 1998 and fiscal 1997, respectively, and increased as
a percentage of revenues from 0.3% to 0.4%. Interest income varies with funds
available to be invested in short-term investments.
Interest expense decreased 7% from the third quarter of fiscal 1997 to fiscal
1998 (from $140,000 to $130,000) and decreased as a percentage of revenues from
0.9% to 0.8%. Interest expense decreased 11% from the first nine months of
fiscal 1997 to fiscal 1998 (from $402,000 to $357,000) and decreased as a
percentage of revenues from 0.9% to 0.7%. Interest expense was impacted in
fiscal 1998 by lower interest rates and lower average principal balances
outstanding.
Income Taxes: Income taxes decreased in the third quarter of fiscal 1998 from
fiscal 1997 by $162,000, and decreased in the first nine months of fiscal 1998
from fiscal 1997 by $130,000. The decreases are due to lower income before
income taxes. It is expected that the fiscal year 1998 effective tax rate will
approximate the 39% rate of fiscal 1997.
<PAGE>
Liquidity and Capital Resources
The Company's cash flow from operations was $6,622,000 and $6,260,000 for the
first nine months of fiscal 1997 and 1998, respectively. Cash flow from
operating activities was greater than net income because non-cash charges such
as depreciation, amortization and deferred income taxes exceeded the net changes
in operating assets and liabilities for the first nine months of fiscal 1997 and
fiscal 1998. Cash has been used to invest in software and program enhancements
($5,210,000 and $6,244,000) in the first nine months of fiscal 1997 and fiscal
1998, respectively. In addition, the Company acquired property and equipment,
including acquired assets, of $2,123,000 and $2,114,000 for the first nine
months of fiscal 1997 and 1998, respectively. The Company expects to continue
its expansion and will acquire property and equipment, enhance software and
products, and develop products.
The Company had a net operating loss carryforward for income tax purposes in
excess of $14,100,000 as of June 30,1997, which can be used to reduce the cash
flow necessary to pay taxes.
The Company's cash position at March 31, 1998 was $4,086,000 as compared to
$5,349,000 at June 30, 1997. The Company also used approximately $1,703,000 and
$1,596,000 for the first nine months of fiscal 1997 and 1998, respectively, to
repay principal on notes payable and capital leases, but borrowed $1,275,000 and
$1,750,000, respectively. The Company received $3,234,000 and $681,000 during
the first nine months of fiscal 1997 and fiscal 1998, respectively, from stock
option exercises for common stock or from the sale of unregistered shares of
common stock. The Company's current ratio was approximately 1.9 and 1.8 at March
31, 1998 and June 30, 1997, respectively. The Company's working capital was
$9,444,000 and $8,578,000 at March 31, 1998 and June 30, 1997, respectively.
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 1998. The Company has a
revolving credit facility of $10,000,000 expiring January 31, 1999, $5,000,000
of which can be converted to term loans payable in 60 installments. The
revolving credit facility and term loan facilities are secured by liens on the
assets of the Company.
Year 2000
Like most corporations, the Company is reliant on technology to deliver
services. As the millennium approaches, the Company is preparing all of its
computer systems to be Year 2000 compliant. A taskforce utilizing both internal
and external resources has been assembled to identify, correct or reprogram, and
test the systems for the year 2000 compliance. It is anticipated that all
reprogramming efforts will be completed in the quarter ended June 30, 1999 at a
cost that is not expected to be material to the Company. Maintenance and Year
2000 modification costs will be expensed as incurred, while the costs of new
software or enhancements to existing software will be capitalized and amortized
over the software's useful life.
Forward looking statements in this report reflected as expectations, plans,
prospects or future estimates are subject to the risks and the uncertainties
present in the Company's business and the competitive health care marketplace
where clients and vendors commonly experience mergers or acquisitions,
reconciliations, volume fluctuations, participant enrollment fluctuations,
changes in member mix or utilization levels, 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 periodically detailed in 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 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 -- Computation of Earnings Per Common Share
Exhibit 27 -- Financial Data Schedule (filed in electronic format
only)
(b) During the three months ended March 31, 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: May 11, 1998 By: /s/Gary T. McIlroy
Gary T. McIlroy, M.D.
Chief Executive Officer
Dated: May 11, 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 March 31, 1998
HEALTH RISK MANAGEMENT, INC.
(SEC File No. 0-18902)
- --------------------------------------------------------------------------------
Exhibit
Number Exhibit Description
11 Computation of Earnings Per Share
27 Financial Data Schedule (filed in electronic format only)
EXHIBIT 11
HEALTH RISK MANAGEMENT, INC.
COMPUTATION OF EARNINGS PER SHARE (EPS)
(Unaudited)
<TABLE>
<CAPTION>
Basic EPS Diluted EPS
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
Earnings:
(in thousands)
Earnings for
<S> <C> <C> <C> <C> <C> <C> <C> <C>
period $ 170 $ 438 $ 1,387 $ 1,573 $ 170 $ 438 $ 1,387 $ 1,573
=== === ===== ===== === === ===== =====
indicated
Number of Shares:
Weighted average
number of
shares of
common stock
outstanding 4,522,015 4,295,521 4,506,681 4,233,434 4,522,015 4,295,521 4,506,681 4,233,434
Weighted
average
number of
shares of
common stock
equivalents -- -- -- -- 132,962 170,163 121,203 183,835
----------- ----------- ---------- ----------- ---------- ---------- ---------- ----------
Number of shares
included in per
share computa-
tion for the
period 4,522,015 4,295,521 4,506,681 4,233,434 4,654,977 4,465,684 4,627,884 4,417,269
========= ========= ========= ========= ========= ========= ========= =========
indicated
Net earnings
per share $ 0.04 $ 0.10 $ 0.31 $ 0.37 $ 0.04 $ 0.10 $ 0.30 $ 0.36
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from
Financial Statements from the Registrants Form 10-Q for the Quarter
Ended March 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 4,086
<SECURITIES> 0
<RECEIVABLES> 14,244
<ALLOWANCES> 265
<INVENTORY> 0
<CURRENT-ASSETS> 19,728
<PP&E> 31,836
<DEPRECIATION> 29,913
<TOTAL-ASSETS> 54,444
<CURRENT-LIABILITIES> 10,284
<BONDS> 3,495
0
0
<COMMON> 46
<OTHER-SE> 36,066
<TOTAL-LIABILITY-AND-EQUITY> 54,444
<SALES> 17,133
<TOTAL-REVENUES> 17,133
<CGS> 11,251
<TOTAL-COSTS> 11,251
<OTHER-EXPENSES> 5,540
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> 284
<INCOME-TAX> 114
<INCOME-CONTINUING> 170
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 170
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
