SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[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 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 May 1, 1999:
Class: Common Stock Number of Shares: 11,851,125
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(in thousands)
Part 1
Item 1. Financial Statements
<TABLE>
<CAPTION>
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 6,672 $ 7,343
Proceeds receivable from the sale of discontinued operations........ 7,500 -
Trade accounts receivable, net of allowance for doubtful accounts
of $1,653 in 1999 and $1,816 in 1998............................... 24,342 23,677
Prepaid expenses and other current assets........................... 2,792 2,619
------------- ------------
Total current assets............................................... 41,306 33,639
Furniture and equipment, net.......................................... 7,591 8,325
Computer software costs, net.......................................... 11,616 10,525
Other intangible assets, net.......................................... 37,598 38,366
Net deferred tax asset................................................ 36,414 36,719
Net assets of discontinued operations................................. - 1,363
Other................................................................. 556 556
------------- ------------
Total assets....................................................... $ 135,081 $ 129,493
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 1,542 $ 1,219
Accrued salaries, benefits and other liabilities..................... 9,108 8,879
Accrued liabilities of discontinued operations....................... 3,772 -
Deferred revenue..................................................... 2,082 1,296
------------- -------------
Total current liabilities.......................................... 16,504 11,394
------------- -------------
Stockholders' equity:
Common stock-$.01 par value; 50,000,000 shares authorized; issued and
outstanding 11,851,125 shares.................................. 118 118
Additional paid-in capital............................................ 250,904 250,904
Accumulated deficit................................................... (132,255) (132,826)
Accumulated other comprehensive loss.................................. (190) (97)
------------- -------------
Total stockholders' equity........................................ 118,577 118,099
------------- -------------
Total liabilities and stockholders' equity............................ $ 135,081 $ 129,493
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 1
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1999 and 1998
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Revenue............................................................. $ 16,172 $ 14,938
Salaries, wages and benefits........................................ 7,747 7,997
Other operating expenses............................................ 5,296 5,154
Depreciation........................................................ 849 949
Amortization........................................................ 1,769 2,900
Impairment loss on intangible assets and restructuring charges...... - 25,067
--------------- --------------
Operating income (loss) ...................................... 511 (27,129)
Interest income..................................................... 68 83
Interest expense ................................................... 55 80
--------------- --------------
Income (loss) from continuing operations before income taxes. 524 (27,126)
Provision (benefit) for income taxes................................ 224 (4,272)
--------------- --------------
Income (loss) from continuing operations..................... 300 (22,854)
Loss from discontinued operations, net of tax....................... (336) (19,196)
Gain on sale of discontinued operations, net of tax............... 607 -
--------------- --------------
Income (loss) from discontinued operations................... 271 (19,196)
Net income (loss)............................................ $ 571 $ (42,050)
=============== ==============
Income (loss) per share from continuing operations:
Basic net income (loss) per share $ 0.03 $ (1.93)
=============== ==============
Basic shares used in per share calculation 11,851 11,851
=============== ==============
Diluted net income (loss) per share $ 0.03 $ (1.93)
=============== ==============
Diluted shares used in per share calculation 11,851 11,851
=============== ==============
Income (loss) per share from discontinued operations:
Basic net income (loss) per share $ 0.02 $ (1.62)
=============== ==============
Basic shares used in per share calculation 11,851 11,851
=============== ==============
Diluted net income (loss) per share $ 0.02 $ (1.62)
=============== ==============
Diluted shares used in per share calculation 11,851 11,851
=============== ==============
Net income (loss) per share:
Basic net income (loss) per share $ 0.05 $ (3.55)
=============== ==============
Diluted net income (loss) per share $ 0.05 $ (3.55)
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE LOSS
Year ended December 31, 1998 and the three months ended March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
ADDITIONAL PAID-IN COMPREHENSIVE
COMMON STOCK CAPITAL ACCUMULATED DEFICIT INCOME (LOSS)
-------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 $ 118 $ 250,892 $ (84,179) $ (117)
------------------------------------------------------------------------
Exercise of stock options - 12 - -
Comprehensive loss
Net loss - - (48,647) -
Other comprehensive loss
Foreign currency translation - - - -
Other comprehensive loss 20
Comprehensive loss
------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 $ 118 $ 250,904 $ (132,826) $ (97)
========================================================================
Exercise of stock options - - - -
Comprehensive income
Net income - - 571 -
Other comprehensive loss
Foreign currency translation - - - -
Other comprehensive loss (93)
Comprehensive income
------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999
(Unaudited) $ 118 $ 250,904 $ (132,255) $ (190)
========================================================================
</TABLE>
<TABLE>
<CAPTION>
COMPREHENSIVE TOTAL STOCKHOLDERS'
INCOME (LOSS) EQUITY
-------------- -------------------
<S> <C> <C>
$ 166,714
BALANCE AT DECEMBER 31, 1997 -------------------
- 12
Exercise of stock options
Comprehensive loss (48,647) (48,647)
Net loss
Other comprehensive loss 20 20
Foreign currency translation ----------------
20
Other comprehensive loss ----------------
$ (48,627)
Comprehensive loss ================
-------------------
$ 118,099
BALANCE AT DECEMBER 31, 1998 ===================
- -
Exercise of stock options
Comprehensive income 571 571
Net income
Other comprehensive loss (93) (93)
Foreign currency translation ----------------
(93)
Other comprehensive loss ----------------
$ 478
Comprehensive income ================
-------------------
BALANCE AT MARCH 31, 1999 $ 118,577
(Unaudited) ===================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
HCIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended March 31, 1999 and 1998
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................. $ 571 $(42,050)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Gain on sale of discontinued operations................................. (1,041) -
Depreciation and amortization........................................... 2,618 3,849
Impairment loss on intangible assets and restructuring charges.......... - 25,067
Impairment loss on intangible assets and restructuring charges..........
of discontinued operations - 25,754
Deferred tax provision.................................................. 305 (11,689)
Changes in operating assets and liabilities:
Accounts receivable.................................................. (665) 4,781
Prepaid expenses and other current assets............................ (60) (601)
Accounts payable..................................................... 323 (461)
Accrued salaries, benefits and other liabilities..................... (1,208) 386
Deferred revenue..................................................... 786 (336)
---------- -----------
Net cash provided by operating activities....................... 1,629 4,700
---------- -----------
Cash flows from investing activities:
Purchases of furniture and equipment.......................................... (115) (171)
Computer software purchased or capitalized.................................... (1,907) (2,124)
Other intangible assets purchased or capitalized.............................. (185) (278)
Investment in net assets of discontinued operations........................... - 347
Other......................................................................... - (40)
---------- -----------
Net cash (used in) investing activities......................... (2,207) (2,266)
---------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options....................................... - 12
---------- -----------
Net cash provided by financing activities...................... - 12
---------- -----------
Impact of currency fluctuations on cash and cash equivalents........................ (93) (32)
---------- -----------
(Decrease) increase in cash and cash equivalents ................................... (671) 2,414
Cash & cash equivalents - beginning of period....................................... 7,343 5,580
---------- -----------
Cash & cash equivalents - end of period............................................. $ 6,672 $ 7,994
========== ===========
Supplemental cash flow information - cash paid during period for interest $ 16 $ 40
========== ===========
- cash paid during period for income taxes $ 98 $ -
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
HCIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(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 March 31, 1999 may not be indicative
of the results that may be expected for the full year ending December 31, 1999.
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, 1998 as contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
(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 Content 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 Content 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 March 31, 1999 substantially all of
the accruals had been used. The following table summarizes the impairment loss
on intangible assets and computer software costs:
<TABLE>
<CAPTION>
Pre-Charge Post-Charge
Asset Net Book Value Write Down Net Book Value
as of 3/31/98
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
===============================================================
</TABLE>
The charges have been allocated to continuing operations ($25.1 million) and
discontinued operations ($25.7 million) based on the nature of the assets and
operations incurring the charge.
(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 believed was realizable through future taxable income.
Page 5
<PAGE>
(4) SEGMENT INFORMATION
Effective December 31, 1998, the Company adopted SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which requires that
the Company report information about its operating segments. The Company's three
operating segments, Content, Managed Care/Pharmaceutical and HCIA Europe, each
have separate management teams and offer different products and services.
The Content Unit builds, manages and maintains comparative databases. The
Managed Care/ Pharmaceutical Unit helps pharmaceutical companies, employers,
managed care organizations and indemnity insurers better manage the overall
health status and costs of a covered population by providing medical resource
usage and outcomes information. HCIA Europe provides clinical, financial, and
operational efficiency analyses to hospitals and health care purchasers outside
of the United States.
The Company evaluates the performance of its operating segments based on
contribution margin. Contribution margin includes direct payroll costs and other
direct costs, but does not include any corporate allocations of overhead costs,
nonrecurring items, interest income, interest expense, amortization or
depreciation. Certain 1998 amounts have been reclassified to conform with the
1999 presentation.
Summarized financial information regarding the Company's operating segments is
shown in the following table. The "Corporate Costs" column includes corporate
related items, results of insignificant operations and income and expense not
allocated to operating segments. There are no material inter-segment revenues or
receivables.
<TABLE>
<CAPTION>
Managed Care/
Content Pharmaceutical HCIA Europe Corporate Costs Consolidated
------- -------------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1999
Revenue $ 8,210,000 $ 6,443,000 $ 1,519,000 - 16,172,000
Contribution 3,904,000 2,282,000 452,000 (6,127,000) 511,000
Accounts Receivable 13,126,000 9,857,000 1,359,000 - 24,342,000
THREE MONTHS ENDED MARCH 31, 1998
Revenue 7,563,000 5,630,000 1,745,000 - 14,938,000
Contribution 3,686,000 1,940,000 492,000 (8,180,000) (2,062,000)
Accounts Receivable 20,278,000 5,596,000 868,000 - 26,742,000
</TABLE>
(5) NEW ACCOUNTING PRONOUNCEMENTS
The American Institute of Certified Public Accountants (AICPA) has issued
Statement of Position 98-9, Modifications of SOP 97-2 "Software Revenue
Recognition" (SOP 98-9), with respect to certain transactions. The new SOP will
have a limited impact on certain revenue recognition practices of the Company.
The new SOP will be effective for the Company's 2000 quarterly and annual
financial statements. The new SOP delays the definition of Vendor Specific
Objective Evidence as stipulated in SOP 97-2 until fiscal years beginning after
March 31, 1999. The Company is currently evaluating the effect of this
pronouncement.
(6) EARNINGS PER SHARE
The Company calculates earnings per share in accordance with SFAS No.128,
"Earnings Per Share". Basic EPS is calculated by dividing net income (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. For the periods ended
March 31, 1999 and 1998, there were no potentially dilutive common shares and,
accordingly, Basic EPS was equal to Diluted EPS.
Page 6
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
REVENUE. Revenue for the three months ended March 31,1999 was $16.2 million, an
increase of $1.2 million or 8.3% over the three months ended March 31, 1998. The
increase was the result of a $750,000 increase in revenue from the Company's
Managed Care Unit and a $650,000 increase from the Company's Content Unit, which
were partially offset by a $200,000 decrease in revenue from HCIA Europe.
Revenue increases were the result of the expansion of the Company's service to
the employer and pharmaceutical markets and the timing of certain product
releases.
SALARIES, WAGES AND BENEFITS. Salaries, wages and benefits were $7.7 million or
48% of revenue for the three months ended March 31, 1999 as compared to $8.0
million or 54% of revenue for three months ended March 31,1998. This decrease
was primarily the result of the Company's restructuring of operations during
1998.
OTHER OPERATING EXPENSES. Other operating expenses, which include facility
costs, royalty payments, production costs, travel and consulting expenses, were
$5.3 million for the three months ended March 31, 1999 as compared to $5.2
million for the three months ended March 31, 1998, but decreased as a percentage
of revenue to 33% for the three month period in 1999 from 35% for the same
period in 1998. The increase in other operating expenses was the result of an
increase in royalty payments associated with new contracts and production costs,
partially offset by a reduction in facilities costs and travel related expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $2.6 million or
16% of revenue for the three months ended March 31, 1999, as compared to $3.8
million or 26% of revenue for the three months ended March 31, 1998. This
decrease was a result of the effect of the write-off of certain intangible
assets in 1998.
IMPAIRMENT LOSS ON INTANGIBLE ASSETS AND RESTRUCTURING CHARGES. During the three
months ended March 31, 1998, the Company recorded a charge from continuing
operations relating to an impairment loss on intangible assets and restructuring
charges of approximately $25.1 million. Approximately $24.6 million of the
charges arose due to the failure of the Company's Content 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 Content 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 the value of these intangible assets. The
remainder of the charges, totaling approximately $500,000, related primarily to
accruals for the cost of employee severance and facilities reduction.
INTEREST INCOME AND EXPENSE. Net interest income was $13,000 for the three
months ended March 31, 1999 compared with net interest income of $3,000 for the
three months ended March 31, 1998. This increase was the result of a reduction
interest expense, partially offset by a reduction in interest income associated
with a lower invested balance.
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 believed was realizable through future taxable
income. Exclusive of this valuation allowance, the Company's effective tax rate
was 34.2% for the three months ended March 31, 1998, compared with 42.7% for the
three months ended March 31, 1999. The higher rate in 1999 is due primarily to
the effect of certain non-deductible goodwill on the quarterly tax provision.
DISCONTINUED OPERATIONS. The Company decided to discontinue operations of its
Implementation Unit during the quarter ended December 31, 1998 and as of March
31, 1999, the Company disposed of such Unit. Revenues for the Implementation
Unit were $1.0 million and $2.6 million for the three months ended March 31,
1999 and 1998, respectively. During the three months ended March 31, 1999, the
Implementation Unit had net income of $271,000 which included a $607,000 gain on
the sale and a $(336,000) loss from operations. During the three months ended
March 31, 1998, the Unit had a net loss of $(19.2) million including pre-tax
impairment losses on intangible assets and related restructuring charges of
$25.8 million.
Page 7
<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 March 31,
1999, the Company was in compliance with all such financial covenants and had a
maximum borrowing capacity of approximately $6.5 million, and there were no
borrowings outstanding under the facility. The credit facility expires on July
31, 2001.
YEAR 2000 COMPUTER SOFTWARE
The Company has created a Year 2000 Program Office to review its exposure to
Year 2000 computer software issues, to coordinate its efforts to identify those
computer software systems which require revisions in anticipation of the Year
2000 and to coordinate such revisions on a corporate-wide basis. This has
entailed the development of a Company-wide assessment, remediation and
certification process, which is monitored by the Program Office and members of
the Company's senior management. In addition, senior management reports to the
Audit Committee of the Board of Directors on a regular basis regarding the
Company's progress in its Year 2000 remediation efforts. While the Company does
not currently intend to engage any outside parties to certify the completion of
its Year 2000 remediation efforts, it does intend to utilize an internal
certification process, whereby remediation efforts will be reviewed and
certified by Company personnel not directly involved in the remediation.
The Company believes that its primary exposure to the issue is in the ability of
its data processing systems to recognize four digit references versus two digit
references (i.e., 1998 versus 98) and to accept and process such information
from its customers in the process of building databases. In addition, the
Company faces exposure in connection with (i) certain of its software products
which are used to deliver data to clients, (ii) third-party software products,
particularly for its management information systems and (iii) non-information
technology systems used in its business, particularly those operated by third
parties, such as the owners or operators of buildings where the Company's
offices are located.
The Company has substantially completed the evaluation of its own data
processing systems and software products, and has begun remediation of these
systems and products. The Company has also substantially completed its
evaluation of third-party software products used by the Company. The Company
believes that as of March 31, 1999, it has completed approximately 79% of its
total expected efforts and has certified as Year 2000 compliant, approximately
39% of its data processing systems, software products and third-party software,
and that it will complete remediation of substantially all of these systems,
products and software by June 30, 1999. It is the Company's goal, and the
Company's Year 2000 work plans have been scheduled, to finish Year 2000
remediation certification of all of its data processing, software products and
third-party software by no later than June 30, 1999.
The Company has not undertaken a substantial effort to certify the Year 2000
compliance on non-information technology systems, but intends to focus on these
systems during 1999.
Through March 31, 1999, the Company has expended approximately $525,000 on Year
2000 remediation efforts, primarily as the result of allocation of personnel to
evaluation, remediation and certification efforts, that it would not have
otherwise expended but for the Year 2000 remediation process. The Company
believes that it will expend an additional $150,000 on such Year 2000
remediation efforts through 1999. The Company has not, to any material extent,
scheduled the acceleration of the replacement of any systems or products as a
result of the Year 2000 effort, but has instead been able to schedule such
replacement or remediation as part of the planned updates and revisions to its
systems and products. The Company intends to have completed the development of
all systems which will replace existing noncompliant systems by September 30,
1999.
In the event the Company does not properly remediate its data processing
systems, it might be unable to accept data from its clients and others for
processing. This would materially and adversely affect its ability to deliver
Page 8
<PAGE>
its information products and provide its data management services. The
failure of the Company to remediate its software products would also
materially and adversely affect its ability to deliver its information
products and data management services. In either case, this could place
the Company in default of many of its agreements, and also threaten the
Company's right to payment from many of its clients. The Company
believes that the risks from the failure of third-party software and
non-information technology systems to be Year 2000 compliant is less
significant for the Company's ability to meet its client obligations,
but could have an adverse impact on its ability to carry out functions
such as financial reporting and accounts receivable and payable
management.
While the Company, in the process of making its data processing systems Year
2000 compliant, intends to design algorithms to test data received from its
customers and covert it to a usable format, there can be no assurances that the
Company's customers will not experience difficulties in actually providing data
produced by their systems to the Company as a result of Year 2000-related
difficulties. It is not currently possible to estimate the effect on the
Company's results of operations from any such difficulties.
The Company is in the process of finalizing contingency plans for its
"mission-critical" systems and products which were not certified as Year 2000
compliant as of March 31, 1999. The Company plans to finalize contingency plans
for non-"mission-critical" system and products by December 31, 1999. It should
be noted that because most of the Company's data processing and information
product releases involve data which trails the calendar period by one to three
months, the full effect of any failure of the Company's systems or products to
be Year 2000 compliant would most likely not be experienced until the first
quarter of 2000.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-Q contain forward-looking
statements, including statements regarding the intent, belief or current
expectations of the Company and its management. These statements are not
guarantees of future performance and involve a number of risks and uncertainties
that are difficult to predict. Therefore, actual outcomes and results could
differ materially from those indicated by such forward-looking statements. The
Company undertakes no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
Among the important factors that could cause actual results to differ materially
from those indicated by such forward-looking statements are (i) variations in
quarterly results, (ii) the assimilation of acquisitions, (iii) the management
of the Company's growth and expansion, (iv) dependence on key personnel, (v)
development by competitors of new or superior products or entry into the market
of new competitors, (vi) dependence on major customers, (vii) dependence on
intellectual property rights, (viii) integrity, availability and reliability of
the Company's data, (ix) volatility of the Company's stock price, (x) changes in
the health care industry from both a regulatory and financial perspective, (xi)
implementation of required changes to computer systems and software for the year
2000, and (xii) other risks identified from time to time in the Company's
reports and registration statements filed with the Securities and Exchange
Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable
Page 9
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(B) REPORTS ON FORM 8-K
None
Page 10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned thereunto duly authorized.
HCIA Inc.
(Registrant)
Date: October 4, 1999
By:
________________________________
Barry C. Offutt
Senior Vice President and
Chief Financial Officer
(principal financial officer)
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
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0
0
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