-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, OX9Qw7Aef9HzEf1GhI1N7w0cLPToJ8cUjP1cVu7HeH5Df4xb+lkxrAfLBqVltVOU SyoQB4pH175xHd7GxXn6fQ== 0000912057-95-005779.txt : 19950801 0000912057-95-005779.hdr.sgml : 19950801 ACCESSION NUMBER: 0000912057-95-005779 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950731 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: 95557473 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 ending June 30, 1995 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) (404) 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 OUTSTANDING AT JUNE 30, 1995 Common Stock, $.05 par value 36,197,554 Shares Page 1 of 23 Exhibit Index is on Page 5 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. The following required financial statements are incorporated by reference from the Registrant's Quarterly Report to Stockholders for the quarter ended June 30, 1995 (attached as Exhibit 19): Consolidated Statements of Income Consolidated Condensed Balance Sheets Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements The financial information included in this Quarterly Report on Form 10-Q has been reviewed by Arthur Andersen LLP, independent public accountants, in accordance with established professional standards and procedures for such a review as set forth in their review letter presented on page 3 of this report. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required in Item 2 is incorporated by reference from the Financial Review in the Registrant's Quarterly Report to Stockholders for the quarter ended June 30, 1995 (attached as Exhibit 19). Page 2 of 23 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of HBO & Company: We have reviewed the accompanying consolidated condensed balance sheet of HBO & COMPANY (a Delaware corporation) and Subsidiaries as of June 30, 1995 and the related 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, 1994 (not presented herein), and in our report dated February 8, 1995, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 1994 is fairly stated in all material respects in relation to the balance sheet from which it has been derived. Arthur Andersen LLP Atlanta, Georgia July 19, 1995 Page 3 of 23 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The information required in Item 1 is incorporated by reference from the Notes to Consolidated Financial Statements in the Registrant's Quarterly Report to Stockholders for the quarter ended June 30, 1995 (attached as Exhibit 19). ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company held its Annual Meeting of Stockholders on May 9, 1995. Of the 32,086,984 shares of common stock entitled to vote, 28,804,342 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 John P. Crecine 28,751,472 52,870 Alfred C. Eckert III 28,749,904 54,438 Holcombe T. Green, Jr. 28,746,794 57,548 Alton F. Irby III 28,749,759 54,583 Gerald E. Mayo 28,752,593 51,749 Charles W. McCall 28,752,289 52,053 James V. Napier 28,728,223 76,119 Charles E. Thoele 28,750,283 54,059 Donald C. Wegmiller 28,752,224 52,118
Accordingly, all nine nominees were duly elected Directors of the Company. 2. The adoption of the HBO & Company Chief Executive Officer Incentive Plan. The result of the vote was 27,532,262 shares in favor of the Plan, 1,181,155 shares opposed to the Plan and 90,925 shares abstained. Accordingly, the Plan was adopted. 3. The ratification of the appointment of Arthur Andersen LLP as independent public accountants. The result of the vote was 28,743,401 shares in favor of the appointment, 15,409 shares opposed to the appointment and 45,532 shares abstained. Accordingly, Arthur Andersen LLP was appointed. Page 4 of 23 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: Page ---- 10 Interim Loan and Security Agreement between General Electric 7 Capital Corporation, HTG Corp. and HBO & Company of Georgia and letter agreement between HTG Corp. and HBO & Company of Georgia, dated June 26, 1995. 11 Statement regarding computation of per share earnings (loss). 14 15 Letter re: unaudited interim financial information. 15 19 Report furnished to security holders. 16
(b) Reports on Form 8-K during the quarter ended June 30, or subsequent to that date but prior to the filing date of this Form 10-Q: FORM 8-K REPORT DATED MAY 17, 1995, was filed under ITEM 5 reporting that the Company signed a definitive agreement to acquire the Health Systems Group (HSG) of First Data Corporation in exchange for approximately 4 million shares of HBOC Common Stock. FORM 8-K REPORT DATED JUNE 23, 1995, was filed under ITEM 2 reporting the acquisition of the Health Systems Group (HSG) of First Data Corporation in exchange for 4 million shares of Common Stock, $500,000 in cash and a promissory note for $100,000. FORM 8-K REPORT DATED JULY 10, 1995, was filed under ITEM 5 reporting the acquisition of Pegasus Medical, LTD, a privately held Israeli software company that markets a computer-based patient record known as the Smart Medical Record. FORM 8-K REPORT DATED JULY 18, 1995, was filed under ITEM 5 reporting that the Company signed a definitive agreement to acquire CliniCom Inc. in exhange for .4 of a share of HBOC Common Stock for each of the approximately 8,660,000 shares outstanding of CliniCom stock. Page 5 of 23 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) Date: July 31, 1995 By: /s/ Jay P. Gilbertson Jay P. Gilbertson Vice President-Finance, Chief Financial Officer, Treasurer and Assistant Secretary Page 6 of 23 EX-10 2 EXHIBIT 10 Exhibit 10 3900 (Loan to Loan) INTERIM LOAN AND SECURITY AGREEMENT THIS INTERIM LOAN AND SECURITY AGREEMENT (this "AGREEMENT") is dated as of _____________ between General Electric Capital Corporation, a New York corporation having an office and place of business located at 3379 Peachtree Road N.E. 400 Atlanta, GA 30326 ("LENDER") and HTG Corp. a corporation organized and existing under the laws of the State of Georgia and having its principal place of business at 3343 Peachtree Road, NE, Ste. 1420, Atlanta, GA 30326 and HBO & COMPANY OF GEORGIA a corporation organized and existing under the laws of the State of Delaware and having its principal place of business at 301 Perimeter Center North, Atlanta, GA 30346 (the "Co-Borrowers"). /s/ JKS CH ---------- initial RECITALS: WHEREAS Borrower desires to purchase the equipment more particularly described in EXHIBIT A hereto (the "EQUIPMENT") pursuant to a purchase order contract, agreement and/or other document, copies of which have been attached hereto as EXHIBIT C (the "PURCHASE AGREEMENT"), with AlliedSignal, Inc. ("SUPPLIER"); WHEREAS Borrower desires to borrow from Lender, on the terms and conditions hereinafter provided, the purchase price and acquisition costs of the Equipment; WHEREAS Borrower desires to borrow from Lender, on the terms and conditions hereinafter provided, the purchase price and acquisition costs of the Equipment; WHEREAS, to induce Lender to lend to Borrower the purchase price and acquisition costs of the Equipment, Borrower desires to assign to Lender, as security for all of Borrower's obligations hereunder, all of Borrower's right, title and interest in and to the Equipment and the Purchase Agreement. NOW, THEREFORE, in consideration of these premises and of the covenants contained herein and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Loan Schedule attached hereto as EXHIBIT D (the "LOAN SCHEDULE"). SECTION 2. AGREEMENT TO MAKE LOANS. Subject to the terms and conditions hereof, and provided no Default (as defined in Section 8), or event which with the passing of time or giving of notice or both would constitute a Default, has occurred and is continuing, Lender agrees to advance to Borrower, on the date hereof the amount of ONE HUNDRED NINETY FIVE THOUSAND SEVEN HUNDRED FIFTY AND NO/100 ($ 195,750.00) U.S. Dollars, and, upon five (5) days written notice, from time to time hereafter until close of business on the Cut-Off Date to make such additional advances in such amounts as Borrower may request, but limited in all events in the aggregate to the Maximum Loan Commitment amount stated in the Loan Schedule. (Each day on which a loan is made is hereinafter referred to as a "FUNDING DATE," each advance a "LOAN FUNDING".) Lender shall not be required or obligated to make any Loan Funding if such Loan Funding, when added to all previous Loan Fundings, would cause Lender to advance to Borrower any sum in excess of the Maximum Loan Commitment set forth in the Loan Schedule. Lender shall have no obligation to make any Loan Funding to any person or entity other than Borrower, and shall have no obligation to make any Loan Funding to Borrower if control of Borrower shall change in any material respect. SECTION 3. PROMISSORY NOTE(S). (a) Each Loan Funding shall be evidenced by a separate demand Promissory Note, at such interest rate as the parties may hereafter agree, in the form of EXHIBIT E. (b) Subject to the terms hereof, upon the earlier of the (i) Cut-Off Date or (ii) the Funding Date on which the total Loan Fundings made as of that date total in the aggregate the Maximum Loan Commitment, Borrower shall (x) pay all unpaid interest due and owing under any Promissory Note issued pursuant hereto; and (y) execute a Consolidated Promissory Note ("CONSOLIDATED NOTE") in the form of EXHIBIT F in a principal amount equal to the aggregate amount of all Loan Fundings (Each Demand Promissory Note and the Consolidated Promissory Note shall hereinafter be referred to, individually or collectively, as the "NOTE(S)".) SECTION 4. CONDITIONS PRECEDENT TO LOAN FUNDINGS. The obligation of Lender to make any Loan Funding to Borrower on the applicable Funding Date is subject to the performance by Borrower of all of its agreements and covenants under this Agreement and the fulfillment of the following conditions: (a) Borrower shall have paid to Supplier the Borrower's Down Payment, if any, specified on the Loan Schedule. (b) No Default, or event which with the passing of time or the giving of notice or both would constitute a Default, has occurred and is continuing on such Funding Date under this Agreement, any Note or any other agreement or instrument then existing between Borrower and Lender. (c) Lender has received such executed financing statements, fixture filings and other documents as it may reasonable request to perfect a first priority security interest in the Collateral, as that term is defined in Section 5, below (including, without limitation, any lien, mortgages, landlord or similar waivers). (d) Borrower has executed and delivered to Lender a Demand Promissory Note, in the form of Exhibit E, in the principal amount of the Loan Funding, executed by an authorized officer of the Borrower. (e) Lender has received such other documents, certificates and opinions, including but not limited to opinions of Borrower's counsel and invoices and receipts in connection with the Equipment, as it shall reasonably request. (f) There has not occurred any adverse change in Borrower's financial situation from the date of execution hereof to the date of the Loan Funding which materially impairs Borrower's ability to perform its obligations hereunder, or under any of the Notes, or materially impairs Lender's interest in the Collateral. SECTION 5. GRANT OF SECURITY INTEREST. (a) As security for the punctual payment and performance of Borrower's obligations under each and all of the Note(s), whether now existing or hereinafter arising, whether the same be totally repaid and extinguished and thereafter reincurred or otherwise, direct or indirect, liquidated or contingent, whether as primary obligor or as endorser, indemnitor, or otherwise, including any obligation arising in connection with or resulting from any amendment to or extension of any Note and, further, as security for the performance and observance by Borrower of all representations, warranties and covenants made by it in this Agreement, any amendment or extension hereof or in any other agreement, document or certificate delivered in connection with this Agreement or any Note, Borrower hereby gives, sets over, assigns, transfers and grants to Lender a security Page 7 of 23 (j) This Agreement and any and all obligations and liabilities secured hereby shall be governed by and construed under the laws of the State of GEORGIA, without regard to choice of law principles thereof, and any provision of this Agreement or of the obligations and liabilities secured by this Agreement which may prove to be unenforceable shall not affect the validity of any other provision of this Agreement or of the said obligations and liabilities. Borrower acknowledges receipt of a true copy hereof and waives acceptance hereof. (k) This Agreement shall continue in full force and effect for so long as there shall remain in existence obligations or liabilities from Borrower to Lender hereunder or under the Notes. (l) BORROWER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN BORROWER AND LENDER RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN BORROWER AND LENDER. The scope of this waiver is intended to be all encompassing of any and all disputes that may be filed in any court (including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. Time is of the essence of this Agreement. Lender's failure at any time to require strict performance by Borrower of any of the provisions hereof shall not waive or diminish Lender's right thereafter to demand strict compliance therewith. Borrower agrees, upon Lender's request, to execute any instrument necessary or expedient for filing, recording or perfecting the interest of Lender. All notices required to be given hereunder shall be deemed adequately given if sent by registered or certified mail to the addressee at its address stated herein, or at such other place as such addressee may have designated in writing. This Agreement and any, Exhibits or Annexes thereto constitute the entire agreement of the parties with respect to the subject matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO. IN WITNESS WHEREOF, Borrower and Lender, intending to be legally bound hereby, have caused their duly authorized representatives to execute this Agreement, as of the day and year first above-written. LENDER CO-BORROWER GENERAL ELECTRIC CAPITAL CORPORATION HTG CORP. By: By: /s/ Julie Koers Shirey --------------------------------- ------------------------------- Title: Title: Secretary ------------------------------ ---------------------------- HBO & COMPANY OF GEORGIA By: /s/ Charles W. McCall -------------------------------- Title: Pres/CEO ----------------------------- Page 8 of 23 LIST OF EXHIBITS TO INTERIM LOAN AND SECURITY AGREEMENT BY AND BETWEEN GENERAL ELECTRIC CAPITAL CORPORATION AND HTG CORP. AND HBO & COMPANY OF GEORGIA AS CO-BORROWERS DATED: ---------------- EXHIBIT A EQUIPMENT DESCRIPTION EXHIBIT B CERTIFICATE - Not Required EXHIBIT C PURCHASE AGREEMENT EXHIBIT D LOAN SCHEDULE EXHIBIT E FORM OF DEMAND PROMISSORY NOTE EXHIBIT F FORM OF CONSOLIDATED PROMISSORY NOTE Page 9 of 23 EXHIBIT D THIS EXHIBIT D is annexed to and made a part of the Interim Loan and Security Agreement of even date herewith between General Electric Capital Corporation as Lender and HTG Corp. and HBO & Company of Georgia as Co-Borrowers as Borrower. LOAN SCHEDULE LENDER: BORROWER: General Electric Capital Corporation HTG Corp. and HBO & Company of 3379 Peachtree Road N.E. 400 Georgia as Co-Borrowers Atlanta, GA 30326 3343 Peachtree Road 1420 Atlanta, Georgia 30326 ADDITIONAL TERMS AND DEFINITIONS: 1. Maximum Loan Commitment: $3,007,500.00 2. Cut-Off Date: October 31, 1995 3. Borrower's Down Payment: $0.00 4. Loan Fundings: (Borrower hereby authorizes Lender to insert below the date on which any Loan Funding is made and the amount thereof.)
Funding Date: Loan Funding Amount: ------------- -------------------- 06/ /95 $ 195,750.00 06/26/95 587,250.00 08/14/95 587,250.00 09/30/95 587,250.00 10/01/95 1,050,000.00 TOTAL $3,007,500.00
5. Location of Equipment and of Additional Equipment (if different than Borrower's address given above.) Garrett's Springfield Mo. Installation Facility 6. Supplier of Equipment (name and address): AlliedSignal, Inc., 6201 W. Imperial Hwy., Los Angeles, CA 90045 LENDER: CO-BORROWER: GENERAL ELECTRIC CAPITAL CORPORATION HTG CORP. By: By: /s/ Julie Koers Shirey -------------------------------- --------------------------------- Title: Title: Secretary ----------------------------- ------------------------------ Date: Date: ------------------------------ ------------------------------- HBO & COMPANY OF GEORGIA By: /s/ Charles McCall --------------------------------- Title: Pres/CEO ------------------------------ Date: ------------------------------- Page 10 of 23 HTG CORP. 3343 Peachtree Road, N.E. Suite 1420 Atlanta, Georgia 30326 June 26, 1995 HBO & Company of Georgia 301 Perimeter Center North Atlanta, Georgia 30346 Re: Loan from General Electric Capital Corporation Gentlemen: 1. FACTUAL BACKGROUND. HTG Corp. ("HTG") and HBO & Company of Georgia ("HBO") entered into a certain Co-Ownership Agreement dated as of July 15, 1993, as amended, which provided for, among other things, the equal ownership of the Airplane, as such term is defined therein. The Co-Owners have entered into, jointly and severally, a certain Interim Loan and Security Agreement (the "Loan Agreement") dated of even date herewith, with General Electric Capital Corporation (together with its successors in interest, "GECC"), providing for a series of promissory notes to be made jointly and severally by the Co-Owners in favor of GECC (the "Notes") in the collective principal amount of $3,007,500.00, the Notes being secured by the Airplane. A portion of the proceeds of the Notes will be applied to pay the entire remaining obligations under an existing note to GECC in the original principal amount of $1,200,000 co-made by HTG and HBO, and the remaining proceeds will be used to reimburse HBO in respect of funds expended in connection with, and by HTG to fund its one-half share of the costs of, the purchase and installation of new engines for the Airplane. HBO will separately fund its one-half share of such expense. HBO recognizes that it will directly benefit from HTG's ability to fund its one-half share of the costs of the new engines from the proceeds of the Notes. 2. PAYMENT OF THE NOTES. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, HTG hereby agrees to timely satisfy for and on behalf of the Co-Owners all obligations arising in connection with the Notes. In the event that HTG fails to make when due a payment in connection with the Notes, HBO will pay the amount due on behalf of HTG. 3. RIGHT OF INDEMNIFICATION. HTG shall hold HBO harmless from and against all liability, loss, damage, or injury and all reasonable costs and expenses (including reasonable counsel fees and costs of any suit related thereto) suffered or incurred by HBO (including, without limitation, any loss or diminution in value of the Airplane) arising from any claims made by or on behalf of GECC, Page 11 of 23 or for any payments made by HBO on behalf of HTG, in connection with the Notes. 4. PAYMENTS OF CLAIMS. Any payments made by HBO on behalf of HTG pursuant to this Agreement (after reasonable prior written notice and demand for reimbursement), or any reimbursements due pursuant to paragraph 3 hereof, shall bear interest at a per annum rate of interest equal to the prime rate of interest (as published in the "Money Rates" section of THE WALL STREET JOURNAL) plus two percent (2%). Such interest shall begin to accrue on the date demand for such reimbursement is made. 5. FURTHER ASSURANCES. HTG hereby agrees that at any time, and from time to time, after the date hereof, it will execute such additional instruments and take such actions as may be reasonably requested by HBO to confirm or perfect or otherwise carry out the intent and purposes of this letter. HTG CORP. By: /s/ Julie Koers Shirey ----------------------------- Title: Treasurer -------------------------- Accepted and Agreed to by: HBO & COMPANY OF GEORGIA By: /s/ Charles McCall ----------------------------- Title: Pres/CEO --------------------- Page 12 of 23 EX-11 3 EXHIBIT 11 Exhibit 11 HBO & COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK FOR THE THREE-MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 (000 OMITTED EXCEPT FOR PER SHARE DATA)
Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 ------- ------- ------- ------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 32,739 31,449 32,333 31,286 ADD-Shares of common stock assumed issued upon exercise of stock options using the "treasury stock" method as it applies to the compu- tation of primary earnings per share - 1,591 - 1,548 ------- ------- ------- ------- NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 32,739 33,040 32,333 32,834 ADD-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 - - - - ------- ------- ------- ------- NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING ASSUMING FULL DILUTION 32,739 33,040 32,333 32,834 ------- ------- ------- ------- ------- ------- ------- ------- NET EARNINGS FOR PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER SHARE ($63,563) $6,335 ($54,561) $11,763 ------- ------- ------- ------- ------- ------- ------- ------- EARNINGS (LOSS) PER SHARE: PRIMARY ($1.94) $0.19 ($1.69) $0.36 ------- ------- ------- ------- ------- ------- ------- ------- FULLY DILUTED ($1.94) $0.19 ($1.69) $0.36 ------- ------- ------- ------- ------- ------- ------- ------- Note: No common stock was assumed issued upon exercise of stock options for the computation of loss per share.
PAGE 14 OF 23 EX-15 4 EXHIBIT 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, 1995, which includes our report dated July 19, 1995 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 19, 1995 Page 15 of 23 EX-19 5 EXHIBIT 19 Exhibit 19 SECOND QUARTER REPORT TO OUR STOCKHOLDERS IN EVERY QUARTER OF THE PAST YEAR, HBO & COMPANY HAS ANNOUNCED AN ACQUISITION THAT HAS HELPED PROPEL THE COMPANY TOWARD ITS GOAL OF BECOMING NO. 1 IN THE HEALTHCARE INFORMATION SOLUTIONS INDUSTRY. SECOND QUARTER 1995 WAS NO DIFFERENT. Charles W. McCall Early in the quarter, we acquired the rights to the CHC (UK) Ltd. Crescendo nursing system, which gave HBOC another 60 National Health Service customers in the United Kingdom. And in June, we acquired the Health Systems Group of First Data Corporation, now the Charlotte Product Group (CPG). With 1994 revenue of $121 million, this group had been the fifth largest healthcare information systems vendor. The acquisition added several solid hospital transaction systems and 500 customers to HBOC, bringing our total customer count to approximately 2,600. The CPG acquisition did cause HBOC to take a one-time write-off of $126 million primarily related to purchased research and development charges. Even though this resulted in a second quarter loss, fully diluted earnings per share excluding the purchased research and development charge came in at 34 cents, a 79 percent increase over the same period last year. Our growth in revenue of 27 percent over second quarter 1994 is not due entirely to acquisitions, however, but results from strong internal sales and installation activity as well. In particular, products from the Company's enterprisewide Pathways 2000TM line continue to roll out, and customers "went live" on several Pathways 2000 products during the quarter. Soon after the close of second quarter, we completed the acquisition of Pegasus Medical, LTD. While this acquisition does not bring us existing customers, the strategic potential is tremendous. Pegasus is a physician-led Israeli software development company that has designed and is developing a computer-based patient record for the physician's office known as the Smart Medical Record (SMR-trademark-). This product -- built by physicians, for physicians -- is strategic to the Company's ongoing effort to provide access to critical patient information across the continuum of care. The acquisition activity didn't stop there, however. On July 17, we announced the signing of a definitive agreement to acquire CliniCom Incorporated. A long-time marketing partner of HBOC, CliniCom is an industry leader in point-of-care nursing information systems. The merger will give HBOC an even greater ability to build on CliniCom's considerable clinical expertise. The acquisition, which is subject to regulatory and shareholder approval, is expected to close in the early fourth quarter of 1995. Obviously, being No. 1 is a key goal for HBOC -- but not just in revenue. Being No. 1 also means taking a leadership position within the industry. With the tremendous expertise we have on board, the quality products we have in place and the vision we have to take our customers forward, HBOC continues to pursue our goal of being the industry leader. Sincerely, Charles W. McCall President & Chief Executive Officer July 18, 1995 Page 16 of 23 HBO&Company and Subsidiaries FINANCIAL REVIEW RESULTS OF OPERATIONS QUARTER AND SIX-MONTH PERIOD ENDED JUNE 30, 1995, COMPARED TO QUARTER AND SIX-MONTH PERIOD ENDED JUNE 30, 1994: Earnings per share for the quarter and six months ended June 30, 1995, excluding the purchased research and development charge was $.36 ($.34 fully diluted), an 89% increase over second quarter 1994, and $.64 ($.61 fully diluted), a 78% increase over the same period in the prior year. These increases are attributable to increases in revenue of 27% for the quarter and 30% for the six-month period compared to the same periods in 1994 with related increases of only 17% and 22% in operating expense, excluding the purchased research and development charge. Revenue growth was fueled primarily by increased revenue from support and maintenance, software license fees, and implementation services related to both internal growth and acquisitions. With the purchased research and development charge, the loss per share for the quarter and six months ended June 30, 1995, was $(1.94) and $(1.69). The purchased research and development charge of $126 million is primarily related to research and development purchased from the Health Systems Group of First Data Corporation, now the Charlotte Product Group (CPG), which had not reached technological feasibility. Also, the reported loss per share is not adjusted for the effect of stock options outstanding since the effect was anti-dilutive. Fully diluted earnings per share information, excluding the purchased research and development charge, is presented above to aid in the analysis of results. The Company's revenue growth is a result of the continued success of the Pathways 2000 product group of enterprisewide solutions and HBOC's core transaction systems and the Company's merger and acquisition activity. The Company's acquisitions -- IBAX Healthcare Systems (Series product line) in May 1994; Serving Software, Inc. (SSG) in September 1994; Advanced Laboratory Systems, Inc. (ALG) in February 1995 and the Health Systems Group of First Data Corporation (CPG) in June 1995 -- have helped to build revenue by enhancing the current product offerings as well as giving the Company an expanded customer base in which to sell its products. Support and maintenance revenue increased 82% for the quarter and 91% for the six-month period compared to the same periods last year and is now the source of approximately 29% of the Company's revenue compared to approximately 20% a year ago. The increase in support and maintenance revenue is a result of having more installed customers. Software license fee revenue grew 19% for the quarter and 29% for the six-month period, largely due to Pathways 2000. As hospitals continue to consolidate into local and regional healthcare enterprises, the need for clinical and financial information across the continuum of care is driving more enterprises to seek the types of solutions offered by HBO & Company in the Pathways 2000 suite of products. Also contributing to the growth in license fee revenue was SSG, which has successfully introduced its Pathways Healthcare Scheduling product to the market. HBOC continues to derive a large portion of its software license fee revenue from the STAR and TRENDSTAR products. Implementation services revenue grew 24% for the quarter and 29% for the six-month period compared to the same periods last year. The increase was a result of the addition of the Series product line and continued increases in implementation services for all current business units. The Company continues to develop new methodologies for delivering services to its customers which increase the efficiency and productivity of services provided. The Company has recently opened a new state-of-the-art training facility in Dallas and has implemented a process called "Service Tracks" to streamline the implementation of Pathways products. Cost of operations dropped to 45% of revenue for the second quarter and 48% of revenue for the six-month period compared to 54% for both of the same periods in 1994. Cost of operations expense increased at a rate significantly slower than the rate of revenue growth primarily due to a shift in the Company's software, services and hardware revenue mix, a low salary growth rate resulting from streamlining within the implementation organization, and a decrease in the use of consultants and third-party contractors. Page 17 of 23 Marketing expense for both the quarter and six-month period increased to 14% of revenue from 13% during the same periods in 1994. Salary, travel and commission expense have increased due to a larger sales force and higher sales volume. Research and development (R&D) expense remained constant at 9% of revenue for the quarter and six-month periods of both 1995 and 1994. Salary expense increased, while consulting expense decreased as HBOC brought almost all of its development expertise in-house. The R&D capitalization rate was 24% for the quarter and 25% for the six-month period compared to 26% for both periods in 1994. Aggressive development efforts continue as HBOC works to enhance existing products and bring additional Pathways 2000 products to the point of general availability. General and administrative expense increased to 12% of revenue for the quarter and 11% for the six-month period compared to 10% for both periods in 1994. The increases were primarily due to increased depreciation and amortization expense resulting from a larger fixed asset base and increased intangible asset amortization related to the acquisitions and higher expense for incentive programs such as the Company-wide gainsharing program. The $126 million purchased research and development charge related to the CPG acquisition resulted in an operating loss of $105 million for the second quarter and $90 million for the six-month period ended June 30, 1995. Before adjusting for the impact of this nonrecurring charge, operating income increased 90% for the quarter and 82% for the six-month period compared to the same periods in 1994. Operating income as a percent of revenue before the purchased research and development charge increased to 20% from 14% for the quarter and 19% from 13% for the six-month period. The tax rate remained constant at 40% for all periods presented. LIQUIDITY AND CAPITAL RESOURCES JUNE 30, 1995, COMPARED TO DECEMBER 31, 1994: During the six-month period ended June 30, 1995, HBOC generated $17 million of cash flow from operations. The Company used a net $11 million for investing activities including the purchase of Advanced Laboratory Systems, Inc. and capital expenditures. In addition, the Company used $3.6 million to reduce indebtedness and pay dividends. As a result, the Company increased its cash balance by $2.4 million to $8.2 million at June 30, 1995. The Company's current ratio remained constant at .9:1 at both June 30, 1995 and December 31, 1994. Current assets increased $40.3 million or 33% primarily due to acquisitions. The bulk of this growth came from increased receivables acquired in the CPG acquisition. Receivables management is a key performance factor for HBOC, and although the Company already believes it has better receivables performance than most of its competitors, management continues to focus on this area. Current liabilities increased $44 million or 33% primarily due to liabilities assumed related to the CPG acquisition and increased accounts payable. The Company has access to several financing sources, including $25 million available under a revolving credit agreement and $5 million available on two lines of credit totalling $10 million, as of June 30, 1995. Management believes HBOC is well positioned to generate strong positive cash flow from operations through continued focus on receivables and expense controls. The CPG acquisition brings a strong base of recurring revenue and cash flow. This, combined with significant expense reductions resulting from the synergies created as the companies combine operations, should result in a positive impact on cash flow for the Company as a whole. The Company has flexibility in completing future acquisitions on a non-cash basis if desired. Management believes positive future cash flows from operations and access to financing sources will enable HBOC to make strategic investments to enhance quality, increase efficiency and promote growth. Page 18 of 23 HBO&Company and Subsidiaries FINANCIAL STATEMENTS (000 Omitted Except for Per Share Data) CONSOLIDATED STATEMENTS OF INCOME -- UNAUDITED
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1995 1994 1995 1994 REVENUE $ 99,536 $78,343 $190,245 $145,850 OPERATING EXPENSE: Cost of Operations 45,192 42,490 91,279 78,870 Marketing 14,080 10,205 26,411 19,649 Research and Development 8,482 6,996 16,453 13,085 General and Administrative 11,535 7,979 20,490 14,712 Purchased Research and Development Charge 125,520 -- 125,520 -- -------- ------- -------- -------- Total Operating Expense 204,809 67,670 280,153 126,316 -------- ------- -------- -------- OPERATING INCOME (LOSS) (105,273) 10,673 (89,908) 19,534 Other Income (Expense), Net (664) (65) (1,026) 73 -------- ------- -------- -------- Income (Loss) Before Provision (Credit) for Income Taxes (105,937) 10,608 (90,934) 19,607 Provision (Credit) for Income Taxes (42,374) 4,273 (36,373) 7,844 -------- ------- -------- -------- NET INCOME (LOSS) $(63,563) $ 6,335 $(54,561) $ 11,763 -------- ------- -------- -------- EARNINGS (LOSS) PER SHARE: Primary $ (1.94) $ .19 $ (1.69) $ .36 Fully Diluted $ (1.94) $ .19 $ (1.69) $ .36 -------- ------- -------- -------- WEIGHTED AVERAGE SHARES OUTSTANDING: Primary 32,739 33,040 32,333 32,834 Fully Diluted 32,739 33,040 32,333 32,834 -------- ------- -------- -------- CASH DIVIDENDS DECLARED PER SHARE $ .04 $ .04 $ .08 $ .08 -------- ------- -------- -------- -------- --------
CONSOLIDATED CONDENSED BALANCE SHEETS -- UNAUDITED
ASSETS June 30, Dec. 31, 1995 1994 CURRENT ASSETS: Cash and Cash Equivalents $ 8,232 $ 5,825 Receivables, Net of $2,389 and $1,749 Allowance for Doubtful Accounts 131,709 101,457 Current Deferred Income Taxes 9,130 5,133 Inventories 1,868 1,280 Prepaids and Other Current Assets 12,061 8,968 -------- -------- Total Current Assets 163,000 122,663 -------- -------- INTANGIBLES, Net of $6,390 and $3,482 Accumulated Amortization 181,293 57,569 DEFERRED INCOME TAX 33,096 -- PROPERTY AND EQUIPMENT, Net of $63,025 and $61,166 Accumulated Depreciation 31,983 26,598 CAPITALIZED SOFTWARE, Net of $19,015 and $16,182 Accumulated Amortization 25,626 25,035 OTHER NONCURRENT ASSETS, NET 6,457 2,012 -------- -------- $441,455 $233,877 -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES $175,370 $131,382 DEFERRED INCOME TAXES -- 9,623 LONG-TERM DEBT AND OTHER LIABILITIES 24,316 1,397 STOCKHOLDERS' EQUITY 241,769 91,475 -------- -------- $441,455 $233,877 -------- -------- --------
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. Page 19 of 23 HBO&Company and Subsidiaries Financial Statements (000 Omitted) CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $(54,561) $ 11,763 -------- -------- Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Purchased Research and Development Charge 125,520 -- Depreciation and Amortization 11,667 7,449 Provision (Credit) for Noncurrent Deferred Income Taxes (9,521) 826 Changes in Assets and Liabilities: Receivables (3,318) (20,317) Current Deferred Income Taxes (3,997) (628) Inventories (588) (754) Prepaids and Other Current Assets (2,077) (1,467) Deferred Income Tax (33,096) -- Other Noncurrent Assets, Net (878) (383) Current Liabilities (12,320) 15,345 Other, Net 213 (88) -------- -------- Total Adjustments 71,605 (17) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 17,044 11,746 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of Property and Equipment 159 -- Purchase of Facility -- (2,698) Purchase of Businesses, Net of Cash Acquired (2,121) (40,876) Capital Expenditures (3,679) (2,218) Capitalized Software (5,365) (4,556) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (11,006) (50,348) -------- -------- NET CASH PROVIDED (USED) BEFORE FINANCING ACTIVITIES 6,038 (38,602) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Long-Term Debt 40,500 45,000 Proceeds from Short-Term Debt 18,000 -- Proceeds from Issuance of Common Stock 4,402 4,503 Payment of Dividends (2,553) (2,304) Repayment of Short-Term Debt (23,000) -- Repayment of Long-Term Debt (40,980) (15,017) -------- -------- Net Cash Provided (Used) by Financing Activities (3,631) 32,182 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,407 (6,420) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,825 25,777 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,232 $ 19,357 -------- -------- -------- Cash Paid During the Period for: Interest $ 1,651 $ 782 Income Taxes $ 10,274 $ 3,980
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. Page 20 of 23 HBO&Company and Subsidiaries 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. Quarterly results of operations are not necessarily indicative of annual results. These statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 1994 Annual Report to Stockholders. 2. Earnings per share is based upon the weighted average number of shares and the dilutive effect of stock options outstanding. The loss per share is based upon the weighted average number of shares outstanding, since the effect of stock options was anti-dilutive. 3. At June 30, 1995, HBOC had a long-term revolving credit agreement for $25 million with interest payable at the Company's option of prime or LIBOR plus a margin determined by certain of the Company's financial ratios (71/16% as of June 30, 1995). The commitment fee on the revolving credit agreement is 3/8% payable quarterly on the unused portion of the commitment. The agreement, which expires on 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, 1995. HBOC also has available a committed, unsecured line of credit for $5 million with no commitment fee, and an uncommitted, unsecured line of credit for $5 million with interest payable at prime less .5% and no commitment fee. Additionally, the Company has repaid, in advance, all amounts outstanding related to the $25 million five-year loan entered into in 1994. During the second quarter of 1994, the Company entered into an 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. During the first quarter of 1995, the Company increased the amount available to be sold and the amount sold from $20 million to $30 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 (71/16% as of June 30, 1995). The two-year agreement expires June 25, 1996. The Company, as agent for the purchaser, retains collection and administrative responsibilities for the receivables sold. 4. On February 22, 1995, HBOC completed the acquisition of Advanced Laboratory Systems, Inc. for approximately $7 million, net of cash acquired. Advanced Laboratory Systems, Inc. was a Eugene, Oregon-based developer of laboratory software for the healthcare and commercial marketplace. The transaction was accounted for as a purchase. 5. On June 17, 1995, HBO & Company of Georgia, a wholly owned subsidiary of HBOC, acquired First Data Health Systems Corporation, now known as the Charlotte Product Group (CPG), a wholly owned subsidiary of First Data Corporation, in exchange for 4 million shares of Common Stock of HBOC valued at approximately $200 million, $500,000 in cash and a promissory note for $100,000. First Data Health Systems Corporation provided information systems and services to hospitals, medical group practices and medical facilities throughout the United States, United Kingdom, Australia, Puerto Rico and other countries. The transaction was accounted for as a purchase. The cost of the acquisition has been allocated on the basis of an outside appraisal of the tangible ($58 million) and intangible assets acquired and the liabilities assumed ($83 million). HBOC recorded approximately $115 million of intangibles after adjusting for the purchased research and development charge (note 6), which are being amortized on a straight line basis over periods ranging from seven to 15 years. The Company is in the process of finalizing the purchase price allocation. Page 21 of 23 HBO&Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The results of operations of CPG are included in the accompanying financial statements since the date of acquisition. The following unaudited pro forma information was prepared assuming the transaction was consummated on January 1 of each year presented and excludes the effect of the second quarter 1995 purchased research and development charge of $126 million:
(000 Omitted Except for Per Share Data) Three Months Ended June 30, 1995 1994 Revenue $126,571 $115,981 Net Income $ 12,664 $ 7,993 Earnings Per Share $ .34 $ .22 -------- -------- Six Months Ended June 30, 1995 1994 Revenue $258,440 $220,126 Net Income $ 24,686 $ 15,462 Earnings Per Share $ .66 $ .42 -------- --------
This pro forma information is not necessarily indicative of the results of operations that would have been attained had the acquisition been consummated on January 1 of each year presented or that may be attained in the future. 6. During the second quarter of 1995, the Company recorded a $126 million charge primarily related to research and development purchased from the Health Systems Group of First Data Corporation which had not reached the stage of technological feasibility ($115 million). The charge also included severance and other acquisition related costs ($8 million) and a mainframe capitalized research and development net book value adjustment ($3 million). 7. In October 1986 a class action lawsuit was filed against the Company by a plaintiff who purchased 500 shares of the Company's stock in 1985. In April 1991 the United States Federal District Court for the Northern District of Georgia, Atlanta Division (the "District Court"), certified the case as a class action on behalf of all purchasers of the Company's common stock on the open market during the period from March 29, 1985, to April 20, 1986. The plaintiff alleges that HBOC's filings with the Securities and Exchange Commission did not fairly present the Company's financial position and results of operations for the years ended December 31, 1984 and 1985, and the intervening quarters with respect to, among other things, reporting the effect of discounting service agreement contracts. In November 1992 the lawsuit was amended to add a claim regarding the timeliness of recognition and disclosure of various expense items by the Company during fiscal year 1985. The plaintiff also alleges that the market price of the Company's common stock during the period was inflated due to the alleged nondisclosures and misrepresentations in the Company's filings. In early February 1993 the plaintiff evidenced an intention to allege substantial damages. Management believes that the members of the class have suffered no damages that entitle them to compensation and that, in any event, the plaintiff's calculation of alleged damages is unrealistic and without merit. On April 1, 1994, the District Court issued an Order granting the Company's motion for summary judgement and dismissed the suit. On April 20, 1994, the District Court issued an Order setting forth the reasons for dismissing the suit. The plaintiff has appealed from the District Court's determination and that appeal is pending. In the event that the outcome is ultimately unfavorable, the amount of loss could be substantial. Management believes, however, that the Company should be able to continue to defend the suit successfully. Page 22 of 23 The Company is subject to other legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of potential liability with respect to these actions will not materially affect the Company's financial position or results of operations. 8. On July 10, 1995, the Company completed the acquisition of Pegasus Medical, Ltd for approximately $8 million of cash and contingent payments, based on certain deliverables, of $7 million. Pegasus was a privately held Israeli software company that markets the Smart Medical Record, a computer-based patient record. The transaction will be accounted for as a purchase. 9. On July 14, 1995, the Company signed a definitive agreement to acquire CliniCom Incorporated (CliniCom) for .4 of a share of HBOC common stock in exchange for each of the approximately 8,660,000 currently outstanding shares of CliniCom common stock. CliniCom is a developer of point-of-care clinical information systems. The transaction, which is subject to certain conditions including regulatory and shareholder approval, will be accounted for as a pooling of interests and is expected to close in the early fourth quarter of 1995. HBO&COMPANY 301 Perimeter Center North Atlanta, Georgia 30346 Phone (404) 393-6000 Page 23 of 23 -----END PRIVACY-ENHANCED MESSAGE-----