CompManagement was acquired by Health Power, Inc. in July 1995. This acquisition was accounted for as a pooling of interests.
Revenues from continuing operations increased $15.5 million, or 232.5%, to $22.2 million during 1997, from $6.7 million for 1996. This increase was primarily the result of $11.2 million in revenues from MCO services derived from the first year of operations of CompManagement Health Systems. Revenues from TPA services increased by 64% from the prior year primarily as a result of an increase in the number of employers participating in the Company's group rating plans.
The Company finances its continuing operations through internally generated funds, and its principal sources of cash for continuing operations are revenues from TPA and MCO services. The Company's principal capital needs for continuing operations are to fund expenditures for continued growth and for possible acquisitions.
The Company has created a committee to address Year 2000 issues. This committee has been actively assessing the Company's Year 2000 readiness and, as part of these assessments, has developed a compliance plan which includes a timetable for identifying, evaluating, resolving, and testing the Company's IT systems for Year 2000 issues. This committee includes members of the Company's senior management and information systems departments to ensure that issues are adequately addressed and completed in a timely manner.
The Company is significantly dependent upon plans or programs administered by governmental agencies pursuant to state statutes and regulations. In particular, the Company is significantly dependent on Ohio's group rating program and Health Partnership Program. The Company's MCO is subject to extensive regulation by OBWC relating to the operation of its MCO. Any changes to Ohio's statutes or regulations applicable to group rating plans or the Health Partnership Program, or interpretations of these statutes and regulations by OBWC, could have a material adverse effect upon the revenues and operations of the Company. The Company believes that its continuing operations are presently in material compliance with all laws, regulations and certification requirements applicable to such operations. However, there can be no assurance that the Company will be able to continue to maintain required regulatory authority or that regulatory changes will not have an adverse impact on the Company in the future.
- 3 - HEALTH POWER, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 - --------------------------------------------------------------------------------
Other disclosures. Effective December 31, 1997, the Company adopted SFAS No. 128, Earnings Per Share. The statement specifies the computation, presentation and disclosure requirements for earnings per share for entities with publicly held common stock (see Note 14). All reported prior period earnings per share information has been restated in accordance with SFAS No. 128.
Under the Plans, the Company is authorized to issue shares of common stock pursuant to "awards" granted in various forms, including incentive stock options (intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended), nonqualified stock options, and other similar stock-based awards to directors and eligible employees of the Company for up to 400,000 common shares of the Company. The Company granted stock options in 1998, 1997 and 1996 under the Plans in the form of incentive stock options and nonqualified stock options. In January 1997, the Company registered 35,000 shares of common stock for the 1996 directors' stock award plan. In February 1998, the Company registered 180,000 shares of common stock under an executive stock option plan.
- 17 - HEALTH POWER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 - --------------------------------------------------------------------------------
Deposits and other assets consist primarily of $420,379 at December 31, 1998 and 1997 in certificate of deposits held on deposit under the terms of the HMO's Certificate of Authority with the Department and ODHS.