-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LE644ygTgWNIaX5ZWWogd+Mw9abrKgFPV7DRoxRaSOYHAzi0Q0nNRqaCZGI6x5Wb qK2xsSKXHQJDHSOLbncDvg== 0000912057-96-015892.txt : 19960801 0000912057-96-015892.hdr.sgml : 19960801 ACCESSION NUMBER: 0000912057-96-015892 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960731 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HBO & CO CENTRAL INDEX KEY: 0000310377 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 370986839 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09900 FILM NUMBER: 96601748 BUSINESS ADDRESS: STREET 1: 301 PERIMETER CTR N CITY: ATLANTA STATE: GA ZIP: 30346 BUSINESS PHONE: 4043936000 MAIL ADDRESS: STREET 1: 301 PERIMETER CTR N CITY: ATLANTA STATE: GA ZIP: 30346 10-Q 1 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (Mark one) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 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 0-9900 --------------------- HBO & COMPANY (Exact name of registrant as specified in its charter) DELAWARE 37-0986839 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 301 PERIMETER CENTER NORTH ATLANTA, GEORGIA 30346 (Address of principal executive offices) (Zip Code) (770) 393-6000 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report.) 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 reports) and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.
CLASS SHARES OUTSTANDING AT JULY 16, 1996 - ------------------------------------ ---------------------------------------- Common Stock, $.05 par value 80,895,901
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Exhibit Index on Page 11 Page 1 of 15 HBO & COMPANY PART 1 -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS -- UNAUDITED (000 OMITTED)
JUNE 30, DEC. 31, 1996 1995 ---------- ----------- ASSETS Current Assets: Cash and Cash Equivalents.............................................................. $ 91,068 $ 65,263 Receivables, Net of Allowance For Doubtful Accounts of $7,813 and $8,330............... 182,872 156,210 Current Deferred Income Taxes.......................................................... 16,313 17,794 Inventories............................................................................ 4,683 6,757 Prepaids and Other Current Assets...................................................... 6,130 6,346 ---------- ----------- Total Current Assets................................................................. 301,066 252,370 Intangibles Net of Accumulated Amortization of $21,475 and $13,801................................. 179,791 184,051 Capitalized Software Net of Accumulated Amortization of $25,328 and $22,054................................. 38,886 34,098 Property and Equipment Net of Accumulated Depreciation of $77,237 and $71,263................................. 31,700 33,609 Deferred Income Taxes.................................................................... 15,745 25,098 Other Noncurrent Assets, Net............................................................. 7,762 5,908 ---------- ----------- Total Assets......................................................................... $ 574,950 $ 535,134 ---------- ----------- ---------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Deferred Revenue....................................................................... $ 66,835 $ 71,684 Other Current Liabilities.............................................................. 128,610 133,436 ---------- ----------- Total Current Liabilities............................................................ 195,445 205,120 Long-Term Debt........................................................................... 340 582 Other Long-Term Liabilities.............................................................. 7,430 10,702 ---------- ----------- Total Liabilities.................................................................... 203,215 216,404 ---------- ----------- Commitments and Contingencies............................................................ -- -- Stockholders' Equity: Preferred Stock, 1,000 Shares Authorized and No Shares Issued.......................... -- -- Common Stock, $.05 Par Value, 250,000 Shares Authorized and 113,194 and 56,597 Shares Issued................................................................................ 5,660 2,830 Additional Paid-in Capital............................................................. 325,206 315,906 Retained Earnings...................................................................... 119,560 80,255 ---------- ----------- 450,426 398,991 Treasury Stock, at Cost (32,306 and 32,956 Shares)..................................... (78,691) (80,261) ---------- ----------- Total Stockholders' Equity........................................................... 371,735 318,730 ---------- ----------- Total Liabilities and Stockholders' Equity........................................... $ 574,950 $ 535,134 ---------- ----------- ---------- -----------
All share amounts have been restated, as appropriate, to reflect the 1996 two-for-one stock split effected in the form of a stock dividend. The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. Page 2 of 15 HBO & COMPANY CONSOLIDATED STATEMENTS OF INCOME -- UNAUDITED (000 OMITTED EXCEPT FOR PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------ ----------------------- 1996 1995 1996 1995 ---------- ------------ ---------- ----------- Revenue: Recurring................................................... $ 63,856 $ 43,087 $ 127,652 $ 80,250 One-Time Sales.............................................. 98,268 66,829 179,550 128,849 ---------- ------------ ---------- ----------- Total Revenue............................................. 162,124 109,916 307,202 209,099 Operating Expense: Cost of Operations.......................................... 72,136 50,088 137,231 98,570 Marketing................................................... 22,124 15,487 42,584 29,135 Research and Development.................................... 12,689 9,669 24,477 18,689 General and Administrative.................................. 17,175 13,135 33,147 23,083 Nonrecurring Charge......................................... -- 125,520 -- 125,520 ---------- ------------ ---------- ----------- Total Operating Expense................................... 124,124 213,899 237,439 294,997 ---------- ------------ ---------- ----------- Operating Income (Loss)....................................... 38,000 (103,983) 69,763 (85,898) Other (Income) Expense, Net................................... (534) 543 (1,058) 785 ---------- ------------ ---------- ----------- Income (Loss) Before Provision (Credit) for Income Taxes...... 38,534 (104,526) 70,821 (86,683) Provision (Credit) for Income Taxes........................... 15,413 (41,810) 28,328 (34,673) ---------- ------------ ---------- ----------- Net Income (Loss)......................................... $ 23,121 $ (62,716) $ 42,493 $ (52,010) ---------- ------------ ---------- ----------- ---------- ------------ ---------- ----------- Earnings (Loss) Per Share: Primary..................................................... $ 0.27 $ (0.86) $ 0.51 $ (0.73) Fully Diluted............................................... $ 0.27 $ (0.86) $ 0.50 $ (0.73) ---------- ------------ ---------- ----------- ---------- ------------ ---------- ----------- Weighted Average Shares Outstanding: Primary..................................................... 84,518 72,720 84,122 71,558 Fully Diluted............................................... 84,683 72,720 84,513 71,558 ---------- ------------ ---------- ----------- ---------- ------------ ---------- ----------- Cash Dividends Declared Per Share............................. $ 0.02 $ 0.02 $ 0.04 $ 0.04 ---------- ------------ ---------- ----------- ---------- ------------ ---------- -----------
All share and per share amounts have been restated to reflect the 1996 two-for-one stock split effected in the form of a stock dividend. The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. Page 3 of 15 HBO & COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED (000 OMITTED)
FOR THE SIX MONTHS ENDED JUNE 30, ---------------------- 1996 1995 ---------- ---------- Cash Flows from Operating Activities: Net Income (Loss) for the Period........................................................ $ 42,493 $ (52,010) ---------- ---------- Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization......................................................... 18,476 12,575 Nonrecurring Charge................................................................... -- 125,520 Provision (Credit) for Noncurrent Deferred Income Taxes............................... 9,353 (7,979) Changes in Assets and Liabilities, Net of Acquisitions: Receivables......................................................................... (26,559) (1,723) Current Deferred Income Taxes....................................................... 1,481 (3,997) Inventories......................................................................... 2,074 (1,792) Prepaids and Other Current Assets................................................... 177 (1,536) Noncurrent Deferred Income Tax...................................................... -- (33,096) Other Noncurrent Assets............................................................. (1,596) (774) Deferred Revenue.................................................................... (4,849) 3,304 Other Current Liabilities........................................................... (2,363) (22,523) Other, Net............................................................................ 37 262 ---------- ---------- Total Adjustments................................................................. (3,769) 68,241 ---------- ---------- Net Cash Provided by Operating Activities......................................... 38,724 16,231 ---------- ---------- Cash Flows from Investing Activities: Sale of Business........................................................................ 830 -- Sale of Property and Equipment.......................................................... 634 159 Capital Expenditures.................................................................... (6,279) (4,271) Capitalized Software.................................................................... (8,142) (5,975) Purchases of Businesses, Net of Cash Acquired........................................... (4,000) (2,121) ---------- ---------- Net Cash Used in Investing Activities............................................. (16,957) (12,208) ---------- ---------- Net Cash Provided Before Financing Activities..................................... 21,767 4,023 ---------- ---------- Cash Flows from Financing Activities: Proceeds from Long-Term Debt............................................................ -- 40,500 Proceeds from Issuance of Common Stock.................................................. 7,716 4,794 Repayment of Long-Term Debt............................................................. (459) (40,980) Payment of Dividends.................................................................... (3,219) (2,553) Repayment of Short-Term Debt............................................................ -- (5,000) ---------- ---------- Net Cash Provided by (Used in) Financing Activities............................... 4,038 (3,239) ---------- ---------- Increase in Cash and Cash Equivalents..................................................... 25,805 784 Cash and Cash Equivalents at Beginning of Period.......................................... 65,263 14,951 ---------- ---------- Cash and Cash Equivalents at End of Period........................................ $ 91,068 $ 15,735 ---------- ---------- ---------- ---------- Cash Paid During the Period For: Interest................................................................................ $ 371 $ 1,651 Income Taxes............................................................................ $ 10,925 $ 10,274
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. Page 4 of 15 HBO & COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results for the periods indicated. All such adjustments are of a normal recurring nature. Quarterly results of operations are not necessarily indicative of annual results. Certain previously reported amounts have been reclassified to conform to the current presentation. These statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 1995 Annual Report to Stockholders. 2. All share and per share amounts have been restated to reflect a two-for-one stock split effected in the form of a stock dividend that was paid on June 10, 1996 to all stockholders of record on May 27, 1996. In addition, share amounts have been restated as necessary to reflect an increase in the number of shares of authorized common stock from 60 million to 250 million, effective May 15, 1996. 3. During the first quarter of 1996, the Company increased the amount available under its existing long-term revolving credit agreement from $25 million to $30 million. As of June 30, 1996, there was no outstanding balance. Interest is payable at the Company's option of prime or LIBOR plus a margin determined by certain of the Company's financial ratios (6.0625% as of June 30, 1996). A variable commitment fee on the revolving credit agreement is payable quarterly on the unused portion of the commitment (.685% for the second quarter of 1996). The agreement, which expires June 30, 1997, contains certain net worth, income, cash flow and financial ratio covenants. The Company is in compliance with these covenants at June 30, 1996. During the first quarter of 1996, the Company canceled one of its two $5 million unsecured lines of credit. The Company has extended until June 30, 1997, its agreement with a financial institution whereby the Company can sell on an ongoing basis, with partial recourse, an undivided interest in a pool of customer receivables. As of June 30, 1996, the amount available to be sold was $30 million and the amount sold was $20 million. Interest is payable at the Company's option of prime or LIBOR plus a margin determined by certain of the Company's financial ratios (6.0625% as of June 30, 1996). The Company, as agent for the purchaser, retains collection and administrative responsibilities for the receivables sold. 4. On May 18, 1996, the Company signed a definitive agreement to acquire CyCare Systems, Inc. (CyCare) in exchange for .86 of a share of HBOC Common Stock for each share outstanding of CyCare Common Stock, subject to possible adjustment as provided in such agreement. The transaction, which is subject to certain conditions including CyCare shareholder approval, will be accounted for as a pooling of interests and is expected to close in the third quarter of 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. UNLESS STATED OTHERWISE, ALL INCOME, EXPENSE AND PER SHARE AMOUNTS FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1995, EXCLUDE THE $126 MILLION NONRECURRING CHARGE RELATED TO THE JUNE 1995 ACQUISITION OF FIRST DATA HEALTH SYSTEMS CORPORATION (NOW KNOWN AS THE CHARLOTTE PRODUCT GROUP OR CPG) AND INCLUDE THE DILUTIVE EFFECT OF STOCK OPTIONS. RESULTS OF OPERATIONS QUARTER AND SIX MONTHS ENDED JUNE 30, 1996, COMPARED TO QUARTER AND SIX MONTHS ENDED JUNE 30, 1995: For the quarter and six months ended June 30, 1996, HBO & Company posted earnings per share of $.27 and $.50, respectively, a 59% increase over earnings per share of $.17 for the second quarter of Page 5 of 15 HBO & COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 1995, and a 61% increase over earnings per share of $.31 for the first six months of 1995. Including the nonrecurring charge, earnings per share for the quarter and six months ended June 30, 1995, were ($.86) and ($.73), respectively. Revenue for the second quarter of 1996 increased 47% to $162.1 million from $109.9 million in 1995, and revenue for the six months ended June 30, 1996, increased 47% to $307.2 from $209.1 million for the same period in 1995. Operating expense increased only 40% for both the quarter and six months ended June 30, 1996, compared to the same periods in 1995. These changes in revenue and expense combined to boost net income for the quarter and six months ended June 30, 1996, by 84% to $23.1 million and 82% to $42.5 million, respectively. The Company's revenue growth was fueled primarily by the healthcare industry's growing interest in enterprisewide solutions and the Company's ability to provide products and services that fit this profile. In addition, the June 1995 acquisition of CPG contributed to the growth in maintenance and remote processing revenue. The Company also continues to make progress in the area of employee productivity, with revenue per average employee at June 30, 1996, of $177,000, up from $152,000 at June 30, 1995. Software license fee revenue grew 54% to $43.6 million for the second quarter of 1996 and 47% to $77.8 million for the six months ended June 30, 1996, compared to the same periods in 1995. These increases were primarily due to the continuing strong demand for the Pathways 2000 line of enterprisewide solutions and strong sales of the Company's STAR 2000 health information system products. Hardware revenue increased 64% to $28.3 million for the second quarter and increased 49% to $49.3 million for the six months ended June 30, 1996, compared to the same periods in 1995. These increases were mainly due to hardware related to the strong sales of CPUs and wireless units, and a continuing effort to increase sales of add-on hardware to existing customers through a newly expanded telemarketing group. The Company has successfully maintained stable hardware margins and continues to design products to run on a variety of platforms. Implementation and other services revenue for the quarter and six months ended June 30, 1996, increased 23%, to $26.3 million from $21.4 million, and 22%, to $52.4 million from $42.8 million, compared to the same periods in 1995. These increases were primarily due to greater system sales and the addition of CPG. The Company continues to invest in programs designed to streamline the implementation process and encourage customer ownership of each step of that process. As a result, the productivity of the Company's implementation personnel continues to improve. Maintenance and support revenue increased 32% to $40.3 million for the second quarter of 1996 and 43% to $81.2 million for the six months ended June 30, 1996, compared to the same periods in 1995. These increases were primarily due to internal growth and expansion of the customer base from acquisitions. HBOC currently has approximately 2,800 customers. To manage this growth, the Company implemented a central support system in the second quarter of 1996, which will service all product lines and business units. This system, Support Automation in a Global Environment (SAGE), will improve the efficiency and quality of support by, among other things, standardizing service definitions, call priority and call escalation procedures and by providing a growing knowledge database of issues and their resolutions. The June 1995 acquisition of CPG added remote processing as a new form of revenue for the Company. The Company recognized remote processing revenue of $11.1 million for the second quarter of 1996 and $22.3 million for the first six months of 1996, compared to $2.0 million, post-acquisition, for both the quarter and six months ended June 30, 1995. Page 6 of 15 HBO & COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Recurring revenue increased to $63.9 million in the second quarter of 1996 from $43.1 million in the second quarter of 1995, and increased to $127.7 million for the first six months of 1996 from $80.3 million for the same period in 1995. Recurring revenue as a percent of total revenue remained stable at 39% in the second quarter of 1996 compared to the same period in 1995, but increased to 42% for the six months ended June 30, 1996, from 38% for the same period in 1995. This strong base of recurring revenue provides a stable source of cash flows to fund further expansion. Cost of operations as a percent of revenue decreased to 44% in the second quarter of 1996 from 46% in the second quarter of 1995, and to 45% for the first six months of 1996 from 47% for the same period in 1995. Both decreases were primarily a result of productivity enhancements. In conjunction with decreases in cost of operations, the gross margin for the second quarter improved to 56% compared to 54% in 1995, and for the six months ended June 30, 1996, it grew to 55% compared to 53% for the same period in 1995. Cost of operations expense increased in both periods compared to 1995 primarily due to increased hardware costs associated with the growth in hardware sales and increased personnel expense due to the overall growth of the Company. Increases in cost of operations expense attributable to acquisitions include costs associated with the remote processing data center, software and hardware maintenance expense and amortization of intangibles. Marketing expense as a percent of revenue remained constant at 14% for both the quarter and six months ended June 30, 1996, compared to the same periods in 1995. Marketing expense increased for both periods primarily due to higher personnel and commission expenses directly related to the growth in revenue of the Company. Research and development (R&D) expense as a percent of revenue decreased to 8% from 9% for both the quarter and six months ended June 30, 1996, compared to the same periods in 1995, while the R&D capitalization rate increased from 24% to 25% for the same periods as a result of continued new product development. The increase in actual R&D expense is mainly due to R&D related to 1995 acquisitions and additional personnel for new product development. General and administrative (G&A) expense as a percent of revenue decreased to 11% in the second quarter of 1996 from 12% in the second quarter of 1995, but remained stable at 11% for the six months ended June 30, 1996 and 1995. Actual G&A expense increased primarily due to increased facilities costs and increased personnel expense due to acquisitions. For all periods presented, operating expense grew at a slower rate than revenue due to successful cost-control programs and productivity enhancements. Total operating income increased 76%, and operating income as a percent of revenue increased to 23% for both the quarter and six months ended June 30, 1996, compared to the same periods in 1995. These increases demonstrate a significant growth in volume and increased efficiency in operations. The tax rate remained constant at 40% for all periods presented. LIQUIDITY AND CAPITAL RESOURCES JUNE 30, 1996, COMPARED TO DECEMBER 31, 1995: The Company continues to improve the quality of its balance sheet. At June 30, 1996, with $91.1 million in cash, no bank debt and an improving current ratio, the Company remains well positioned for continued growth. During the first six months of 1996, the Company generated $38.7 million in cash flow from operations. The Company used $17.0 million in investing activities, primarily consisting of $8.1 million for software development capitalization, $6.3 million for capital expenditures and $4.0 million for a contractual payment associated with the 1995 purchase of Pegasus Medical Ltd. An additional Page 7 of 15 HBO & COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) $4.0 million was generated from financing activities, mainly the issuance of stock, which was partially offset by the payment of dividends. As a result, the Company's cash balance increased by 40% to $91.1 million at June 30, 1996, from $65.3 million at December 31, 1995. The Company's current ratio increased to 1.54:1 at June 30, 1996 from 1.23:1 at December 31, 1995. Current assets increased $48.7 million, mainly reflecting increases in receivables and cash. The Company's management places a high priority on the area of receivables and the Company continues to maintain a low delinquency rate. Current liabilities decreased $9.7 million due to the reduction in year-end accruals and payables, specifically those related to employee incentive plans, partially offset by an increase in customer deposits. The Company has access to several financing sources, including a $5 million line of credit and a $30 million revolving credit agreement. As of June 30, 1996, there were no outstanding balances on either. The Company is well positioned to generate strong cash flows from operations through continued focus on receivables and increases in productivity. The stability of the Company's liquidity is further enhanced as recurring revenue remains strong at 42% of total revenue on a year-to-date basis. These factors provide stable sources of cash for operating, investing and financing needs that should enable the Company to achieve its strategic objectives. Page 8 of 15 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of HBO & Company: We have reviewed the accompanying consolidated balance sheet of HBO & Company (a Delaware corporation) and Subsidiaries as of June 30, 1996 and the related consolidated statements of income for the three and six month periods and cash flows for the six month period then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of HBO & Company as of December 31, 1995 (presented herein), and in our report dated February 6, 1996, we expressed an unqualified opinion on that statement. Arthur Andersen LLP Atlanta, Georgia July 16, 1996 Page 9 of 15 HBO & COMPANY PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NOTE: SHARE AMOUNTS HAVE NOT BEEN RESTATED TO REFLECT THE STOCK SPLIT EFFECTED IN THE FORM OF A STOCK DIVIDEND, PAID JUNE 10, 1996, TO ALL STOCKHOLDERS OF RECORD ON MAY 27, 1996. SHARE AMOUNTS ARE AS THEY APPEAR IN THE OFFICIAL MINUTES OF THE 1996 ANNUAL MEETING OF STOCKHOLDERS. The Company held its Annual Meeting of Stockholders on May 14, 1996. Of the 40,356,174 shares of common stock outstanding and entitled to vote at this meeting, 34,178,652 shares were represented in person or by proxy at the meeting. There were no broker non-votes. The following matters were voted upon. 1. The election of the Board of Directors consisting of nine members to hold office until the next Annual Meeting of Stockholders or until their successors are elected and qualified. The result of the vote for each individual director was:
FOR WITHHELD ------------- --------- Alfred C. Eckert III............................................... 34,137,957 40,695 Holcombe T. Green, Jr.............................................. 34,129,951 48,701 Philip A. Incarnati................................................ 33,707,366 471,286 Alton F. Irby III.................................................. 34,136,757 41,895 Gerald E. Mayo..................................................... 34,138,782 39,870 Charles W. McCall.................................................. 34,124,693 53,959 James V. Napier.................................................... 34,101,686 76,966 Charles E. Thoele.................................................. 34,139,416 39,236 Donald C. Wegmiller................................................ 34,138,522 40,130
Accordingly, all nine nominees were duly elected Directors of the Company. 2. The approval of an Amendment to the Certificate of Incorporation to increase the number of authorized shares of common stock, par value $.05 per share, from 60,000,000 to 250,000,000. The result of the vote was 26,393,507 shares in favor, 7,489,831 shares opposed and 106,379 shares abstained. Accordingly, the amendment was adopted. 3. The approval of an Amendment to the HBO & Company 1993 Stock Option Plan for Nonemployee Directors to provide an initial grant of options to purchase 12,500 shares of common stock to newly elected Directors. The result of the vote was 30,821,059 shares in favor, 2,008,675 shares opposed and 129,538 shares abstained. Accordingly, the amendment was adopted. 4. The approval of an Amendment to the HBO & Company 1990 Executive Incentive Plan to increase the number of shares available for awards thereunder by an additional 1,500,000 shares of common stock. The result of the vote was 22,076,366 shares in favor, 10,927,106 shares opposed and 138,374 shares abstained. Accordingly, the amendment was adopted. 5. The ratifications of the appointment of Arthur Andersen LLP as independent public accountants. The result of the vote was 33,804,589 shares in favor, 273,567 shares opposed and 100,496 shares abstained. Accordingly, the appointment of Arthur Andersen LLP was ratified. Page 10 of 15 HBO & COMPANY ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits:
PAGE ----- 2 Agreement of Merger dated May 18, 1996, by and among HBO & Company, HBO & Company of Georgia, and CyCare Systems, Inc. [Incorporated by reference from Exhibit 2 to the registrant's Registration Statement on Form S-4 (File No. 333-5663)]............... n/a 11 Statement regarding computation of per share earnings............................... 13 15 Letter re: unaudited interim financial information.................................. 14 27 Financial Data Schedule............................................................. 15
(b) Reports on Form 8-K during the quarter ended June 30, 1996, or subsequent to that date but prior to the filing date of this Form 10-Q: FORM 8-K DATED MAY 21, 1996: Reporting under Item 5 that: i) on May 14, 1996, the stockholders approved an amendment to the Company's Certificate of Incorporation to increase the number of shares of authorized common stock from 60 million to 250 million; ii) on May 14, 1996, the Board of Directors of the Company declared a two-for-one stock split to be effected in the form of a stock dividend, payable June 10, 1996, to all stockholders of record as of May 27, 1996; and iii) on May 20, 1996, the Company announced that it had signed a definitive agreement to acquire CyCare Systems, Inc. FORM 8-K(A)3 DATED JUNE 5, 1996: Reporting under Item 7 that the Form 8-K of HBO & Company dated June 23, 1995, as amended by Form 8-K(A) dated July 31, 1995, as further amended by Form 8-K(A)2 dated August 8, 1995, was thereby further amended to include the addition of the following Pro Forma Financial Information for the year ended December 31, 1995: HBO & Company Pro Forma Combined Income Statement (Unaudited) HBO & Company Notes to Pro Forma Combined Income Statement Page 11 of 15 HBO & COMPANY 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. HBO & COMPANY (Registrant) By: /S/ JAY P. GILBERTSON -------------------------------------- Jay P. Gilbertson SENIOR VICE PRESIDENT -- FINANCE, CHIEF FINANCIAL OFFICER, PRINCIPAL ACCOUNTING OFFICER, TREASURER AND ASSISTANT SECRETARY Date: July 31, 1996 Page 12 of 15 EXHIBIT 11 HBO & COMPANY COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (000 OMITTED EXCEPT FOR PER SHARE DATA)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, --------------------- --------------------- 1996 1995 1996 1995 --------- ---------- --------- ---------- Weighted average number of common shares outstanding............... 80,826 72,720 80,656 71,558 Add -- Shares of common stock assumed issued upon exercise of stock options using the "treasury stock" method as it applies to the computation of primary earnings per share*.............. 3,692 -- 3,466 -- --------- ---------- --------- ---------- Number of common and common equivalent shares outstanding.......... 84,518 72,720 84,122 71,558 Add -- Additional shares of common stock assumed issued upon exercise of stock options using the "treasury stock" method as it applies to the computation of fully diluted earnings per share*.................................................. 165 -- 391 -- --------- ---------- --------- ---------- Number of common and common equivalent shares outstanding assuming full dilution..................................................... 84,683 72,720 84,513 71,558 --------- ---------- --------- ---------- --------- ---------- --------- ---------- Net earnings (loss) for primary and fully diluted earnings per share............................................................. $ 23,121 $ (62,716) $ 42,493 $ (52,010) --------- ---------- --------- ---------- --------- ---------- --------- ---------- Earnings (loss) per share: Primary.......................................................... $ 0.27 $ (0.86) $ 0.51 $ (0.73) --------- ---------- --------- ---------- --------- ---------- --------- ---------- Fully Diluted.................................................... $ 0.27 $ (0.86) $ 0.50 $ (0.73) --------- ---------- --------- ---------- --------- ---------- --------- ----------
- ------------------------ *Common Equivalent Shares are not presented for 1995 because the effect is anti-dilutive. All share and per share amounts have been restated to reflect the 1996 two-for-one stock split effected in the form of a stock dividend. Page 13 of 15 EXHIBIT 15 ARTHUR ANDERSEN LLP To HBO & Company: We are aware that HBO & Company has incorporated by reference in its previously filed registration statements on Form S-8 its Form 10-Q for the quarter ended June 30, 1996, which includes our report dated July 16, 1996 covering the unaudited interim consolidated financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the "Act"), that report is not considered a part of the registration statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Arthur Andersen LLP Atlanta, Georgia July 16, 1996 Page 14 of 15 EX-27 2 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HBO & COMPANY CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED 6/30/96 AND HBO & COMPANY CONSOLIDATED BALANCE SHEET AT 6/30/96 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 91,068 0 190,685 7,813 4,683 301,066 108,937 77,237 574,950 195,445 0 0 0 5,660 366,075 574,950 179,550 307,202 137,231 237,439 (1,058) 0 0 70,821 28,328 0 0 0 0 42,493 0.51 0.50
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