<PAGE> 1
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 quarter ended December 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For this transition period from _________________ to _________________
Commission file number O-19291
CORVEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 33-0282651
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2010 Main Street, Suite 1020
Irvine, CA 92614
- --------------------------------- ----------
(Address of principal executive office) (zip code)
Registrant's telephone number, including code: (949) 851-1473
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 [ ]
The number of shares outstanding of the registrant's Common Stock, $0.0001 Par
Value, as of December 31, 1998 was 4,067,000 shares.
<PAGE> 2
CORVEL CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1998 (audited) and December 31, 1998
(unaudited)- Page 3 of 15
Consolidated Statements of Income -- Three months ended December 31, 1997 and
1998 (both unaudited) - Page 4 of 15
Consolidated Statements of Income -- Nine months ended December 31, 1997 and
1998 (both unaudited) - Page 5 of 15
Consolidated Statements of Cash Flows -- Nine months ended December 31, 1997 and
1998 (both unaudited) - Page 6 of 15
Notes to Consolidated Financial Statements (unaudited) - December 31, 1998 -
Page 7 of 15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Pages 8 through 13 of 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Page 14 of 15
Item 2. Changes in Securities - Page 14 of 15
Item 3. Defaults upon Senior Securities - Page 14 of 15
Item 4. Submission of Matters to a Vote of Security Holders - Pages 14 of 15
Item 5. Other Information - Page 14 of 15
Item 6. Exhibits and Reports on Form 8-K - page 14 of 15
Page 2 of 15
<PAGE> 3
Part I - Financial Information
Item 1. Financial Statements
CORVEL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1998
-------------- -----------------
(audited) (unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 8,430,000 $ 7,029,000
Accounts receivable, net 25,633,000 30,811,000
Prepaid taxes and expenses 736,000 439,000
Deferred income taxes 2,376,000 2,050,000
------------ ------------
Total current assets 37,175,000 40,329,000
------------ ------------
Property and Equipment, Net 16,542,000 17,222,000
Other Assets 6,774,000 6,987,000
------------ ------------
TOTAL ASSETS $ 60,491,000 $ 64,538,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 6,078,000 $ 4,993,000
Accrued liabilities 6,371,000 6,473,000
------------ ------------
Total current liabilities 12,449,000 11,466,000
------------ ------------
Deferred income taxes 2,271,000 2,649,000
Stockholders' Equity
Common stock -- --
Paid-in-capital 30,615,000 31,960,000
Treasury Stock, (731,000 shares at March 31,
1998 and 849,000 shares at December 31, 1998) (21,727,000) (26,101,000)
Retained earnings 36,883,000 44,564,000
------------ ------------
Total stockholders' equity 45,771,000 50,423,000
------------ ------------
TOTAL LIABILITIES AND EQUITY $ 60,491,000 $ 64,538,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 15
<PAGE> 4
CORVEL CORPORATION
INCOME STATEMENT
FISCAL YEAR ENDING FISCAL MARCH 31, 1999
THIRD QUARTER ENDING DECEMBER 31, 1998
<TABLE>
<CAPTION>
Three months ending December 31,
---------------------------------
1997 1998
----------- -----------
<S> <C> <C>
REVENUES $35,558,000 $42,030,000
Cost of Revenues 28,963,000 34,676,000
----------- -----------
Gross profit 6,595,000 7,354,000
General and administrative expenses 2,732,000 3,122,000
----------- -----------
Income before income taxes 3,863,000 4,232,000
Income tax provision 1,468,000 1,608,000
----------- -----------
NET INCOME $ 2,395,000 $ 2,624,000
=========== ===========
EARNINGS PER SHARE:
Basic $ .58 $ .65
=========== ===========
Diluted $ .56 $ .64
=========== ===========
WEIGHTED AVERAGE SHARES:
Basic 4,154,000 4,064,000
Diluted 4,274,000 4,121,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 15
<PAGE> 5
CORVEL CORPORATION
INCOME STATEMENT
FISCAL YEAR ENDING FISCAL MARCH 31, 1999
NINE MONTHS ENDING DECEMBER 31, 1998
<TABLE>
<CAPTION>
Nine months ending December 31,
--------------------------------
1997 1998
------------ ------------
<S> <C> <C>
REVENUES $104,265,000 $122,056,000
Cost of Revenues 84,728,000 100,344,000
------------ ------------
Gross profit 19,537,000 21,712,000
General and administrative expenses 8,164,000 9,325,000
------------ ------------
Income before income taxes 11,373,000 12,387,000
Income tax provision 4,322,000 4,706,000
------------ ------------
NET INCOME $ 7,051,000 $ 7.681,000
============ ============
EARNINGS PER SHARE:
Basic $ 1.67 $ 1.88
============ ============
Diluted $ 1.63 $ 1.86
============ ============
WEIGHTED AVERAGE SHARES:
Basic 4,211,000 4,081,000
Diluted 4,314,000 4,138,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 15
<PAGE> 6
CORVEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 1997, AND 1998
<TABLE>
<CAPTION>
Nine months ended December 31,
-------------------------------
1997 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 7,051,000 7,681,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,335,000 4,108,000
Changes in operating assets and liabilities
Accounts receivable (2,663,000) (5,178,000)
Prepaid taxes and expenses 1,143,000 297,000
Accounts payable (262,000) (1,085,000)
Accrued liabilities 1,389,000 102,000
Income taxes payable (45,000) 704,000
Other assets (749,000) (213,000)
------------ -----------
Net cash provided by operating activities 9,199,000 6,416,000
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (5,686,000) (4,788,000)
------------ -----------
Net cash used in investing activities (5,686,000) (4,788,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of Treasury Stock (9,510,000) (4,374,000)
Sale of common and exercise of stock
options and related tax benefits 1,412,000 1,345,000
------------ -----------
Net cash provided by financing activities (8,098,000) (3,029,000)
------------ -----------
INCREASE (DECREASE) IN CASH: (4,585,000) (1,401,000)
Cash and cash equivalents at beginning 15,665,000 8,430,000
------------ -----------
Cash and cash equivalents at end $ 11,080,000 7,029,000
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6 of 15
<PAGE> 7
CORVEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 (UNAUDITED)
A. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
December 31, 1998 are not necessarily indicative of the results that may be
expected for the year ended March 31, 1999. For further information, refer
to the consolidated financial statements and footnotes thereto for the year
ended March 31, 1998 included in the Company's registration statement on
Form 10-K.
B. Earnings per Share
Earnings per common and common equivalent shares were computed by dividing
net income by the weighted average number of shares of common stock and
common stock equivalents outstanding during the quarter. For calculation of
the common and common equivalent shares, see Exhibit 11 included herein.
Page 7 of 15
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The following table contains certain financial data as a percentage of revenues:
<TABLE>
<CAPTION>
Three months ended Dec. 31: 1997 1998
--------------------------- ------ ------
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of services 81.5 82.5
------ ------
Gross profit 18.5 17.5
------ ------
General and administrative 7.7 7.4
------ ------
Income from operations 10.8 10.1
------ ------
Income tax provision 4.1 3.9
------ ------
NET INCOME 6.7% 6.2%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine months ended Dec. 31: 1997 1998
-------------------------- ------ ------
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of services 81.3 82.2
------ ------
Gross profit 18.7 17.8
------ ------
General and administrative 7.8 7.6
------ ------
Income from operations 10.9 10.2
------ ------
Income tax provision 4.1 3.9
------ ------
NET INCOME 6.8% 6.3%
====== ======
</TABLE>
Revenues for the three months ended December 31, 1998 increased by $6.4
million to $42.0 million, an increase of 18% over the $35.6 million
revenue for the comparable period in the prior fiscal year. The increase
in revenues is primarily attributable to a 23% increase in patient
management revenue along with a 12% increase in provider revenues. Case
management revenue grew to $24.8 million from $20.1 million in the prior
year, an increase of $4.7 million. The increase in patient management is
primarily due to a few national case management contracts, which the
company was awarded during the past year.
Revenues for the nine months ended December 31, 1998 increased by $17.8
million to $122.1 million, an increase of 17% over the $104.3 million
revenue for the comparable period in the prior fiscal year. The increase
in revenues is primarily attributable to a 22% increase in patient
management revenue along with an 11% increase in provider revenues. Case
management revenue grew to $71.0 million from $58.2 million in the prior
year, an increase of $12.8 million. The increase in patient management is
primarily due to a few national case management contracts, which the
company was awarded during the past year.
Page 8 of 15
<PAGE> 9
Cost of revenues for the three months ended December 31, increased from
81.5% of revenues in 1997 to 82.5% of revenue for the three months ended
December 31, 1998. Cost of revenues for the nine months ended December 31
increased from 81.3% of revenues in 1997 to 82.2% of revenue for the nine
months ended December 31, 1998. Both of the cost of revenues percentage
noted above increased primarily due to a higher growth rate in the
patient management business compared to the growth in the provider
programs business. The patient management business has a greater cost of
revenue percentage than that in the provider program business.
Additionally, both of the Company's businesses were under greater pricing
pressure than in prior years.
General and administrative expenses as a percentage of revenues decreased
from 7.8% for the nine months ending December 31, 1997, to 7.6% for the
nine months ending December 31, 1998. This decline in this percentage is
due to the growth in the Company's revenue slightly exceeded the growth
in general and administrative expenses. General and administrative
expenses as a percentage of revenues for the quarter ending December 31,
1998 declined to 7.4% from 7.7% for the same quarter in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and capital expenditures primarily
from cash flow from operations. During the nine months ending December
31, 1998, net working capital increased by $4.2 million, from $24.7
million at March 31, 1998 to $28.9 million at December 31, 1998. This
increase was primarily due to the increase in accounts receivable by $5.2
million, from $25.6 million to $30.8 million. As of December 31, 1998,
the Company had $5.2 million in cash, primarily in short-term
highly-liquid investments with maturities of 90 days or less. The Company
has historically required substantial capital to fund the growth of its
operations, particularly working capital to fund the growth in accounts
receivable. The Company believes, however, that the cash balance at
December 31, 1998 along with anticipated internally generated funds will
be sufficient to meet the Company's expected cash requirements for at
least the next twelve months. As of December 31, 1998, the Company had no
interest bearing debt.
YEAR 2000 INFORMATION SYSTEMS ISSUES
Certain computer programs written with two digits rather than four to
define the applicable year may experience problems handling dates near
the end of and beyond the year 1999 (Year 2000 failure dates). This may
cause computer applications to fail or provide erroneous results unless
corrective action is taken. The Company has developed a plan to address
the Year 2000 issue and, in doing so, will incur internal staff costs as
well as external consulting and other expenses related to infrastructure
enhancements necessary to prepare its systems for the new century. A
strategy for achieving compliance for each system component has been
prepared. Costs of the Company's Year 2000 Project are estimated to be
approximately $2.4 million of which approximately $1.3 million has been
incurred through December 31, 1998. The cost of the Year 2000 Project
will be expensed as incurred.
Page 9 of 15
<PAGE> 10
With respect to Information Technology (IT) systems, our Year 2000 plan
encompasses computer application systems, including those for
client-server, minicomputer, and personal computer environments; and IT
infrastructure, including hardware, operating system software, network
technology, and voice and data communications.
All of the Company proprietary systems development methodologies assure
that core functions like date comparisons, date sorts, and elapsed-day
calculations are standardized in shared-code libraries and/or utilities.
This reduces the number of instances of redundant code to be reviewed and
certified for Year 2000 compliance. The Company is currently conducting
full system tests in a simulated post-2000 environment. It is anticipated
that the certified versions of these systems will be fully implemented in
all operating sites by June 30, 1999. Interoperability tests with
clients' systems, if needed, commenced in the third quarter of 1998. Data
formats used in EDI transmissions, unless specifically requested by the
client, are Year 2000 compliant.
Non-IT Systems
The Company's non-IT systems are primarily comprised of systems typically
found in commercial office buildings including, electrical, fire alarm
and suppression, security, HVAC and elevator systems. The inventory phase
for non-IT systems at the Company's major facilities in is complete. The
Company is currently at the beginning of the assessment phase for its
non-IT systems. As part of the assessment phase, the Company is
communicating with the owners/landlords of office spaces which the
Company leases to determine the Year 2000 readiness of such office space.
At this time, the Company has not received any notice of non-compliance
problems from landlords. The Company is also communicating with its
significant vendors to determine their Year 2000 readiness and, when
possible, obtain written assurances that the Year 2000 problem will not
materially adversely effect their ability to continue to provide supplies
or services to the Company.
Each of the foregoing IT and non-IT programs are being conducted in
phases, described as follows: INVENTORY or AWARENESS PHASE -- Identify
hardware, software, processes or devices that use or process date
information. ASSESSMENT PHASE -- Identify Year 2000 date processing
deficiencies and related implications. PLANNING and VALIDATION PHASE --
Determine for each deficiency an appropriate solution and budget.
Schedule resources and develop testing plans. Validate the recommended
solution with testing. IMPLEMENTATION PHASE -- Implement designed
solutions. Conduct systems testing. The plan also includes a control
element intended to ensure that changes to IT and non-IT systems do not
introduce Year 2000 issues.
The Company's bill review product for Windows is presently Year 2000
compatible as well as the case management software. The Company's bill
review software which runs on VMS is nearing the completion of the
validation testing phase with implementation scheduled prior to the end
of the June 1999 quarter.
Page 10 of 15
<PAGE> 11
The Company's software for its accounts receivable, accounts payable and
general ledger is presently Year 2000 compatible and the billing software
is nearing the completion of the validation testing phase with
implementation scheduled prior to the end of the June 1999 quarter.
Review of the non-IT systems is in the assessment phase with
implementation scheduled prior to the end of the September 1999 quarter.
The plan as provides for contingency plans and related cost estimates, as
additional information becomes available. Our Year 2000 Plan is subject
to modification and is revised periodically as additional information is
developed. The Company currently believes that its Year 2000 Plan will be
completed in all material respects prior to the anticipated Year 2000
failure dates.
Successful completion of the Company's 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 estimated 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 computers codes, and the impact of the Company's
external relationships. The possible consequences of the Company or its
business partners not being fully Year 2000 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.
CAUTIONARY STATEMENT REGARDING RISK FACTORS
Certain statements contained in the Company's Annual Report on
Form 10-K for the year ended March 31, 1998, Quarterly Report on Form
10-Q for the quarter ending September 30, 1998, as well as the Company's
Annual Report for the year ending March 31, 1998, such as statements
concerning the development of new services, possible legislative changes,
and other statements contained herein regarding matters that are not
historical facts, are forward-looking statements (as such term is defined
in the Securities Act of 1933, as amended). Because such statements
involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements.
Past financial performance is not necessarily a reliable
indicator of future performance, and investors should not use historical
performance to anticipate results or future period trends. Factors that
could cause actual results to differ materially include, but are not
limited to, those discussed below. In addition, reference is made to the
Company's most recent annual report for the fiscal year ending March 31,
1998.
Page 11 of 15
<PAGE> 12
POTENTIAL ADVERSE IMPACT OF GOVERNMENT REGULATION. Many states,
including a number of those in which the Company transacts business, have
licensing and other regulatory requirements applicable to the Company's
business. Approximately half of the states have enacted laws that require
licensing of businesses which provide medical review services. Some of
these laws apply to medical review of care covered by workers'
compensation. These laws typically establish minimum standards for
qualifications of personnel, confidentiality, internal quality control,
and dispute resolution procedures. These regulatory programs may result
in increased costs of operation for the Company, which may have an
adverse impact upon the Company's ability to compete with other available
alternatives for health care cost control. In addition, new laws
regulating the operation of managed care provider networks have been
adopted by a number of states. These laws may apply to managed care
provider networks having contracts with the Company or to provider
networks which the Company may organize. To the extent the Company is
governed by these regulations, it may be subject to additional licensing
requirements, financial oversight and procedural standards for
beneficiaries and providers.
Regulation in the health care and workers' compensation fields is
constantly evolving. The Company is unable to predict what additional
government regulations, if any, affecting its business may be promulgated
in the future. The Company's business may be adversely affected by
failure to comply with existing laws and regulations, failure to obtain
necessary licenses and government approvals or failure to adapt to new or
modified regulatory requirements. Proposals for health care legislative
reforms are regularly considered at the federal and state levels. To the
extent that such proposals affect workers' compensation, such proposals
may adversely affect the Company's business and results of operations. In
addition, changes in workers' compensation laws or regulations may impact
demand for the Company's services, require the Company to develop new or
modified services to meet the demands of the marketplace or modify the
fees that the Company may charge for its services. One of the proposals
which has been considered is 24-hour health coverage, in which the
coverage of traditional employer-sponsored health plans is combined with
workers' compensation coverage to provide a single insurance plan for
work-related and non-work-related health problems. Incorporating workers'
compensation coverage into conventional health plans may adversely affect
the market for the Company's services.
POSSIBLE LITIGATION AND LEGAL LIABILITY. The Company, through its
utilization management services, makes recommendations concerning the
appropriateness of providers' medical treatment plans of patients
throughout the country, and it could share in potential liabilities for
adverse medical consequences. The Company does not grant or deny claims
for payment of benefits and the Company does not believe that it engages
in the practice of medicine or the delivery of medical services. There
can be no assurance, however, that the Company will not be subject to
claims or litigation related to the grant or denial of claims for payment
of benefits or allegations that the Company engages in the practice of
medicine or the delivery of medical services. In addition, there can be
no assurance that the Company will not be subject to other litigation
that may adversely affect the Company's business or results of
operations. The Company maintains professional liability insurance and
such other coverages as the Company believes are reasonable in light of
the Company's experience to date. There can be no assurance, however,
that such insurance will be sufficient or available in the future at
reasonable cost to protect the Company from liability.
COMPETITION. The Company faces competition from large insurers,
health maintenance organizations ("HMOs"), preferred provider
organizations ("PPOs"), third party administrators and other managed
health care companies. The Company believes that, as managed care
techniques continue to gain acceptance in the workers' compensation
marketplace, CorVel's competitors will increasingly consist of nationally
focused workers' compensation managed care service companies, insurance
companies, HMOs and other significant providers of managed care products.
Legislative reforms in some states permit employers to designate health
plans such as HMOs and PPOs to cover workers' compensation claimants.
Because many health plans have the ability to manage medical costs for
workers' compensation claimants, such legislation may intensify
competition in the market served by the Company. Many of the Company's
current and potential competitors are significantly larger and have
greater financial and marketing resources than those of the Company, and
there can be no assurance that the Company will continue to maintain its
existing performance or be successful with any new products or in any new
geographical markets it may enter.
Page 12 of 15
<PAGE> 13
CHANGES IN MARKET DYNAMICS. Legislative reforms in some states
permit employers to designate health plans such as HMOs and PPOs to cover
workers' compensation claimants. Because many health plans have the
capacity to manage health care for workers' compensation claimants, such
legislation may intensify competition in the market served by the
Company. Within the past few years, several states have experienced
decreases in the number of workers' compensation claims and the average
cost per claim which have been reflected in workers' compensation
insurance premium rate reductions in those states. The Company believes
that declines in workers' compensation costs in these states are due
principally to intensified efforts by payors to manage and control claim
costs, to improved risk management by employers and to legislative
reforms. If declines in workers' compensation costs occur in many states
and persist over the long-term, they may have an adverse impact on the
Company's business and results of operations.
DEPENDENCE UPON KEY PERSONNEL. The Company is dependent to a
substantial extent upon the continuing efforts and abilities of certain
key management personnel. In addition, the Company faces competition for
experienced employees with professional expertise in the workers'
compensation managed care area. The loss of, or the inability to attract,
qualified employees could have a material adverse effect on the Company's
business and results of operations.
RISKS RELATED TO GROWTH STRATEGY. The Company's strategy is to
continue its internal growth and, as strategic opportunities arise in the
workers' compensation managed care industry, to consider acquisitions of,
or relationships with, other companies in related lines of business. As a
result, the Company is subject to certain growth-related risks, including
the risk that it will be unable to retain personnel or acquire other
resources necessary to service such growth adequately. Expenses arising
from the Company's efforts to increase its market penetration may have a
negative impact on operating results. In addition, there can be no
assurance that any suitable opportunities for strategic acquisitions or
relationships will arise or, if they do arise, that the transactions
contemplated thereby could be completed. If such a transaction does
occur, there can no assurance that the Company will be able to integrate
effectively any acquired business into the Company. In addition, any such
transaction would be subject to various risks associated with the
acquisition of businesses, including the financial impact of expenses
associated with the integration of businesses.
There can be no assurance that any future acquisition or other
strategic relationship will not have an adverse impact on the Company's
business or results of operations. If suitable opportunities arise, the
Company anticipates that it would finance such transactions, as well as
its internal growth, through working capital or, in certain instances,
through debt or equity financing. There can be no assurance, however,
that such debt or equity financing would be available to the Company on
acceptable terms when, and if, suitable strategic opportunities arise.
During the past fiscal year, the Company has made efforts to
increase its presence and revenue in the group health market with
moderate success. Managed care in this market is more mature than managed
care in workers' compensation and has numerous large competitors,
primarily health maintenance organizations. The Company has limited
experience in the group health market. There is no assurance that the
Company will be successful in this market. The Company expects that a
considerable amount of its future growth will depend on its ability to
process and manage claims data more efficiently and to provide more
meaningful healthcare information to customers and payors of healthcare.
There is no assurance that the Company will be able to develop, license
or otherwise acquire software to address these market demands as well or
as timely as its competitors.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the
Company's Common Stock following this offering may be highly volatile.
Factors such as variations in the Company's revenues, earnings and cash
flow, general market trends in the workers' compensation managed care
market, and announcements of innovations by the Company or its
competitors could cause the market price of the Common Stock to fluctuate
substantially. In addition, the stock market has in the past experienced
price and volume fluctuations that have particularly affected companies
in the health care and managed care markets resulting in changes in the
market price of the stock of many companies which may not have been
directly related to the operating performance of those companies.
Page 13 of 15
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS - The Company is involved in litigation arising in
the normal course of business. The Company believes that resolution of these
matters will not result in any payment that, in the aggregate, would be material
to the financial position or financial operations of the Company.
ITEM 2 - CHANGES IN SECURITIES - None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
ITEM 5 - OTHER INFORMATION - None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - None.
11 Computation of Per Share Earnings
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CORVEL CORPORATION
By: V. Gordon Clemons
--------------------------------
V. Gordon Clemons, Chairman of the
Board, Chief Executive Officer,
and President
By: Richard J. Schweppe
--------------------------------
Richard J. Schweppe,
Chief Financial Officer
February 11, 1999
Page 14 of 15
<PAGE> 1
EXHIBIT 11
CORVEL CORPORATION
COMPUTATION OF PER SHARE EARNINGS
Shares used in per share calculations were determined as follows:
<TABLE>
<CAPTION>
Three months ended Dec. 31,
--------------------------
1997 1998
---------- ----------
<S> <C> <C>
Weighted shares for basic earnings per share computation 4,154,000 4,064,000
Net effect of dilutive common stock options 120,000 57,000
---------- ----------
Weighted shares for diluted earnings per share 4,274,000 4,121,000
========== ==========
NET INCOME $2,395,000 $2,624,000
========== ==========
BASIC EARNINGS PER SHARE $ .58 $ .65
========== ==========
DILUTED EARNINGS PER SHARE $ .56 $ .64
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Nine months ended Dec. 31,
--------------------------
1997 1998
---------- ----------
<S> <C> <C>
Weighted shares for basic earnings per share 4,211,000 4,081,000
Net effect of dilutive common stock options 103,000 57,000
---------- ----------
Weighted shares for diluted earnings per share 4,314,000 4,138,000
========== ==========
NET INCOME $7,051,000 $7,681,000
========== ==========
BASIC EARNINGS PER SHARE $ 1.67 $ 1.88
========== ==========
DILUTED EARNINGS PER SHARE $ 1.63 $ 1.86
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 7,029,000
<SECURITIES> 0
<RECEIVABLES> 33,347,000
<ALLOWANCES> 2,536,000
<INVENTORY> 0
<CURRENT-ASSETS> 40,329,000
<PP&E> 38,680,000
<DEPRECIATION> 21,458,000
<TOTAL-ASSETS> 64,528,000
<CURRENT-LIABILITIES> 11,466,000
<BONDS> 0
0
0
<COMMON> 31,960,000
<OTHER-SE> 18,463,000
<TOTAL-LIABILITY-AND-EQUITY> 50,423,000
<SALES> 0
<TOTAL-REVENUES> 122,056,000
<CGS> 0
<TOTAL-COSTS> 109,669,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,387,000
<INCOME-TAX> 4,706,000
<INCOME-CONTINUING> 7,681,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,681,000
<EPS-PRIMARY> 1.88<F1>
<EPS-DILUTED> 1.86
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
