Health Risk Management Reports First Quarter Calendar Year 2000 Results.MINNEAPOLIS, May 11 /PRNewswire/ --Health Risk Management, Inc. (HRM HRM Her/His Royal Majesty HRM Human Resources Management HRM Heart-Rate Monitor HRM Halifax Regional Municipality (Canada) HRM Hotel Restaurant Management HRM Hrvatska Ratna Mornarica (Croatian Navy) ) (Nasdaq: HRMI HRMI Human Resources Management Information (UK) ) reported total revenues for its first quarter of calendar year 2000 ended March 31, 2000, increased eight percent to $56,741,000 from $52,442,000 for the quarter ended March 31, 1999. Income for the quarter was $104,000 or $0.02 per share ($0.02 diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) compared to $1,069,000 or $0.23 per share ($0.23 diluted) for last year's quarter ended March 31. Commenting on first quarter earnings, HRM Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Gary McIlroy, M.D., said, "The results for the quarter are within our expectations. At the time of our last earnings report, we expected earnings for the first quarter would be offset by additional amortization of approximately $250,000 in the quarter for shortening the useful life of our current care management software, approximately $350,000 in realization of the decision the Board made in late March to provide additional health plan medical services payables in the quarter to be a more conservative best estimates and internal start-up costs of approximately $500,000 associated with two new businesses. Internal start-up expenses associated with the new businesses are expected to end by mid-summer when both business units expect to secure external financing In the theory of capital structure, External financing is the phrase used to describe funds that firms obtain from outside of the firm. It is contrasted to internal financing which consists mainly of profits retained by the firm for investment. and/or strategic partners with financing capabilities." Service Business Unit Pamela Hursh, Service Business Unit president, said, "this quarter the business unit had slightly lower revenues than expected. We expect this to continue through the second quarter due to run-out revenue from lost covered lives that has not been replaced at this time. Our unit has been reducing its cost structure in anticipation of its new web-based product. We believe this improved cost structure will provide us with greater financial flexibility going forward." Health Plan Business Unit Luis Rosa, president of the Health Plan Business Unit, said: "our objectives to increase revenues, reduce our medical loss ratio and move our administrative expenses to the lowest possible level are on target. The premium increase granted to OakTree Health Plan does appear to be adequately covering the expected health plan cost increases, and our medical loss ratio of 82% in the quarter is a significant improvement over the MLR MLR mixed lymphocyte reaction. MLR Myocardial laser revascularization, see there of 85% we saw in the transition period ended December 31, 1999. "We are particularly excited about the potential of HealthMATE, the nearly 17,000 voluntary member health plan that we acquired in January 2000 that serves the Medicaid population in a six county area in central Pennsylvania. Revenue from this plan is expected to exceed $32,000,000 annually. Further," Rosa said, "we plan to expand into six additional counties in the Lehigh-Capital Zone, which currently has only 55,000 members enrolled in managed care plans out of 170,000 eligible Medicaid members who will be required to join a managed care plan in 2001. So we see a tremendous opportunity for growth." QualityFIRST(R) Business Unit QualityFIRST Business Unit CEO Marlene Travis, said, "During the first quarter we continued our focus on development of plans and prototypes to make our QualityFIRST clinical decision support systems, including the medical content, suitable and attractive for Internet applications. We completed a preliminary demonstration disk that highlights the potential of our concept; we completed our business plan, which is being circulated to potential funding sources; and in April we held the first meeting of our 15-member advisory board. We expect to send out a news release later this month highlighting the advisory board membership. "The polarization polarization Property of certain types of electromagnetic radiation in which the direction and magnitude of the vibrating electric field are related in a specified way. that exists in the health care industry is due primarily to the continuing controversies over clinical decisions made by health plans. Both providers and health plan members show an increasing lack of trust in the health plan's motivation in making health care decisions," Travis said. "With our new e-health business, we expect to 'open the black box of guidelines' for physicians and consumers. With this approach the health plans using QualityFIRST scientific, evidence-based, decision support will be able to offer their network providers and their health plan members access to the same decision support they use in making clinical decisions. This will create a WIN/WIN/WIN by enhancing communications and collaboration among the stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. . "We have branded, and are applying for a patent, on this concept, which we call the HEALTHeDECISIONS Triple Win. This approach seems to resonate res·o·nate v. res·o·nat·ed, res·o·nat·ing, res·o·nates v.intr. 1. To exhibit or produce resonance or resonant effects. 2. with health plans as they strive to gain the trust and confidence of their network providers and their members." Travis also announced that the business unit has established a number of vendor partner relationships to assist in the development of the new QualityFIRST business on the Internet. These will be announced in separate news releases. Shareholder Value in Relation to New Business Costs 1. Costs associated with the start-up of the new businesses are necessary if the company is to successfully leverage existing appreciated assets into maximum value for the shareholder. 2. The company does not expect that current operations will need to continue to support new business start up efforts after mid-summer. 3. Discussions are underway with potential strategic partners, venture capital firms and investment bankers. HRM, with headquarters in Minneapolis, delivers evidence-based solutions to the managed care and indemnity marketplaces. Solutions for managed care organizations that are at financial risk include a suite of QualityFIRST evidence-based clinical decision support and benchmarking systems for medical risk management. HRM also provides outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. and risk sharing arrangements for health plans using HRM's electronically integrated health plan management services. More than 10 million health plan members benefit from QualityFIRST services. In addition, HRM provides integrated health plan solutions for more than two million members of CarePASS(R) USA -- Your Passport to Health(SM), a nationwide managed indemnity health plan. HRM also owns Pennsylvania HealthMATE, a Medicaid Integrated Delivery System integrated delivery system Integrated provider Medical practice A coordinated health care system formed by physician groups and hospitals which ↑ efficiency and ↓ redundancy in providing health care; IDSs coordinate delivery of a broad range of health and OakTree Health Plan(SM), a Philadelphia area Medicaid HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, . Forward-looking statements in this news release reflected as expectations, plans, anticipations, prospects or future estimates are subject to the risks and the uncertainties present in the Company's business and the competitive health care marketplace including, but not limited to clients and vendors commonly experiencing mergers or acquisitions, use of estimates for incurred but not yet reported claims including medical services payable, use of estimates of bonus accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. including accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying , reconciliations, volume fluctuations, provider relations and contracting, participant enrollment fluctuations, changes in member mix or utilization levels, fixed price contracts, contract disputes, contract modifications, contract renewals and non-renewals, regulatory issues and requirements, various business reasons for delaying contract closings, and the operational challenges of matching case volume with optimum staffing, having fully trained staff, having computer and telephonic supported operations, and managing turnover of key employees and outsourced services to performance standards. While occurrences of these risks, and others periodically detailed in the Company's SEC reports, cannot be predicted exactly, such occurrences can be expected to have an impact on HRM's anticipated level of revenue growth or profitability. NOTE TO EDITORS: All HRM releases are available at no charge through our news on-call fax services and on the Internet. For a menu of HRM's recent releases or to retrieve a specific release via fax, call 1-800-758-5804, extension 399650. For further information about HRM, visit our website at www.hrmi.com . HEALTH RISK MANAGEMENT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data) Three Months Ended March 31, 2000 Revenues: % (1) Premiums - gross $44,790 78.9% Ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. allowance - 0.0% Management service fees 10,490 18.5% QualityFIRST revenues 1,174 2.1% Investment income 287 0.5% Total revenues 56,741 100.0% Less ceded premiums - Net revenues 56,741 Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. : Medical costs, net 36,783 Medical loss ratio (MLR) 82.1% Cost of services, net 15,437 27.2% Selling, marketing and administration, net 3,985 7.0% Interest expense 332 0.6% Total operating expenses 56,537 99.6% Income (loss) before income taxes 204 0.4% Income taxes expense (benefit) 100 0.2% Net income (loss) $104 0.2% Basic earnings per share: Net income (loss) $0.02 Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of : Net income (loss) $0.02 Weighted average shares: Basic 4,653 Diluted 4,654 Three Months Ended March 31, 1999 Change Revenues: % (1) Premiums - gross $37,962 72.4% $6,828 18% Ceding allowance 1,239 2.4% (1,239) -100% Management service fees 11,903 22.7% (1,413) -12% QualityFIRST revenues 1,059 2.0% 115 11% Investment income 279 0.5% 8 3% Total revenues 52,442 100.0% 4,299 8% Less ceded premiums (18,528) 18,528 -100% Net revenues 33,914 22,827 67% Operating expenses: Medical costs, net 15,644 21,139 135% Medical loss ratio (MLR) 80.5% Cost of services, net 13,144 38.8% 2,293 17% Selling, marketing and administration, net 3,174 9.4% 811 26% Interest expense 265 0.8% 67 25% Total operating expenses 32,227 95.0% 24,310 75% Income (loss) before income taxes 1,687 5.0% (1,483) -88% Income taxes expense (benefit) 618 1.8% (518) -84% Net income (loss) $1,069 3.2% $(965) -90% Basic earnings per share: Net income (loss) $0.23 Diluted earnings per share: Net income (loss) $0.23 Weighted average shares: Basic 4,624 Diluted 4,665 (1) Percentages for revenues are presented as percent of total revenues, and percentages for operating expenses are presented as a percentage of net revenue, except medical costs, which are presented as a percentage of the component revenue(MLR). HEALTH RISK MANAGEMENT, INC. CONSOLIDATED CASH FLOW INFORMATION (Unaudited, in thousands) Three Months Ended March 31, March 31, 1999 2000 Net Income $104 $1,069 Adjustments: Loss on disposal of equipment 14 - Depreciation 834 941 Amortization 2,157 1,800 Provision for deferred income taxes 95 614 Changes in operating assets/liabilities, net Accounts receivable (690) 6,861 Other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. (170) 980 Accounts payable 2,442 1,339 Medical services payable (6,302) (15,749) Due to reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. (138) 7,203 Accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. expenses 699 2,040 Unearned revenues (1,167) 4,063 Net cash (used in) provided by operating activities (2,122) 11,161 Cash flow from investing activities Cash Flow From Investing Activities An item on the cash flow statement that reports the aggregate change in a company's cash position resulting from any gains (or losses) from investments in the financial markets and operating subsidiaries, and changes resulting from amounts spent : Acquisition of net liabilities(assets), net of cash 1,593 (7,734) Property and equipment, net (231) (595) Capitalized software costs (1,423) (2,031) Purchase of investments - (234) Net cash used in investing activities (61) (10,594) Cash flows from financing activities: Proceeds from notes payable - 4,000 Principal payments on notes payable (1,125) (471) Principal payments on capital leases (88) (174) Issuance of common shares 5 105 Net cash used in financing activities (1,208) 3,460 Decrease in cash and cash equivalents (3,391) 4,027 Cash and cash equivalents at beginning of period 10,577 6,736 Cash and cash equivalents at end of period $7,186 $10,763 HEALTH RISK MANAGEMENT, INC. CONSOLIDATED BALANCE SHEETS (In thousands) March 31, December 31, 2000 1999 (Unaudited) Assets Current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. : Cash and cash equivalents $7,186 $10,577 Accounts receivable, net 21,785 19,627 Deferred income taxes 700 700 Other current assets Other Current Assets A balance sheet item that includes the value of non-cash assets due within one year. Notes: Examples are things like prepaid expenses and accounts receivable. 1,641 1,448 Total current assets 31,312 32,352 Fixed maturity investments at fair value 6,665 6,675 Computer software costs, net 25,694 26,180 Property and equipment, net 13,153 11,078 Other assets 7,818 4,552 Total $84,642 $80,837 Liabilities and Shareholders' Equity Current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. : Accounts payable $5,533 $3,084 Medical services payable 22,911 22,506 Due to reinsurer - 138 Accrued expenses 6,127 4,226 Unearned revenues 1,607 2,774 Current maturities of notes payable 8,995 6,825 Current maturities of capitalized equipment leases 575 380 Total current liabilities 45,748 39,933 Deferred income taxes 1,574 1,479 Long-term portion of notes payable - 3,295 Long-term portion of capitalized equipment leases 1,504 529 Surplus note payable 2,500 2,500 Shareholders' equity 33,316 33,101 Total $84,642 $80,837 |
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