SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
APRIL 17, 1998
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED)
HCIA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MARYLAND 0-25378 52-1407998
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
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300 EAST LOMBARD STREET
BALTIMORE, MARYLAND 21202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(410) 895-7470
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 5. OTHER EVENTS
On April 17, 1998, the Company issued a press release (incorporated by
reference herein) announcing preliminary results for the quarter ended March 31,
1998. Filed herewith are selected financial statements for the quarter ended
March 31, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. None.
(b) Pro Forma Financial Statements. None.
(c) Exhibits.
99.1 Press release.
99.2 Selected Financial Statements.
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SIGNATURE
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.
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Registrant
Date: April 27, 1998 By: /s/ Barry C. Offutt
___________________________________
Barry C. Offutt
Senior Vice President and Chief
Financial Officer
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EXHIBIT INDEX
EXHIBIT NO.
99.1 Press release
99.2 Selected financial statements
HCIA ANNOUNCES SHORTFALL IN FIRST QUARTER EARNINGS;
RECORDS RESTRUCTURING CHARGES
BALTIMORE, MD, APRIL 17, 1998 -- HCIA Inc. (NASDAQ:HCIA) today announced its
preliminary results for the first quarter of 1998, which ended March 31, 1998.
Revenue for the first quarter was $17.6 million, compared with $25.7 million for
the first quarter of 1997. Net loss per share, before the charges discussed
below, using a normalized tax rate of 40% was $(0.15) for the first quarter of
1998, compared with net income per share of $0.21 for the first quarter of 1997.
During the first quarter of 1998, the Company expects to record a pre-tax charge
of approximately $50 million, representing the write-off of certain intangible
assets. The Company estimates that the after-tax impact of the charge and a
related write-down of deferred tax assets will be $40 to $45 million.
"The charges reflect our conclusion that certain of the intangibles carried on
our balance sheet will not generate cash flows at a level sufficient to justify
their current carrying value. This conclusion is based primarily on the failure
of our Integrated Solutions Unit to execute agreements with customers for
large-scale custom solutions which integrate the products and technologies of
HCIA's other business units. Because the very nature of the products offered by
the Integrated Solutions Unit involves the use of assets primarily assigned to
other business units, the write-offs have been recorded against intangible
assets across all of our business units. Thus, these assets are now valued to
reflect our expectation of revenue and cash flows from the sale of our products
by business units other than Integrated Solutions. In addition, based upon our
current estimates of future taxable income, we will reduce the carrying amount
of our deferred tax assets to an amount which we believe will be realized
through future taxable income," stated Barry Offutt, Chief Financial Officer of
HCIA.
"As a result of a revenue shortfall in our Integrated Solutions Unit, we missed
our revenue and earnings' targets for the first quarter. However, the growth of
our core revenues has allowed HCIA to make progress towards reaching the primary
objective we established for our company last summer -- to increase core
revenues to the point where they would cover substantially all of our expenses
as we enter a quarter," stated George D. Pillari, Chairman & CEO of HCIA.
Mr. Pillari continued, "We have re-focused our efforts on expanding HCIA's core
lines of business, each of which has a strong market presence and established
customer base. By focusing our resources, including sales personnel, on
expanding our presence in our traditional market niches, we believe HCIA is
positioned to grow incrementally without reliance on stand-alone sales made by
the Integrated Solutions Unit, with their longer and more complex sales cycles.
We believe our strategy to pursue a business model focused on building core
revenues and controlling expenses will reduce the volatility of our quarterly
results and allow HCIA to return to profitability and achieve long-term
success."
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The Company announced the following First Quarter Highlights:
- -------------------------------------------------------------
o At the end of First Quarter 1998, core revenues increased by 12% on a
year-to-year basis.
o Core revenues for Second Quarter 1998 are estimated to be 95% of
expenses, up from 75% for Second Quarter 1997.
o Cash generated of $2.4 million during First Quarter 1998, compared
with cash consumption of $4.5 million during First Quarter 1997.
o Estimated quarterly expense base for Second Quarter 1998 represents a
$1.0 million reduction from the First Quarter 1998 expense base and a
reduction of approximately $2.6 million from Second Quarter 1997.
o DSOs, or Days Sales Outstanding, declined sequentially by 14 days in
First Quarter 1998.
The Company announced the following expanded or extended relationships:
- -----------------------------------------------------------------------
o Louisiana Hospital Association
o Hospital Association of Rhode Island
o Georgia Hospital Association
o Virginia Hospital Association
The Company announced the following significant new relationships:
- ------------------------------------------------------------------
o Siemens Medical Systems. In its relationship with Siemens Medical
Systems, Inc., HCIA's Implementation Unit is a member of the Siemens
on-site team, focusing on cost-containment solutions primarily in the
areas of oncology and cardiology in hospital and integrated delivery
systems, for certain hospitals that have retained Siemens to provide
financial risk-sharing consultancy services. HCIA will be paid based
on the contribution of its database and other services to the success
of the Siemens consulting services in managing the customer's total
health care costs.
o Integrated Therapeutics Group of Schering Plough. HCIA is developing
patient-centered outcomes measurements services, focusing on asthma
and hepatitis, for implementation by ITG in managed care
organizations.
o 3M Health Care Information. HCIA is developing specialized normative
databases utilizing HCIA's outpatient data streams and 3M's Ambulatory
Patient Grouping software. The databases will be available from HCIA
and 3M, and will also be included in 3M's Ambulatory Care Analytical
Workstation.
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An investor conference call is scheduled for 10:30 a.m., eastern time, on
Friday, April 17, 1998. Please contact the Company's Investor Relations
Department, at (410) 895-7515, for further information regarding the call.
HCIA Inc. is a leading health care information content company that develops and
markets clinical and financial decision support systems used by hospitals,
integrated delivery systems, managed care organizations, employers, and
pharmaceutical manufacturers. The Company's databases and products are used to
benchmark clinical performance and outcomes, profile best practices and manage
the cost and delivery of health care.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THIS PRESS RELEASE, OTHER THAN HISTORICAL FINANCIAL INFORMATION, CONSISTS
OF FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE
INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND ITS MANAGEMENT.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD LOOKING STATEMENTS ARE
NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE A NUMBER OF RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
INDICATED BY SUCH FORWARD LOOKING STATEMENTS. AMONG THE IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH
FORWARD LOOKING STATEMENTS ARE (i) THAT THE INFORMATION IS OF A PRELIMINARY
NATURE AND MAY BE SUBJECT TO FURTHER ADJUSTMENT, (ii) VARIATIONS IN QUARTERLY
RESULTS, (iii) THE ASSIMILATION OF ACQUISITIONS, (iv) THE MANAGEMENT OF THE
COMPANY'S GROWTH AND EXPANSION, (v) DEPENDENCE ON KEY PERSONNEL, (vi)
DEVELOPMENT BY COMPETITORS OF NEW OR SUPERIOR PRODUCTS OR ENTRY INTO THE MARKET
OF NEW COMPETITORS, (vii) DEPENDENCE ON MAJOR CUSTOMERS, (viii) DEPENDENCE ON
INTELLECTUAL PROPERTY RIGHTS, (ix) INTEGRITY AND RELIABILITY OF THE COMPANY'S
DATA, (x) VOLATILITY OF THE COMPANY'S STOCK PRICE, (xi) CHANGES IN THE HEALTH
CARE INDUSTRY FROM BOTH A REGULATORY AND FINANCIAL PERSPECTIVE, (xii)
IMPLEMENTATION OF REQUIRED CHANGES TO COMPUTER SYSTEMS AND SOFTWARE FOR THE YEAR
2000, AND (xiii) OTHER RISKS IDENTIFIED FROM TIME TO TIME IN THE COMPANY'S
REPORTS AND REGISTRATION STATEMENTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE THE INFORMATION
CONTAINED IN THIS PRESS RELEASE, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.
# # #
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(in thousands)
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1998 1997
(Unaudited)
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ASSETS
Current assets:
Cash and cash equivalents..................................................................... $ 7,994 $ 5,580
Trade accounts receivable, net of allowance for doubtful accounts
of $2,408 in 1998 and $2,100 in 1997......................................................... 29,490 34,354
Prepaid expenses and other current assets..................................................... 4,314 3,669
Deferred compensation funds held in trust..................................................... 3,218 3,583
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Total current assets......................................................................... 45,016 47,186
Furniture and equipment, net.................................................................... 12,763 13,671
Computer software costs, net.................................................................... 7,712 26,727
Other intangible assets, net.................................................................... 39,837 71,298
Net deferred tax asset.......................................................................... 34,927 23,238
Other........................................................................................... 160 120
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Total assets................................................................................. $140,415 $182,240
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................................. $ 1,811 $ 2,227
Accrued salaries, benefits and other liabilities.............................................. 8,823 7,461
Deferred revenue.............................................................................. 1,919 2,255
Acquired deferred compensation liability ..................................................... 3,218 3,583
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Total current liabilities................................................................... 15,771 15,526
Total liabilities........................................................................... 15,771 15,526
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Stockholders' equity:
Common stock-$.01 par value; 50,000,000 shares authorized; issued and
outstanding 11,851,125 as of March 31, 1998 and 11,850,094 as of
December 31, 1997........................................................................... 118 118
Additional paid-in capital..................................................................... 250,904 250,892
Accumulated deficit............................................................................ (126,229) (84,179)
Accumulated other comprehensive income......................................................... (149) (117)
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Total stockholders' equity................................................................. 124,644 166,714
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Total liabilities and stockholders' equity..................................................... $140,415 $182,240
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HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1998 and 1997
(in thousands, except per share data)
(Unaudited)
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1998 1997
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Revenue............................................................................ $ 17,556 $ 25,725
Salaries, wages and benefits....................................................... 9,904 10,875
Other operating expenses........................................................... 5,920 6,054
Depreciation....................................................................... 1,079 932
Amortization....................................................................... 3,531 3,740
Impairment loss on intangible assets and restructuring charges..................... 50,821 --
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Operating (loss) income...................................................... (53,699) 4,124
Interest income.................................................................... 83 181
Interest expense .................................................................. 80 98
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(Loss) income before income taxes........................................... (53,696) 4,207
(Benefit) provision for income taxes............................................... (11,646) 1,679
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Net (loss) income.......................................................... $(42,050) $ 2,528
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Basic net (loss) income per share.................................................. $ (3.55) $ 0.21
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Basic shares used in per share calculation......................................... 11,851 11,800
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Diluted net (loss) income per share................................................ $ (3.55) $ 0.21
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Diluted shares used in per share calculation....................................... 11,851 12,077
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HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended March 31, 1998 and 1997
(in thousands)
(Unaudited)
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1998 1997
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Cash flows from operating activities:
Net (loss) income................................................................ $ (42,050) $ 2,528
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization.............................................. 4,610 4,672
Impairment loss on intangible assets and restructuring charges............. 50,821 --
Deferred tax provision..................................................... (11,689) 1,214
Changes in operating assets and liabilities:
Accounts receivable..................................................... 4,864 (5,856)
Income taxes receivable................................................. -- 214
Prepaid expenses and other current assets............................... (645) 451
Accounts payable........................................................ (416) 887
Accrued salaries, benefits and other liabilities........................ 239 (1,483)
Deferred revenue........................................................ (336) (386)
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Net cash provided by operating activities.......................... 5,398 2,241
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Cash flows from investing activities:
Purchases of furniture and equipment............................................. (171) (1,991)
Computer software purchased or capitalized....................................... (2,475) (4,095)
Other intangible assets purchased or capitalized................................. (278) (473)
Proceeds from disposals of short-term investments................................ -- 546
Other............................................................................ (40) --
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Net cash used in investing activities.............................. (2,964) (6,013)
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Cash flows from financing activities:
Proceeds from exercise of stock options.......................................... 12 453
Income tax benefit related to stock options...................................... -- 558
Repayments of notes payable...................................................... -- (1,184)
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Net cash provided by (used in) financing activities............... 12 (173)
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Impact of currency fluctuations on cash and cash equivalents........................... (32) (18)
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Increase (decrease) in cash and cash equivalents ...................................... 2,414 (3,963)
Cash & cash equivalents - beginning of period.......................................... 5,580 13,302
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Cash & cash equivalents - end of period................................................ $ 7,994 $ 9,339
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Supplemental cash flow information - cash paid during period for interest $ 40 $ 111
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- cash paid during period for income taxes $ -- $ 306
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