<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 quarterly period ended March 31, 1999.
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 000-27056
Medirisk, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 58-2256400
- -----------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Two Piedmont Center, Suite 400, 3565 Piedmont Rd., Atlanta, Georgia 30305
- -----------------------------------------------------------------------------------------------------------
(Address of principal executive office) (Zip code)
</TABLE>
Registrant's Telephone Number Including Area Code: (404) 364-6700
------------------------------
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 issuer's only class of Common
Stock, $0.001 par value as, of May 14, 1999 was 7,427,979.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MEDIRISK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
3/31/99 12/31/98
----------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $13,968 $21,365
Accounts receivable, less allowance for
doubtful accounts of $474 and $466 at March 31, 1999
and December 31, 1998, respectively 9,292 8,009
Prepaid expenses 1,368 1,181
Notes receivable from stockholders 198 448
Other current assets 252 399
------- -------
Total current assets 25,078 31,402
------- -------
Property and equipment 5,732 4,951
Less accumulated depreciation and amortization 2,685 2,377
------- -------
Property and equipment, net 3,047 2,574
------- -------
Excess of cost over net assets of businesses acquired, less accumulated
amortization of $2,086 and $1,689 at March 31, 1999 and
December 31, 1998, respectively 28,078 17,761
Other intangible assets, less accumulated amortization of $1,108 and $922 at
March 31, 1999 and December 31, 1998, respectively 6,552 4,337
Software development costs, less accumulated amortization of $420
and $363 at March 31, 1999 and December 31, 1998, respectively 3,196 2,437
Notes receivable from stockholders, excluding current portion 45 45
Other assets 722 564
------- -------
Total other assets 38,593 25,144
------- -------
Total assets $66,718 $59,120
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIRISK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
3/31/99 12/31/98
----------- ---------
<S> <C> <C>
CURRENT LIABILITIES
Current installments of long-term debt and obligations
under capital leases $ 30 $ 62
Accounts payable 864 277
Accrued expenses 1,389 1,117
Accrued contingent consideration
relating to acquired business 5,402 --
Income taxes payable 1,304 1,297
Deferred revenue 3,164 2,703
-------- --------
Total current liabilities 12,153 5,456
Long-term debt and obligations under capital leases,
excluding current installments 15 16
-------- --------
Total liabilities 12,168 5,472
Series 1998-A preferred stock, $.001 par value, redeemable; 5 shares
authorized and designated; none issued or outstanding -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 795 shares authorized;
none issued or outstanding -- --
Series A junior participating preferred stock, $.001 par value; 200 shares
authorized and designated; none issued or outstanding -- --
Common stock - $.001 par value; 20,000 shares authorized;
7,404 and 7,345 shares issued and outstanding at
March 31, 1999 and December 31, 1998, respectively 7 7
Additional paid-in capital 76,332 76,114
Accumulated deficit (21,789) (22,473)
-------- --------
Total stockholders' equity 54,550 53,648
-------- --------
Total liabilities and stockholders' equity $ 66,718 $ 59,120
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIRISK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1999 1998
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<S> <C> <C>
Revenue $ 8,078 $ 5,176
Salaries, wages and benefits 3,857 2,574
Other operating expenses 2,366 1,522
Depreciation and amortization 1,002 427
Acquired in-process research and development costs,
integration costs and acquisition-related costs -- 4,815
------- -------
Operating income (loss) 853 (4,162)
Interest income, net 273 36
------- -------
Income (loss) before income taxes 1,126 (4,126)
Income tax expense (442) --
------- -------
Net income (loss) $ 684 $(4,126)
======= =======
Net income (loss) per share of common stock - basic and diluted:
$ 0.09 $ (0.92)
======= =======
Weighted average number of common shares outstanding:
Basic 7,391 4,495
======= =======
Diluted 7,816 4,495
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIRISK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 684 $ (4,126)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Acquired in-process research and development costs -- 4,750
Depreciation and amortization 1,002 427
Increase in:
Accounts receivable (1,283) (873)
Other assets (52) (771)
Increase (decrease) in:
Accounts payable 587 (78)
Accrued expenses and other liabilities (196) (318)
Deferred revenue 358 131
-------- --------
Net cash provided by (used in) operating activities 1,100 (858)
-------- --------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (7,289) (2,689)
Purchases of property and equipment (626) (505)
Additions to software development costs (871) (396)
Repayment of note receivable from stockholder 250 --
-------- --------
Net cash used in investing activities (8,536) (3,590)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 72 5
Proceeds from draw on revolving credit facility -- 2,375
Payments on long-term debt and obligations under capital leases (33) (168)
-------- --------
Net cash provided by financing activities 39 2,212
-------- --------
Net decrease in cash and cash equivalents $ (7,397) $ (2,236)
======== ========
Cash and cash equivalents at beginning of period 21,365 3,516
-------- --------
Cash and cash equivalents at end of period $ 13,968 $ 1,280
======== ========
Supplemental disclosure of non-cash activities:
Accrual of contingent consideration $ 5,402 $ 2,975
======== ========
Issuance of restricted stock awards $ 145 $ --
======== ========
Acquisitions of businesses:
Fair value of assets acquired $ 4,867 $ 2,284
Acquired in-process research and development costs -- 4,750
Fair value of liabilities assumed (578) (1,238)
Common stock issued -- (3,099)
Contingent consideration paid 3,000 --
-------- --------
Total cash paid for acquisitions 7,289 2,697
Cash acquired -- (8)
-------- --------
Net cash paid for acquisitions $ 7,289 $ 2,689
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIRISK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL:
The consolidated condensed financial statements as of March 31, 1999
and for the three-month periods ended March 31, 1999 and 1998 are unaudited. In
the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for the fair presentation of the consolidated financial
position and results of operations and cash flows for the periods presented have
been included. Results for the interim period are not necessarily indicative of
results that may be expected for the full year.
These consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes included in the
Annual Report on Form 10-K of Medirisk, Inc. ("Medirisk" or the "Company") for
the year ended December 31, 1998.
2. NET INCOME (LOSS) PER SHARE OF COMMON STOCK:
Basic net income (loss) per share of Common Stock is based on the
weighted-average number of shares of Common Stock outstanding. Diluted net
income (loss) per share of Common Stock is based on the weighted-average
number of shares of Common Stock outstanding and dilutive potential shares,
such as dilutive stock options.
3. LINE OF CREDIT:
In June 1998, the Company entered into an Amended and Restated Credit
Agreement with NationsBank under which a $25 million revolving credit facility
(the "NationsBank Revolver") was made available to the Company. The NationsBank
Revolver is available to fund working capital needs as well as new product
development and acquisitions. As of March 31, 1999, the Company had $25 million
of borrowing availability under the NationsBank Revolver.
4. FOLLOW-ON OFFERING:
In June 1998, the Company completed a follow-on offering of 2,250,000
shares of Common Stock. As a result of the offering, the Company received
approximately $40.5 million, net of offering costs of approximately $600,000.
5. ACQUISITIONS:
Effective March 11, 1999, the Company acquired Patient Care Analyst
("PCA"), an Internet-based product that provides online evaluation of
patient-level hospital discharge data and national Medicare discharge data.
PCA was acquired from the Center for Performance Improvement, a subsidiary of
the Maryland Hospital Association, for $289,000 in cash. The acquisition was
accounted for using the purchase method of accounting with the results of
operations of the business acquired included in the Company's results of
operations from the effective date of the acquisition. PCA will be integrated
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into the Healthdemographics family of strategic evaluation tools.
The acquisition resulted in excess of cost over net assets acquired of $162,000.
Effective March 31, 1999, the Company acquired certain assets,
including two Internet-based physician credentialing products, of Healthcare
Credentials Management Services, Inc. ("HCMS"), a leading Credentials
Verification Organization, for $4.0 million in cash. The HCMS assets will be
integrated into Sweetwater's family of physician credentials products. The
acquisition resulted in excess of cost over net assets acquired of $1.9 million.
Potential contingent consideration will be paid by the Company based upon a
multiple of HCMS's revenues over a predetermined amount through March 2000.
Contingent consideration ultimately paid will be added to excess of cost over
net assets acquired and amortized prospectively. Contingent consideration, if
any, will be paid in cash.
Many of the Company's acquisition agreements provide for the payment of
contingent consideration based upon the performance of the acquired businesses
over a prescribed period of time. If such acquired businesses exceed the
relevant performance goals, the Company will be required to make additional
payments, which could be material. In connection with the CareData acquisition,
additional consideration of $5.5 million and $3.0 million was paid in April 1999
and 1998, respectively. In connection with the Healthdemographics acquisition,
additional consideration of $3.0 million was paid in March 1999.
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6. SEGMENT REPORTING:
The Company's reportable segments are designated as Market Performance,
Clinical Performance and Physician Credentials. Medirisk's Market Performance
products provide customers with comprehensive proprietary data and decision
support tools for use in analyzing physician fees, healthcare utilization
patterns and member satisfaction with managed care plans in the United States.
Medirisk's Clinical Performance products enable customers to measure clinical
outcomes across a full range of care within a variety of medical specialties.
Medirisk's Physician Credentials segment provides database products, software
and outsourced services designed to enable its customers to access detailed
information concerning the background and credentials of physicians in the
United States.
Medirisk evaluates each segment's profit (loss) based on a modified
operating profit measurement (earnings before interest, taxes, depreciation,
amortization, acquired in-process research and development costs and integration
and acquisition-related costs).
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
(Amounts in thousands) March 31, 1999 March 31, 1998
------------------ ------------------
<S> <C> <C>
Revenue:
Market Performance $ 3,752 $ 2,443
Clinical Performance 1,062 708
Physician Credentials 3,264 2,025
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$ 8,078 $ 5,176
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Segment profit (loss):
Market Performance $ 2,274 $ 1,524
Clinical Performance (12) 22
Physician Credentials 887 402
Corporate (1,294) (868)
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$ 1,855 $ 1,080
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Depreciation and Amortization:
Market Performance $ 64 $ 75
Clinical Performance 124 40
Physician Credentials 196 91
Corporate 618 221
------- -------
$ 1,002 $ 427
------- -------
Reconciling items $ 273 $(4,779)
Income before income taxes $ 1,126 $ 4,126
======= =======
Assets:
Market Performance $ 9,482 $ 4,439
Clinical Performance 3,878 3,396
Physician Credentials 8,004 2,973
Corporate 45,354 14,983
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$66,718 $25,791
======= =======
</TABLE>
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Medirisk is a provider of proprietary database products,
decision-support software and analytical services concerning the healthcare
industry. The Company's products and services enable its customers to make
objective comparisons of the financial costs and clinical outcomes of physician
services to customer-specific and industry benchmarks, assess member
satisfaction with specific managed care plans, and obtain information concerning
the background and credentials of physicians. These capabilities assist the
Company's customers in measuring the performance of healthcare payors and
providers and forecasting the supply of and demand for healthcare services.
Applications of Medirisk's products include pricing managed care
contracts, evaluating physician fee schedules and utilization of physician
services, comparing provider outcomes and health plan performance, credentialing
and recruiting physicians, developing healthcare delivery networks, and
marketing healthcare services. The Company actively sells its products to over
1,000 major customers, including leading health plans, insurers, hospitals,
large multi-specialty physician groups, physician practice management companies,
employers, equipment suppliers and pharmaceutical companies, as well as several
hundred smaller customers, including single-specialty physician groups. Medirisk
believes that it is the leading provider of clinical and financial database
products comprised of physician-oriented content and managed care member
satisfaction information in the United States.
ACQUISITIONS
The acquisition of businesses with complementary products and services
continues to broaden the Company's customer base, create additional
cross-selling opportunities, increase market share within existing products and
give rise to new product extensions and enhancements. The Company completed two
acquisitions during the first quarter of 1999 (the "1999 Acquisitions"),
summarized as follows:
- - In March 1999, Medirisk acquired Patient Care Analyst ("PCA"), an
Internet-based product that provides online evaluation of patient-level
hospital discharge data and national discharge records for Medicare
patients.
- - In March 1999, Medirisk acquired certain assets of Healthcare
Credentials Management Services, Inc. ("HCMS"), a leading Credentials
Verification Organization. Assets acquired from HCMS include Healthcare
Credentials Online, an Internet-based product that enables physician
credentials to be verified online, and AppSTAT, an Internet-based
product that streamlines the physician application process by allowing
physicians to electronically maintain a single set of credentials
information that can be provided to any managed care organization. The
Company also acquired HCMS' outsourced physician credentialing
services, which are provided to over 300 managed care clients.
In connection with the 1999 Acquisitions, the Company acquired
intangible assets which are being amortized over various useful lives. The
amortization periods are based on, among other things, the nature of the
products and markets, the competitive position of the acquired companies and
their adaptability to changing market conditions.
The Company did not record any integration costs in the first quarter
of 1999 but estimates that it will incur integration costs of approximately
$750,000 in connection with the 1999 Acquisitions during the remainder of 1999.
As a result of the Company's acquisitions, including the 1999
Acquisitions, the Company's historical financial statements are not necessarily
representative of financial results to be expected for future periods. See Note
2 of Notes to Consolidated Financial Statements of the Company.
SOURCES OF REVENUE
The Company provides services and licenses its products primarily
pursuant to single- and multi-year contracts that provide for the payment of
non-refundable annual fees or quarterly fees. The products and services consist
of market performance, clinical performance and physician credentials products.
The market performance products provide customers with information from
the Company's market performance product databases. Revenue from these sales is
recognized upon the delivery of the data. The Company
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also licenses the exclusive right to market the results of its managed care
consumer satisfaction surveys. Revenue from the licenses of disease-specific
customized surveys to the pharmaceutical industry is recognized as the related
costs of producing the surveys are incurred, and revenue from non-customized
data licensing is recognized upon delivery. The clinical performance products
revenues relate to the delivery of services and are recognized over the contract
terms as the services are provided. The physician credentials products consist
of (i) data and services provided to customers over time, for which revenue is
recognized ratably over the life of the contract, and (ii) credentials reports
that validate physicians' education, training and other matters, for which
revenue is recognized upon delivery of the completed reports. Customer service
revenues are recognized ratably over the service contract period. Revenue from
the licensing of the Company's software products is recognized upon shipment of
the software. All other revenue, including fees for training, consulting fees
and other miscellaneous services, is recognized upon the completion of the
applicable services.
The Company's three groups of products contribute varying percentages
of the Company's total revenue from quarter to quarter based on a variety of
factors, including, without limitation, the timing and size of acquisitions and
the differences in seasonality among the groups of products. Of its total
revenue for the three months ended March 31, 1999, the Company derived
approximately 46% from market performance products, 14% from clinical
performance products and 40% from physician credentials products. Of its total
revenue for the year ended December 31, 1998, the Company derived approximately
44% from market performance products, 17% from clinical performance products and
39% from physician credentials products.
The Company's revenue is composed of both recurring revenue from the
Company's current customer base, as well as revenue from new customers. The
Company defines its recurring revenue percentage with respect to any particular
period as the quotient, expressed as a percentage, of (i) revenue recognized
during such period from a sale of a product to a customer who purchased a
similar product in the prior period, divided by (ii) the Company's total revenue
in the prior period. In determining its recurring revenue percentage, the
Company includes in its revenue the revenue of entities acquired during the
period as if such acquisitions had occurred at the beginning of the prior
period. The Company does not include revenue in its recurring revenue percentage
to the extent that such revenue exceeds total revenue in the prior period. The
Company's recurring revenue percentage has been in excess of 70% for each of the
last five years.
RESULTS OF OPERATIONS
The following table sets forth, for the fiscal periods indicated,
certain items from the statements of operations of the Company expressed as a
percentage of revenue:
<TABLE>
<CAPTION>
THREE MONTHS
STATEMENTS OF OPERATIONS: ENDED MARCH 31,
--------------------
1999 1998
---- ----
<S> <C> <C>
Revenue 100% 100%
Salaries, wages and benefits 48 50
Other operating expenses 29 29
Depreciation and amortization 12 8
Acquired in-process research and
development costs, integration costs and acquisition-
related costs -- 93
---- ----
Operating income (loss) 11 (80)
Interest income, net 4 1
Income tax expense (6) --
---- ----
Net income (loss) 9% (79)%
==== ====
</TABLE>
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QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998
Revenue. Revenue for the three months ended March 31, 1999 was $8.1
million, an increase of $2.9 million or 56% over the same period in the prior
year. The increase was attributable to the three acquisitions made by the
Company in 1998 (the "1998 Acquisitions").
Salaries, wages and benefits. Salaries, wages and benefits for the
three months ended March 31, 1999 were $3.9 million, an increase of $1.3 million
or 50% over the same period in the prior year. The increase was primarily the
result of the 1998 Acquisitions. Salaries, wages and benefits as a percentage of
revenue decreased to 48% from 50% in the same period in the prior year primarily
due to leveraging personnel investments made during 1998.
Other operating expenses. Other operating expenses for the three months
ended March 31, 1999 were $2.4 million, an increase of $800,000 or 55% over the
same period in the prior year. This increase is primarily related to costs
associated with the 1998 Acquisitions. Other operating expenses as a percentage
of revenue were constant at 29% compared to the same period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses
for the three months ended March 31, 1999 were $1.0 million, an increase of
$600,000 or 135% over the same period in the prior year. The increase was
primarily the result of the amortization of goodwill and intangible assets
acquired in the 1998 Acquisitions; consequently, depreciation and amortization
as a percentage of revenue increased to 12% as compared to 8% in the same period
in the prior year.
Acquired in-process research and development costs, integration costs
and acquisition-related costs. Acquired in-process research and development
costs, integration costs and acquisition-related costs for the three months
ended March 31, 1999 were $0 as compared to $4.8 million in the same period in
the prior year. The Company did not record any acquired in-process research and
development costs for the 1999 acquisitions. Integration costs for the three
months ended March 31, 1999 were $0 as compared to $65,000 in the same period in
the prior year. The Company anticipates integration costs of approximately
$750,000 during the remainder of 1999 related to the 1999 acquisitions.
Interest income, net. Net interest income for the three months ended
March 31, 1999 was $273,000, compared to net interest income of $36,000 for the
same period in the prior year. The net proceeds from the Company's follow-on
offering remaining in the three months ended March 31, 1999 were substantially
larger than the net proceeds from the Company's initial public offering
remaining in the same period in the prior year, which resulted in increased net
interest income.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $12.9 million as of March 31, 1999
as compared to working capital of $25.9 million at December 31, 1998. The
decrease was due primarily to the use of working capital for the purchases of
PCA and HCMS, the payment of $3.0 million of contingent consideration in
connection with the acquisition of Healthdemographics, and the accrual of $5.5
million of additional contingent consideration payable in connection with the
acquisition of CareData.
Net cash provided by operating activities totaled $1.1 million for the
three months ended March 31, 1999 as compared to cash used in operating
activities of $858,000 for the same period in the prior year. The increase in
cash provided by operating activities of $2.0 million was primarily due to
increases in accounts payable and net income.
Net cash used in investing activities was approximately $8.5 million
for the three months ended March 31, 1999 as compared to $3.6 million in the
same period in the prior year. In the three months ended March 31, 1999, the
Company used $4.3 million in cash to fund the acquisitions of PCA and HCMS and
$3.0 million of contingent consideration was paid in connection with the
acquisition of Healthdemographics. The remaining cash used in
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<PAGE> 12
investing activities for the three months ended March 31, 1999 funded $626,000
in fixed asset purchases and $871,000 of software development, offset by a
$250,000 partial repayment of a note receivable from a stockholder.
Net cash provided by financing activities was $39,000 for the three
months ended March 31, 1999 as compared to $2.2 million for the same period in
the prior year. The cash provided by financing activities in 1998 was primarily
due to borrowings on the revolving line of credit with NationsBank.
Many of the Company's acquisition agreements provide for the payment of
contingent consideration based upon the performance of the acquired businesses
over a prescribed period of time. If such acquired businesses exceed the
relevant performance goals, the Company is required to make additional payments,
which could be material. In connection with the CareData acquisition, additional
consideration of $5.5 and $3.0 million was paid in April 1999 and 1998,
respectively. In connection with the Healthdemographics acquisition, additional
consideration of $3.0 million was paid in March 1999. Additional consideration
may be paid to Healthdemographics during 1999.
In June 1998, the Company entered into an Amended and Restated Credit
Agreement with NationsBank under which a $25 million revolving credit facility
(the "NationsBank Revolver") was made available to the Company. The NationsBank
Revolver is available to fund working capital needs, new product development and
acquisitions. At March 31, 1999, the Company had $25 million in borrowing
availability remaining on the NationsBank Revolver.
The Company's future liquidity and cash requirements will depend on a
wide range of factors, including costs associated with development of new
products, enhancements of existing products and acquisitions. The Company
believes that the remaining proceeds of its follow-on offering completed in June
1998, available borrowings under the NationsBank Revolver and cash generated
from operations will be sufficient to meet the capital expenditure and working
capital needs for the Company's operations for the near term.
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EFFECTS OF INFLATION
Management does not believe that inflation has had a material impact on
the Company's results of operations for the periods presented. Substantial
increases in costs, particularly the cost of labor for product development,
marketing and sales, could have an adverse impact on the Company and the
healthcare information industry.
YEAR 2000 COMPLIANCE
Many of the world's computer systems and non-information technology
systems have programs and imbedded chips using two digits rather than four to
define the applicable year. If not addressed, such computer systems could be
unable to properly interpret dates beyond the year 1999. Many of Medirisk's
systems and much of its software are Year 2000 compliant. To bring the remaining
systems and software into compliance by mid-1999, Medirisk has designed a Year
2000 compliance program.
The Company has implemented a project team and project plan to manage
the Year 2000 initiative. The project team has completed the Year 2000
assessment for all business areas that may be impacted by the Year 2000 issue,
including assessment of the following business areas: IT systems, Non-IT
systems, third parties and Medirisk products. The assessment included an
inventory in all areas, state of readiness determination, assessment of risk and
cost associated with non-compliant items, development of contingency plan steps
in the event of non-compliance and the remediation steps for non-compliant
items. The Company's remediation efforts were prioritized in order of risk, with
the most critical items corrected immediately. The Company assessed risk based
on level of impact to operations and the ability to deliver quality products to
our customers.
The Company designates each of the statements made by it in this
section as a Year 2000 Readiness Disclosure. Such statements are pursuant to the
Year 2000 Information and Readiness Disclosure Act.
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State of Readiness
Substantially all of the Company's business areas are Year 2000
compliant. The Company has developed a plan to bring the remaining areas into
compliance, and the Company has scheduled completion of such plan by August
1999. The Company is in the process of assessing the Year 2000 compliance of
third parties, including its customer and vendors. Detailed project plans are
being designed for bringing all non-compliant issues into compliance; however,
the process of analyzing Year 2000 issues, particularly as they relate to
customers and suppliers, is ongoing.
Cost
The Company's current estimate of the remaining cost of compliance is
under $100,000; however, the process of analyzing these issues is ongoing, and
the estimate may change. The Company's cost estimate does not include unforeseen
costs in the event of additional programming hours and similar matters. The
Company does not anticipate that the overall costs will have a material impact
on the Company's financial results or financial condition.
Contingency Plans
The Company has developed written contingency plans for all currently
identified non-compliant items. Medirisk has developed a project plan and has
assigned dates and responsibilities to each action item.
Remediation Steps
The Year 2000 project team plans to achieve full remediation of all
non-Year 2000 compliant items by August of 1999.
Risk
The Year 2000 issue creates risk for the Company from unforeseen
problems with both its internal systems and those of third parties upon which
the Company relies. Accordingly, the Company has produced a list of all vendors
and has assessed the level of impact of each vendor. Medirisk is in the process
of querying all vendors and third parties to determine their compliance.
If the databases or systems of the Company, key suppliers of data or
key customers are not Year 2000 compliant, then the cost necessary to update
databases or software or potential interruption in the supply of data or
interruptions in demand for the Company's products could have a material adverse
effect on the Company's business, results of operations or financial conditions.
RECENT ACCOUNTING PRONOUNCEMENTS
In the first quarter of 1998, the Company adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income," and Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures About Segments of an
Enterprise and Related Information." SFAS 130 establishes standards for
reporting and display of comprehensive income and its components. Comprehensive
income generally includes all changes in equity during a period except those
resulting from investments by owners and distribution to owners. There was no
impact on the Company's consolidated financial statements with the adoption of
SFAS 130. SFAS 131 establishes standards for reporting information about
operating segments in annual financial statements and in interim financial
reports to shareholders.
On September 15, 1998 the SEC issued a letter to the AICPA SEC
Regulations Committee outlining changes that the SEC believes should be made to
the methodology of calculating acquired in-process research and development
costs. The Company has applied this new guidance with respect to the 1997, 1998
and 1999 acquisitions.
-17-
<PAGE> 15
RISK FACTORS
In evaluating the Company and its business, prospective investors should
carefully consider the following risk factors in addition to the other
information contained herein. This Form 10-Q, as well as press releases and
other public statements made by the Company from time to time, contain
"forward-looking statements" within the meaning of the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. These statements
address activities, events or developments that will be may occur in the future
and are based on assumptions and analyses made by the Company in light of its
experience and perception of historical trends, current conditions, expected
future developments and other factors. Actual results and developments are
subject to a number of risks and uncertainties, including general economic,
market or business conditions; opportunities (or lack thereof) that may be
presented to and pursued by the Company; competitive actions by other
companies; changes in laws or regulations; and other factors (such as those set
forth below) as may be discussed from time to time in the Company's SEC reports
and other filings. Many of these risks and uncertainties are beyond the control
of the Company. Accordingly, readers are cautioned not to place undue reliance
on such forward looking statements, which speak only as of the date made and
which the Company undertakes no obligation to revise or update in order to
reflect events after the date made.
Variable Quarterly Operating Results; Seasonality. The Company's quarterly
revenue and operating result have varied significantly in the past and are
likely to vary substantially from quarter to quarter in the future Quarterly
results may fluctuate as a result of a variety of factors including, but not
limited to, the Company's sales cycle; demand for the Company's products; the
timing of significant new consumer contracts; the non-renewal of significant
customer contracts; the timing of acquisitions; competitive conditions in the
industry; changes in customer budgets; and general economic factors. The
Company has historically recorded a disproportionate amount of its revenue for
each quarter in the final month of the quarter, while expenses have been
incurred more evenly throughout the period. Furthermore, the Company has
experienced a seasonal pattern in its operating results, with a greater
proportion of the Company's revenue and more favorable operating margins
occurring in the second half of
<PAGE> 16
the year. Accordingly, results of operations for any particular quarter may not
be indicative of results of operations for future periods. Additionally, a
significant portion of the Company's expenses are relatively fixed, and the
amount and timing of increases in such expenses are based in large part on the
Company's expectations concerning future revenue. If revenue is below
expectations in any given quarter, the adverse effect may be magnified by the
Company's inability to adjust spending quickly enough to compensate for the
revenue shortfall. Accordingly, even a small variation from expected revenue
could have a material adverse effect on the Company's operating results and
financial condition for a given quarter. Fluctuations in the Company's revenue
and operating results could have a material adverse effect on the market price
for the Company's Common Stock.
History of Operating Losses; Uncertain Profitability. The Company
incurred net losses in the years ended December 31, 1996, 1997 and 1998. In view
of the Company's prior operating history, there can be no assurance that the
Company will be able to achieve profitability on a quarterly or annual basis or
that it will be able to sustain or increase its revenue growth in future
periods. Furthermore, in applying the provisions of Statement of Financial
Accounting Standards No. 109 ("SFAS 109") to the Company, particularly
considering the Company's history of net losses, the Company was unable to
support a conclusion that it is more likely than not that its deferred tax
assets will be realized for purposes of SFAS 109. As a result, the Company has
provided a full valuation allowance against its net deferred tax assets.
Risks Related to Growth. The Company's strategy is to grow
aggressively, both internally and through acquisitions. This strategy is likely
to place significant demands on the Company's financial, operational and
management resources, and to expose the Company to a variety of risks, including
the risk that the Company will be unable to retain the personnel or obtain the
financial and other resources necessary to pursue and manage such growth. The
Company's growth has resulted in an increase in the level of responsibility for
the Company's key personnel. Expenses arising from the Company's efforts to
complete acquisitions, develop new products or increase its existing market
penetration could have an adverse impact on the Company's business, results of
operations and financial condition. Furthermore, there can be no assurance that
the Company will be able to identify, acquire or integrate acquisition
candidates successfully or to manage profitably any additional products and
services resulting from such acquisitions. Acquired businesses, products and
services may not contribute to the Company's overall strategy or produce returns
that justify the related investment or implementation by the Company. In
addition, the Company's growth may involve the acquisition of companies or the
development of products or services in areas in which the Company does not
currently operate. Such acquisition or development may require the Company's
management to develop expertise in new areas and to attract a new customer base,
and could have a material adverse effect on the Company's business, results of
operations or financial condition. There can be no assurance that the Company
will be able to implement its growth strategy successfully or, if successful in
consummating acquisitions, that it will be able to manage its expanded
operations effectively and profitably.
Risks of Integration of Acquired Operations. The process of integrating
management services, administrative organizations, facilities, management
information systems and other operational aspects of acquired businesses,
products or services can be time consuming and costly, and may distract
management from day-to-day operations. The difficulties of integration may be
increased by challenges in coordinating geographically separated organizations,
integrating personnel with disparate business backgrounds and combining
different corporate cultures. If Medirisk is to realize the anticipated benefits
of past and future acquisitions, the operations of the acquired entities must be
combined and integrated successfully. There can be no assurance that the
Company's integration processes will be successful or that the anticipated
benefits of any past or future acquisitions will be realized. Furthermore, there
can be no assurance that there will not be substantial unanticipated costs or
liabilities, or other material adverse effects associated with past or future
acquisitions and integration activities conducted by the Company.
Dependence on Data Sources and AMA Licenses. The Company incorporates
the Physicians' Current Procedural Terminology ("CPT") codes of the AMA into
certain of its market performance products under a non-exclusive five-year
license with the AMA that expires in February 2000. The CPT code system is
considered to be the current industry standard for identifying physician
procedures, and the loss or non-renewal of the AMA CPT code license would have a
material adverse effect on the Company's business, results of operations or
financial condition. In addition, the Company relies in large part on data from
outside payor, provider and other sources to develop its proprietary products,
including acquired data and data received from customers under the Company's
data collection program. In general, the Company's data sources are not subject
to exclusive agreements with the
-13-
<PAGE> 17
Company; therefore, data included in the Company's data products may also be
included in data products of the Company's competitors. There can be no
assurance that the Company's sources will continue to provide data in the
future. If any of the Company's sources of data becomes unavailable, there can
be no assurance that alternative sources of data would be available or that the
Company could purchase such data in a cost-efficient manner.
Risks of Customer Concentration. The Company derives a substantial
portion of its revenue from clinical performance products provided to
HEALTHSOUTH Corporation under a three-year contract, the current term of which
expires in December 2000. HEALTHSOUTH accounted for approximately 7% of the
Company's revenues for fiscal 1998. The loss of, or a significant decrease in,
business from HEALTHSOUTH could have a material adverse effect on the Company's
business, results of operations and financial condition.
Risks of Rapid Technological Change. The health care information market
is characterized by rapid technological change, changing customer needs and
evolving industry standards. The Company believes that as the market for its
current products matures, its future success will depend on its ability to
enhance its current products and to develop or acquire and introduce new
products to keep pace with technological developments and emerging industry
standards. In addition, the introduction of competing products embodying new
technologies and the emergence of new industry standards could render the
Company's existing products non-competitive or obsolete. Accordingly, the
Company anticipates that significant amounts of future revenue may be derived
from products and product enhancements that do not exist today or have not been
sold in sufficient quantities to measure accurately market acceptance. There can
be no assurance that the Company will not experience difficulties that could
delay or prevent the successful development and introduction of product
enhancements or new products, or that such enhancements or new products will
adequately meet the requirements of the marketplace or achieve market
acceptance. Any failure by the Company to develop and introduce product
enhancements and new products in a timely and cost-efficient manner in response
to changing market conditions or customer requirements could have a material
adverse effect on the Company's business, results of operations or financial
condition.
Need for Additional Financing. Implementation of the Company's growth
strategy will require significant capital resources. Capital is needed for both
internal growth and the acquisition and integration of new businesses, products
and services. In addition, many of the Company's acquisition agreements provide
for the payment of contingent consideration based on the performance of the
acquired business. If such acquired businesses exceed the relevant performance
goals, the Company will be required to make additional payments, which could be
material. If the Company does not have sufficient cash resources or if the
Company's Common Stock is not attractive to target businesses, the Company's
growth could be limited and its existing operations impaired, unless it is able
to obtain additional capital through debt or equity financings. Any debt
financings could result in the imposition on the Company of operational or
financial restrictions. Any equity financings could result in dilution to
holders of the Company's Common Stock. There can be no assurance that the
Company will be able to obtain financing in the future or that, if available,
such financing will be on terms acceptable to the Company.
Dependence on Intellectual Property Rights. The Company does not own
any patents or federally-registered copyrights relating to its databases or
software applications. The Company relies largely on copyright law, its license
agreements with customers and its own security systems, confidentiality
procedures and employee non-disclosure agreements to maintain the
confidentiality and trade secrecy of its proprietary procedures and resources.
Policing unauthorized use and piracy of the Company's products is difficult. The
Company is aware that from time to time there have been limited breaches of the
confidentiality provisions of customers' agreements with the Company, and there
can be no assurance that the precautions taken by the Company will be adequate
to prevent further breaches or misappropriation of the Company's proprietary
information. In addition, the Company cannot prevent the independent development
or implementation of functionally equivalent or superior systems, products or
methodologies. The misappropriation of the Company's information or independent
development of similar products may have a material adverse effect on the
Company's competitive position. Furthermore, there can be no assurance that
third parties will not assert infringement claims against the Company or that a
license or similar agreement will be available on reasonable terms in the event
of an unfavorable ruling on any such claim.
Risk Related to Intangible Assets and Acquisition Related Charges.
Largely as a result of the Company's various acquisitions, Medirisk had recorded
approximately $37.8 million in intangible assets net of accumulated amortization
as of March 31, 1999. Such intangible assets are being amortized over periods of
five to 15 years. The
-14-
<PAGE> 18
Company expects the amount allocable to intangible assets on its balance sheet
to increase in connection with future acquisitions and in connection with future
contingent consideration payments for acquisitions that have been consummated,
resulting in increases in the Company's amortization expense. In the event of
any sale or liquidation of the Company or a portion of its assets, there can be
no assurance that the value of the Company's intangible assets will be realized.
In addition, the Company regularly evaluates whether events and circumstances
have occurred indicating that any portion of the remaining balance of amounts
allocable to the Company's intangible assets may not be recoverable. If factors
indicate that the carrying value of the Company's intangible assets has been
impaired, the Company would be required to reduce the carrying value of such
assets. Any future determination requiring the write-off of a significant
portion of the unamortized intangible assets could have a material adverse
effect on the Company's business, results of operations or financial condition.
In connection with many of its acquisitions, the Company has recorded
non-recurring charges related to in-process research and development costs. The
amount of each of these non-recurring charges is equal to the estimated current
fair value of specifically identified technologies for which technological
feasibility has not yet been established pursuant to Statement of Financial
Accounting Standards No. 86, "Accounting for Costs of Computer Software to be
Sold, Leased or Otherwise Marketed" and for which future alternative uses did
not exist at the time of acquisition. The Company has recorded approximately
$4.4 million of these charges in 1997, $11.7 million in 1998 and none in the
three months ended March 31, 1999. Similar charges could result in the future as
a result of additional acquisitions accounted for as purchases.
Uncertainty and Consolidation in the Healthcare Industry. The
healthcare industry is subject to changing political, economic and regulatory
influences that may affect the procurement practices and operation of health
care providers, payors and other industry participants. The Company's products
and services are designed to function within the current structure of the U.S.
health care system; therefore, the commercial value of the Company's products
could be adversely affected if there were material changes in the current U.S.
health care system. Many federal and state legislators have announced that they
intend to propose programs to reform the U.S. health care system at both the
federal and state levels. These programs may contain proposals to increase
governmental involvement in health care, lower reimbursement rates and otherwise
change health care delivery and payment systems. Participants in the health care
market may react to these proposals and the uncertainty surrounding such
proposals by curtailing or deferring investments, including investments in the
Company's products and services. In addition, in response to this changing
environment, many market participants are consolidating to create larger health
care delivery organizations. This consolidation reduces the number of potential
customers for the Company and may increase the bargaining power of these
organizations, which could lead to reduced prices for Medirisk's products and
services. The impact of these developments on the health care industry is
difficult to predict and could have a material adverse effect on the Company's
business, results of operations or financial condition.
Competition. The healthcare information market is intensely competitive
and rapidly changing. The Company believes that the principal competitive
factors in its target markets include the breadth and quality of database and
applications offerings, access to proprietary data, the proprietary nature of
methodologies and technical resources, price, and the effectiveness of marketing
and sales efforts. In each of its target markets, the Company competes with
various competitors, which vary in size, scope and breadth of product and
service offerings. In addition, other information companies not presently
offering health care information services competitive with the Company's
products and services may enter the markets in which the Company competes. Many
of the Company's competitors have, and many of its potential competitors may
have, significantly greater financial, technical, product development and
marketing resources than the Company. The Company also competes with the
internal information resources and systems of certain of its prospective and
existing customers. There can be no assurance that competitive pressures will
not have a material adverse effect on the Company's business, results of
operations or financial condition.
Potential for System Defects. The information products offered by the
Company may contain undetected errors or failures. Any such errors or failures
could result in a loss of, or delay in, market acceptance of the product and in
claims against the Company. The Company also depends on the accuracy of the data
received from its data sources. If a statistically significant number of medical
records, transactions or physician profiles were found to have been altered or
incorrectly entered, or otherwise contain flawed data, there could be a loss of,
or delay in, market
-15-
<PAGE> 19
acceptance of the product and possible claims against the Company. Any of the
foregoing results could have a material adverse effect on the Company's
business, results of operations or financial condition.
Year 2000 Compliance. Both the Company's internal operations and
products use a significant number of computer software programs and operating
systems. Given the information known at this time about the Company's systems
and products, coupled with the Company's ongoing efforts to upgrade or maintain
systems and products, as necessary, the Company does not anticipate that the
year 2000 issue or related costs will have a material adverse effect on the
Company's business, results of operations or financial condition. However, the
Company is still analyzing its databases and software applications and those
utilized by key suppliers of data and key customers, and to the extent they are
not fully year 2000 compliant, there can be no assurance that the costs
necessary to update databases or software or potential systems interruptions,
interruptions in the supply of data or interruptions in demand for the Company's
products would not have a material adverse effect on the Company's business,
results of operations or financial condition.
Adverse Impact Of Anti-Takeover Provisions. Certain provisions of the
Company's Certificate of Incorporation and Bylaws and of Delaware law could have
the effect of delaying, deterring or preventing a change of control involving
the Company. Specifically, the Company's Certificate of Incorporation, as
amended, provides for the issuance of up to 995,000 shares of preferred stock
with such rights and preferences as may be determined by the Board of Directors.
Such shares may be issued without further stockholder approval in circumstances
that could have the effect of preventing or delaying a change of control. The
Company's Board of Directors is classified into three classes, with each class
of directors having a staggered three year term. The Company's Bylaws prohibit
action by the stockholders through written consent and restrict the ability of
stockholders to call stockholder meetings and propose action at meetings.
Finally, Section 203 of the Delaware General Corporation Law restricts
transactions between the Company and any "interested stockholders" (as defined
therein). In addition, the Company adopted a Shareholder Protection Rights
Agreement, commonly known as a "poison pill", in August of 1998. These
provisions could reduce or eliminate any takeover premium in the market price
for the Company's Common Stock or otherwise limit the price certain investors
might be willing to pay for the Company's Common Stock.
<PAGE> 20
FORWARD-LOOKING STATEMENTS
The Company may from time to time make written or oral forward-looking
statements contained in press releases, the Company's filings with the SEC and
its reports to stockholders. Statements made in this Quarterly Report on Form
10-Q, other than those concerning historical information, should be considered
forward-looking and subject to various risks and uncertainties. Such
forward-looking statements are made based on management's belief, as well as on
assumptions made by, and information currently available to, management and are
made pursuant to, and in reliance upon, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The Company's actual results
may differ materially from the results anticipated in these forward-looking
statements due to numerous factors, including the following: History of
Operating Losses and Uncertain Profitability; Risks Related to Growth; Risks of
Integration of Acquired Operations; Dependence on Data Sources and AMA Licenses;
Dependence on Intellectual Property Rights; Risks Related to Intangible Assets
and Acquisition of In-process Research and Development; Uncertainty and
Consolidation in the Healthcare Industry; Risks of Rapid Technological Change;
Need for Additional Financing; Competition; Risks of Customer Concentration;
Potential for System Defects; Variable Quarterly Operating Results and
Seasonality; Year 2000 Compliance; and Adverse Impact of Anti-takeover
Provisions and other factors as may be discussed from time to time in the
Company's reports and filings with the SEC. For a more complete discussion of
these factors, please see the section of Management's Discussion and Analysis of
Financial Condition and Results of Operations entitled "Risk Factors."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company currently maintains all cash in United States dollars in
highly liquid, interest-bearing, investment-grade instruments with maturities of
less than three months, which the Company considers cash equivalents. The
Company has no "market risk sensitive instruments," and no disclosure is
required under this Item.
-18-
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
(a) Exhibits
2.8 Asset Purchase Agreement dated March 26, 1999 by and
among Sweetwater Health Enterprises, Inc. and
Healthcare Credentials Management Services, Inc.
(incorporated by reference from the Company's Current
Report on Form 8-K filed on April 15, 1999)
11 Statements of Computation of Per Share Income (Loss)
27 Financial Data Schedule (for SEC use only)
----------
(b) Reports on Form 8-K
None
-19-
<PAGE> 22
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.
Medirisk, Inc.
May 14, 1999 By: /s/ Thomas C. Kuhn III
------------------------------------------
Thomas C. Kuhn III
Senior Vice President
Chief Financial Officer and
Principal Accounting Officer
-20-
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.8 Asset Purchase Agreement dated March 26, 1999 by and among
Sweetwater Health Enterprises, Inc. and Healthcare Credentials
Management Services, Inc. (incorporated by reference from the
Company's Current Report on Form 8-K filed April 15, 1999)
11 Statements of Computation of Per Share Income (Loss)
27 Financial Data Schedule (for SEC use only)
</TABLE>
-21-
<PAGE> 1
EXHIBIT 11
MEDIRISK, INC. AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF PER SHARE INCOME (LOSS)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999 1998
------ -------
<S> <C> <C>
Net income (loss) $ 684 $(4,126)
====== =======
Weighted average number of common shares outstanding 7,391 4,495
====== =======
Net income (loss) per share of common stock - basic $ 0.09 $ (0.92)
====== =======
Shares used in net income (loss) per diluted share calculation:
Weighted average number of common shares outstanding 7,391 4,495
Dilutive stock options 425 --
------ -------
7,816 4,495
====== =======
Net income (loss) per share of common stock - diluted $ 0.09 $ (0.92)
====== =======
</TABLE>
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE MEDIRISK, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 1999 AND THE MEDIRISK, INC. CONSOLIDATED CONDENSED BALANCE SHEET AS OF MARCH
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,968
<SECURITIES> 0
<RECEIVABLES> 9,766
<ALLOWANCES> 474
<INVENTORY> 0
<CURRENT-ASSETS> 25,078
<PP&E> 5,732
<DEPRECIATION> 2,685
<TOTAL-ASSETS> 66,718
<CURRENT-LIABILITIES> 12,153
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 54,543
<TOTAL-LIABILITY-AND-EQUITY> 66,718
<SALES> 8,078
<TOTAL-REVENUES> 8,078
<CGS> 0
<TOTAL-COSTS> 7,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 273
<INCOME-PRETAX> 1,126
<INCOME-TAX> 442
<INCOME-CONTINUING> 684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 684
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
