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 June 30, 1998
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from __________________ to ___________________
Commission File Number 0-25378
HCIA INC.
---------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 52-1407998
- ---------------------------- ----------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
300 EAST LOMBARD STREET, BALTIMORE, MARYLAND 21202
- -------------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (410) 895-7470
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 report(s)), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, at August 1, 1998:
Class: Common Stock Number of Shares: 11,851,125
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(in thousands)
PART 1
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1998 1997
(Unaudited)
<S><C>
ASSETS
Current assets:
Cash and cash equivalents.................................................................$ 6,955 $ 5,580
Trade accounts receivable, net of allowance for doubtful accounts
of $2,781 in 1998 and $2,100 in 1997..................................................... 29,739 34,354
Prepaid expenses and other current assets................................................. 4,119 3,669
Deferred compensation funds held in trust................................................. 917 3,583
--------- --------
Total current assets..................................................................... 41,730 47,186
Furniture and equipment, net................................................................ 12,026 13,671
Computer software costs, net................................................................ 8,647 26,727
Other intangible assets, net................................................................ 39,042 71,298
Net deferred tax asset...................................................................... 34,917 23,238
Other....................................................................................... 160 120
--------- --------
Total assets.............................................................................$ 136,522 $182,240
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...........................................................................$ 1,873 $ 2,227
Accrued salaries, benefits and other liabilities........................................... 7,772 7,461
Deferred revenue........................................................................... 1,266 2,255
Acquired deferred compensation liability .................................................. 917 3,583
--------- --------
Total current liabilities................................................................ 11,828 15,526
--------- --------
Stockholders' equity:
Common stock-$.01 par value; 50,000,000 shares authorized; issued and
outstanding 11,851,125 as of June 30, 1998 and 11,850,094 as of
December 31, 1997.................................................................... 118 118
Additional paid-in capital.................................................................. 250,904 250,892
Accumulated deficit......................................................................... (126,160) (84,179)
Accumulated other comprehensive loss........................................................ (168) (117)
--------- --------
Total stockholders' equity.............................................................. 124,694 166,714
--------- --------
Total liabilities and stockholders' equity..................................................$ 136,522 $182,240
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 1
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30, 1998 and 1997
(in thousands, except per share data)
(Unaudited)
1998 1997
Revenue................................................... $18,800 $19,238
Salaries, wages and benefits.............................. 9,915 10,537
Other operating expenses.................................. 6,265 6,366
Depreciation.............................................. 1,070 1,012
Amortization.............................................. 1,523 3,995
------- -------
Operating income (loss) ............................ 27 (2,672)
Interest income........................................... 119 105
Interest expense ......................................... 44 101
------- -------
Income (loss) before income taxes.................. 102 (2,668)
Provision (benefit) for income taxes...................... 33 (494)
------- -------
Net income (loss).................................. $ 69 $(2,174)
======= =======
Basic net income (loss) per share......................... $ 0.01 $ (0.18)
======= =======
Basic shares used in per share calculation................ 11,851 11,837
======= =======
Diluted net income (loss) share........................... $ 0.01 $ (0.18)
======= =======
Diluted shares used in per share calculation.............. 11,872 11,837
======= =======
See accompanying notes to consolidated financial statements.
Page 2
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30, 1998 and 1997
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
<S><C>
Revenue............................................................................ $ 36,356 $44,963
Salaries, wages and benefits....................................................... 19,819 21,411
Other operating expenses........................................................... 12,185 12,421
Depreciation....................................................................... 2,149 1,944
Amortization....................................................................... 5,054 7,735
Impairment loss on intangible assets and restructuring charges..................... 50,821 -
-------- -------
Operating (loss) income...................................................... (53,672) 1,452
Interest income.................................................................... 202 286
Interest expense .................................................................. 124 199
-------- -------
(Loss) income before income taxes........................................... (53,594) 1,539
(Benefit) provision for income taxes............................................... (11,613) 1,185
-------- -------
Net (loss) income........................................................... $(41,981) $ 354
======== =======
Basic net (loss) income per share.................................................. $ (3.54) $ 0.03
======== =======
Basic shares used in per share calculation......................................... 11,851 11,819
======== =======
Diluted net (loss) income per share................................................ $ (3.54) $ 0.03
======== =======
Diluted shares used in per share calculation....................................... 11,851 12,022
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND
COMPREHENSIVE LOSS
Year ended December 31, 1997 and the six months ended June 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Additional Paid-In Accumulated Other Total Stockholders'
Common Stock Capital Accumulated Deficit Comprehensive Loss Comprehensive Loss Equity
------------ ------- ------------------- ------------------- ------------------ ------
<S><C>
BALANCE AT
DECEMBER 31, 1996 $118 $249,591 $ (47,220) $ (82) $ - $202,407
---- -------- --------- ----- -------- --------
Exercise of stock
options - 613 - - - 613
Tax benefits related to
exercise of stock options - 688 - - - 688
Comprehensive loss
Net loss - - (36,959) - (36,959) (36,959)
Other comprehensive loss
Foreign currency translation (31) (31)
Unrealized depreciation of
short-term investments (4) (4)
--------
Other comprehensive loss (35) (35)
--------
Comprehensive loss $(36,994)
========
---- -------- --------- ----- --------
BALANCE AT
DECEMBER 31, 1997 $118 $250,892 $ (84,179) $(117) $166,714
---- -------- --------- ----- --------
Exercise of stock
options - 12 - - 12
Comprehensive loss
Net loss - - (41,981) - (41,981) (41,981)
Other comprehensive loss
Foreign currency
translation - - - - (51) (51)
--------
Other comprehensive loss (51) (51)
--------
Comprehensive loss $(42,032)
========
---- -------- --------- ----- --------
BALANCE AT JUNE 30, 1998
(Unaudited) $118 $250,904 $(126,160) $(168) $124,694
==== ======== ========= ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1998 and 1997
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
<S><C>
Cash flows from operating activities:
Net (loss) income......................................................... $(41,981) $ 354
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization....................................... 7,203 9,679
Impairment loss on intangible assets and restructuring charges...... 50,821 -
Deferred tax provision.............................................. (11,679) 545
Changes in operating assets and liabilities:
Accounts receivable.............................................. 4,615 (4,739)
Income taxes receivable.......................................... - 242
Prepaid expenses and other current assets........................ (450) (52)
Accounts payable................................................. (354) 971
Accrued salaries, benefits and other liabilities................. (487) (660)
Deferred revenue................................................. (989) (625)
-------- --------
Net cash provided by operating activities................... 6,699 5,715
-------- --------
Cash flows from investing activities:
Purchases of furniture and equipment...................................... (504) (4,515)
Cost of acquisitions, net of cash acquired................................ - (104)
Computer software purchased or capitalized................................ (4,158) (7,824)
Other intangible assets purchased or capitalized.......................... (583) (1,056)
Proceeds from disposals of short-term investments......................... - 520
Other..................................................................... (40) (7)
-------- --------
Net cash used in investing activities....................... (5,285) (12,986)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options................................... 12 574
Income tax benefit related to stock options............................... - 688
Repayments of notes payable............................................... - (1,157)
-------- --------
Net cash provided by financing activities.................. 12 105
-------- --------
Impact of currency fluctuations on cash and cash equivalents.................... (51) (2)
-------- --------
Increase (decrease) in cash and cash equivalents ............................... 1,375 (7,168)
Cash & cash equivalents - beginning of period................................... 5,580 13,302
-------- --------
Cash & cash equivalents - end of period......................................... $ 6,955 $ 6,134
======== ========
Supplemental cash flow information - cash paid during period for interest $ 63 $ 169
======== ========
- cash paid during period for income taxes $ 31 $ 351
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
HCIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of the Company have been
prepared in accordance with generally accepted accounting principles. In the
opinion of management, these statements reflect all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
Company's financial condition, results of operations, changes in stockholders'
equity and comprehensive loss and cash flows for the periods presented. The
results of operations for the period ended June 30, 1998 may not be indicative
of the results that may be expected for the full year ending December 31, 1998.
These financial statements and notes should be read in conjunction with the
financial statements and notes included in the audited consolidated financial
statements of the Company for the year ended December 31, 1997 as contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
(1934 Act File No. 0-25378).
(2) IMPAIRMENT LOSS ON INTANGIBLE ASSETS AND RESTRUCTURING CHARGES
During the three months ended March 31, 1998, the Company recorded an impairment
loss on intangible assets and restructuring charges of approximately $50.8
million. Approximately $50.0 million of the charges represented the write-down
of certain intangible assets. This write-down arose primarily due to the failure
of the Company's Integrated Solutions Unit to execute agreements with customers
for large-scale custom solutions and the Company's determination that the Unit's
revenue, which could be anticipated from future agreements of this type, was
significantly less than had been previously anticipated. As the products
marketed by the Integrated Solutions Unit were intended to integrate the
products and technologies of the Company's other business units, this
determination resulted in a reduced expectation of future cash flows from the
Company's intangible assets across most of its business units and, accordingly,
an impairment in value of these intangible assets. The remainder of the charges,
totaling approximately $800,000, relates primarily to accruals for the cost of
employee severance and facilities reductions. As of June 30, 1998 approximately
$421,000 of the accruals had been used. The remainder of the accrual primarily
relates to reserves for facility reductions. The following table summarizes the
impairment loss on intangible assets and computer software costs:
Pre-Charge Post-Charge
Asset Net Book Value Write Down Net Book Value
- -------------------------------------------------------------------
Databases $ 2,871,000 $ 1,649,000 $ 1,222,000
CPHA License 9,113,000 -- 9,113,000
Goodwill 46,326,000 20,644,000 25,682,000
Customer Bases 2,987,000 2,028,000 959,000
Methodologies 3,549,000 2,355,000 1,194,000
Assembled Workforce 3,266,000 1,751,000 1,515,000
Tradename 1,029,000 1,029,000 --
Software 28,106,000 20,567,000 7,539,000
------------------------------------------
$97,247,000 $50,023,000 $47,224,000
==========================================
(3) INCOME TAXES
During the quarter ended March 31, 1998, the Company recorded a valuation
allowance of $5.0 million to reduce the carrying value of its deferred tax asset
to an amount management believes is realizable through future taxable income.
Page 6
<PAGE>
(4) NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 130
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," (SFAS No. 130) as of January 1, 1998. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.
Adoption of SFAS No. 130 did not have any material effect on current or prior
period financial displays presented by the Company. The Company has selected
the presentation option of including comprehensive income (loss) in its
Consolidated Statements of Changes in Stockholders' Equity and Comprehensive
Loss.
SOP 97-2
The Company adopted provisions of Statement of Position 97-2, "Software Revenue
Recognition" (SOP 97-2) issued by The American Institute of Certified Public
Accountants Accounting Standards Executive Committee as of January 1, 1998. SOP
97-2 provides revised and new guidance on when and in what amounts revenue
should be recognized for licensing, selling, leasing or otherwise marketing
computer software. Adoption of SOP 97-2 did not have any material effect on the
Company's revenue recognition policies.
(5) EARNINGS PER SHARE
The Company adopted SFAS No. 128 during the fourth quarter of the year ended
December 31, 1997. SFAS No. 128 establishes revised standards for computing and
presenting earnings per share (EPS) data. It requires dual presentation of
"basic" and "diluted" EPS on the face of the statements of operations and a
reconciliation of the numerators and denominators used in the basic and diluted
EPS calculations. As required by SFAS No. 128, EPS data for prior periods
presented have been restated to conform to the new standard.
Basic EPS is calculated by dividing net earnings (loss) by the weighted average
number of common shares outstanding for the applicable period. Diluted EPS is
calculated after adjusting the numerator and the denominator of the basic EPS
calculation for the effect of all potential dilutive common shares outstanding
during the period. Information related to the calculation of net earnings per
share of common stock is summarized as follows:
<TABLE>
<CAPTION>
For the three months ended For the three months ended
June 30, 1998 June 30, 1997
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S><C>
Basic EPS 69 11,851 0.01 (2,174) 11,837 (0.18)
Incremental shares from
assumed exercise of
dilutive options and
warrants - 21 - - - -
----------------------------------------- --------------------------------------------
Diluted EPS 69 11,872 0.01 (2,174) 11,837 (0.18)
========================================= ============================================
</TABLE>
For the three months ended June 30, 1997, no exercise of options is assumed
since their effect is antidilutive.
Page 7
<PAGE>
<TABLE>
<CAPTION>
For the six months ended For the six months ended
June 30, 1998 June 30, 1997
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S><C>
Basic EPS (41,981) 11,851 (3.54) 354 11,819 0.03
Incremental shares from
assumed exercise of
dilutive options and
warrants - - - - 203 -
------------------------------------------ ---------------------------------------------
Diluted EPS (41,981) 11,851 (3.54) 354 12,022 0.03
========================================== =============================================
</TABLE>
For the six months ended June 30, 1998, no exercise of options is assumed since
their effect is antidilutive.
Page 8
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
REVENUE. Revenue for the three months ended June 30, 1998 was $18.8 million, a
decrease of $400,000 or 2% less than the three months ended June 30, 1997. The
decrease was primarily the result of revenue from large-scale custom solutions
during the three months ended June 30, 1997 which did not recur during the three
months ended June 30, 1998 and reduced revenue from the Company's Implementation
Unit. This decrease was partially offset by an increase in revenue from the
Company's European and Managed Care Units.
SALARIES, WAGES AND BENEFITS. Salaries, wages and benefits were $9.9 million or
53% of revenue for the three months ended June 30, 1998 as compared to $10.5
million or 55 % of revenue for three months ended June 30, 1997. The decrease in
these expenses was the result of the Company reducing its overall level of
employment during the second half of 1997 and first quarter of 1998.
OTHER OPERATING EXPENSES. Other operating expenses, which include occupancy,
travel and consulting expenses, were $6.3 million or 33% of revenue for the
three months ended June 30, 1998 as compared to $6.4 million or 33% of revenue
for the three months ended June 30, 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $2.6 million or
14% of revenue for the three months ended June 30, 1998, as compared to $5.0
million or 26% of revenue for the three months ended June 30, 1997. The decrease
in these expenses was a result of the effect of the write-off of certain
intangible assets in 1997 and 1998.
INTEREST INCOME AND EXPENSE. Net interest income was $75,000 for the three
months ended June 30, 1998 compared with net interest income of $4,000 for the
three months ended June 30, 1997. This increase was the result of lower bank
fees in 1998.
INCOME TAXES. The Company's effective tax rate was 32% for the three months
ended June 30, 1998, compared with 18.5% for the three months ended June 30,
1997. This higher rate is due primarily to the effect of the write-off of the
intangible assets associated with the impairment loss discussed above and the
effects of interperiod tax allocations on the Company's 1997 tax provision.
Page 9
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
REVENUE. Revenue for the six months ended June 30, 1998 was $36.4 million, a
decrease of $8.6 million or 19% less than the six months ended June 30, 1997.
The decrease was primarily the result of revenue from large-scale custom
solutions during the six months ended June 30, 1997 which did not recur during
the six months ended June 30, 1998 and reduced revenue from the Company's
Implementation Unit. This increase was partially offset by an increase in
revenue from the Company's European Unit.
SALARIES, WAGES AND BENEFITS. Salaries, wages and benefits were $19.8 million
for the six months ended June 30, 1998 as compared to $21.4 million for six
months ended June 30, 1997, but increased as a percentage of revenue to 55% for
the six month period as compared to 48% for the same period in 1997. The
decrease in these expenses was primarily the result of the Company reducing its
overall level of employment during 1997 and 1998, but with overall employment
still at a level in anticipation of higher revenue than was actually achieved.
OTHER OPERATING EXPENSES. Other operating expenses, which include occupancy,
travel and consulting expenses, were $12.2 million for the six months ended June
30, 1998 as compared to $12.4 million for the six months ended June 30, 1997,
but increased as a percentage of revenue to 34% for the three month period as
compared to 28% for the same period in 1997. The decrease in these expenses was
a result of cost control efforts relating to travel and the use of outside
consultants, but with the expenses still at a level in anticipation of higher
revenue than was actually achieved.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $7.2 million or
20% of revenue for the six months ended June 30, 1998, as compared to $9.7
million or 22% of revenue for the six months ended June 30, 1997. The decrease
in these expenses was a result of the effect of the write-off of certain
intangible assets during 1997 and 1998.
IMPAIRMENT LOSS ON INTANGIBLE ASSETS AND RESTRUCTURING CHARGES. These charges
arose primarily due to the failure of the Company's Integrated Solutions Unit to
execute agreements with customers for large scale custom solutions and the
Company's determination that the Unit's revenue which could be anticipated from
future agreements of this type was significantly less than had been previously
anticipated. As the products marketed by the Integrated Solutions Unit were
intended to integrate the products and technologies of the Company's other
business units, this determination resulted in a reduced expectation of future
cash flows from the Company's intangible assets across most of its business
units and, accordingly, an impairment in value of these intangible assets. The
remainder of the charges, totaling approximately $800,000, related primarily to
accruals for the cost of employee severance and facilities reductions. As of
June 30, 1998 approximately $421,000 of the accruals had been used. The
remainder of the accrual primarily relates to reserves for facility reductions.
INTEREST INCOME AND EXPENSE. Net interest income was $78,000 for the six months
ended June 30, 1998 compared with net interest income of $87,000 for the six
months ended June 30, 1997. This change was the result of a lower invested
balance in 1998 which was partially offset by lower bank fees.
INCOME TAXES. During the quarter ended March 31, 1998, the Company recorded a
valuation allowance of $5.0 million to reduce the carrying value of its deferred
tax asset to an amount management believes is realizable through future taxable
income. Exclusive of this valuation allowance, the Company's effective tax rate
was 31% for the six months ended June 30, 1998, compared with 77% for the six
months ended June 30, 1997. This lower rate is due primarily to the effect of
the write-off of the intangible assets associated with the impairment loss as
discussed above.
Page 10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a $25 million revolving line of credit (subject to certain
borrowing limitations) with First Union National Bank ("First Union") for
general corporate purposes including working capital requirements and
acquisitions. Borrowings under this line are collateralized by substantially all
of the Company's assets and bear interest at varying rates based on an index
tied to First Union's prime rate or LIBOR. The Company is required to pay a
commitment fee on the average daily unused portion of the facility at a rate
from 0.25% to 0.375% per annum, depending on the Company's debt/cash flow ratio.
The credit facility also contains financial covenants applicable to the Company,
including debt/cash flow ratios and ratios of debt to capital. As of June 30,
1998, the Company was in compliance with all such financial covenants and had a
maximum borrowing capacity of approximately $11million, and there were no
borrowings outstanding under the facility. The credit facility expires on July
31, 2001.
YEAR 2000 COMPUTER SOFTWARE
The Company has performed a review of its computer systems and software and has
begun to implement the required revisions in anticipation of the Year 2000. The
Company believes that its primary exposure to the issue is in the ability of its
systems to recognize four digit references versus two digit references (i.e.,
1998 versus 98) and to accept such information from its customers in the process
of building its databases. At this time, the Company has completed the required
revisions to certain of its main processing systems to make them Year 2000
compliant and has scheduled the remainder of its efforts such that they should
be completed by June 1999. The Company believes that to a significant extent,
the necessary revisions to its systems and products will be made during the
planned updates and edits to its products offerings. As a result, the cost of
the efforts performed to date and the incremental future costs the Company
expects to incur to make all of its systems and processes Year 2000 compliant
are not anticipated to be material to the Company's results of operations,
liquidity or capital resources.
While the Company, in the process of making its systems Year 2000 compliant,
intends to design algorithms to test data received from its customers and
convert it to a usable format, there can be no assurances that the Company will
not experience difficulties in utilizing data provided by its customers who have
not taken the necessary steps to make their internal systems Year 2000
compliant. It is not currently possible to estimate the effect on the Company's
results of operations from any such difficulties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable
Page 11
<PAGE>
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held at 10:00 a.m.,
Baltimore time, on May 6, 1998 at the corporate headquarters of the Company. The
stockholders elected all of the Company's nominees for director and approved the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
1998. The votes were as follows:
1. ELECTION OF DIRECTORS
---------------------
NOMINEE FOR WITHHELD
------- --- --------
GEORGE D. PILLARI 10,360,476 67,370
RICHARD DULUDE 10,353,746 74,100
2. APPOINTMENT OF KPMG PEAT MARWICK LLP
------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
10,356,128 50,808 20,910
ITEM 5. OTHER INFORMATION
Discretionary Voting for 1999 Annual Meeting of Stockholders
Pursuant to Rule 14a-4 promulgated under the Securities Exchange Act of
1934, in connection with the Company's 1999 annual meeting of stockholders, the
execution of a proxy solicited by the Company shall confer on the designated
proxyholder discretionary voting authority to vote the shares on any matter for
which the Company has not received notice at least 45 days prior to date on
which the Company first mailed its proxy materials for the 1998 annual meeting.
If the date of the 1999 annual meeting is changed by more than 30 days from the
1998 annual meeting date, such notice must be received a reasonable period of
time before the Company mails its proxy materials for the 1999 annual meeting.
In order for any proposal to be actually submitted to the annual meeting, the
submitting stockholder must provide a written notice to the Secretary of the
Company describing such proposal and providing such other information as is
required by the Company's Bylaws, all within the time periods outlined in the
Bylaws. Copies of the relevant provisions of the Company's Bylaws may be
obtained by writing to the Secretary, HCIA Inc., 300 East Lombard Street,
Baltimore, Maryland 21202.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(B) REPORTS ON FORM 8-K
A current Report on Form 8-K, dated April 17, 1998, was filed in
connection with the Company's results for the three months ended March 31, 1998.
The Report contained a summarized version of that quarter's financial
statements.
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HCIA Inc.
_________
(Registrant)
Date: August 7, 1998
By: _____________________
Barry C. Offutt
Senior Vice President and
Chief Financial Officer
(principal financial officer)
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,955
<SECURITIES> 0
<RECEIVABLES> 29,739
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,730
<PP&E> 12,026
<DEPRECIATION> 0
<TOTAL-ASSETS> 136,522
<CURRENT-LIABILITIES> 11,828
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 124,576
<TOTAL-LIABILITY-AND-EQUITY> 136,522
<SALES> 36,356
<TOTAL-REVENUES> 36,356
<CGS> 0
<TOTAL-COSTS> 90,028
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (78)
<INCOME-PRETAX> (53,594)
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