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Contract Headaches Affect Healthaxis 3Q Results

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NU Online News Service, Nov. 5, 2003, 10:59 a.m. EST – Healthaxis Inc., Irving, Texas, says problems with a Washington state contract hurt third-quarter earnings.

The health benefits administration technology company is reporting a $792,000 net loss for the latest quarter on $5.4 million in revenue, compared with a $14 million net loss on $4.8 million in revenue for the third quarter of 2002.

The amount of cash and cash equivalents on hand fell to $8.4 million at the end of the quarter, from $11 million at the end of 2002.

Net income for the third quarter of 2002 included a one-time gain of $16 million created by the exchange of long term debt for preferred stock and cash. Without the gain, Healthaxis would have reported a loss of $2.2 million for the quarter.

Healthaxis signed contracts with several large new clients during the third quarter, but it notes that third-quarter results include $128,000 in losses resulting from efforts to handle a fixed-fee job for the State of Washington Health Care Authority.

Healthaxis also could end up losing money as the result of the cancellation of portions of a $351 million benefits administration system development contract between the Georgia Department of Community Health and Affiliated Computer Services Inc., Dallas.

Healthaxis acted as a subcontractor to Affiliated.

Georgia officials have accused the development team of failing to live up to expectations, and Affiliated says it has had problems because Georgia has not devoted sufficient resources to support the project, according to press reports.

Healthaxis says it recognized $550,000 in previously deferred Georgia project revenue in the third quarter. Healthaxis will be billing Affiliated for other completed work in the fourth quarter, but the amount of the fourth-quarter bill cannot be estimated at this time, Healthaxis says.