-----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, TIVlHGwoAhRY9Zpttwczi/4JMHWBm9K2h495CYvucSGhAj4eF2EHMya+LVSTlhEb yoklcIE5t8tInsQsmQ5zBA== 0000912057-96-004429.txt : 19960314 0000912057-96-004429.hdr.sgml : 19960314 ACCESSION NUMBER: 0000912057-96-004429 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960313 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-09900 FILM NUMBER: 96534255 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-K 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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 No.) 301 PERIMETER CENTER NORTH ATLANTA, GEORGIA 30346 (Address of principal (Zip Code) executive office)
Registrant's telephone number, including area code: (770) 393-6000 -------------------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.05 PAR VALUE (Title of Class) -------------------------- 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 ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. ____ Aggregate market value of the voting stock held by nonaffiliates of the registrant, computed using the closing price as reported by The Nasdaq Stock Market's National Market for the Company's common stock on February 29, 1996: $3,984,744,951. Indicate the number of shares outstanding of the registrant's common stock as of the latest practicable date:
OUTSTANDING AT CLASS FEBRUARY 29, 1996 - ------------------------------ ------------------ Common Stock, $.05 par value 40,249,949
DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Stockholders for the year ended December 31, 1995, are incorporated by reference into Parts I, II and IV of this Form 10-K. Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 1996, are incorporated by reference into Part III of this Form 10-K. All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1: BUSINESS GENERAL OVERVIEW. HBO & Company (HBOC or the Company), incorporated in 1974, develops integrated patient care, clinical, financial and strategic management software solutions for the healthcare industry. These open systems applications facilitate the integration of clinical, financial and administrative data from a wide range of customer systems and software. HBOC's broad product portfolio can be implemented in a variety of combinations from stand-alone to enterprisewide, enabling customers to add incremental capabilities to existing information systems without making prior capital investments obsolete. HBOC also provides a full complement of network communications technologies, including wireless capabilities, as well as outsourcing services that are offered under contract management agreements whereby its staff manages and operates data centers, information systems, organizations and business offices of healthcare institutions of various sizes and structures. HBOC markets its products and services to integrated health delivery networks, hospitals, physicians' offices, home health providers, pharmacies, reference laboratories, managed care providers and payers. At December 31, 1995, HBOC had 2,700 customers of which 2,200 were United States community hospitals. Currently there are a total of 5,300 community hospitals in the United States. HBOC also sells its products and services internationally through subsidiaries and/or distribution agreements in the United Kingdom, Canada, Ireland, Saudi Arabia, Australia, Puerto Rico and New Zealand. As of December 31, 1995, the Company's customers include 897 active users of patient care systems, 986 active users of clinical/departmental systems, 1,298 active users of financial systems, 755 active users of decision support systems and 68 active users of enterprise information systems. In addition, HBOC had 183 networking technology customers and 15 outsourcing services sites. As of December 31, 1995, HBOC had 3,363 employees worldwide. INDUSTRY. The healthcare industry is undergoing significant and rapid change. Healthcare delivery costs have increased dramatically in recent years as compared to the overall rate of inflation. The growing influence of managed care has resulted in increased pressure on participants in healthcare systems to contain costs. Accordingly, healthcare systems are migrating toward more managed care reimbursement, including discounted fee-for-service and capitation. Under capitation, providers are paid a predetermined fee per individual to provide all healthcare services, thereby assuming the potential financial risks of escalating healthcare costs. To deliver care in a more cost-effective manner, providers are forming integrated health delivery networks that may include acute-care hospitals, physicians' offices, outpatient clinics, homecare and long-term care facilities. The success of these comprehensive delivery networks is dependent on effectively managing and delivering information to caregivers and managers across multiple points of care. Traditionally, the hospital information systems market has been the largest segment of healthcare information services. According to industry analysts, the healthcare industry spent approximately $10 billion in 1995 for products and services to support automated information systems and the growth in healthcare information systems expenditures will continue to rise, reaching an expected $20 billion by 2000. In addition to this expanding market opportunity, the demand for healthcare information systems is also increasing because hospitals and other providers are under pressure to quantify and control their costs. As a result, they are spending more of their operating budgets on systems that enable them to access such information. In the 1995 Annual HIMSS/HP Leadership Survey, an 1 industry survey conducted by Hewlett-Packard at the Healthcare Information and Management Systems Society conference, 75 percent of the respondents stated that their information system investments will increase at a rate of 20 percent or more over the next two years. Healthcare information systems are evolving to meet the needs of a changing marketplace. Initially, these systems were financially oriented, focusing on the ability to capture charges and generate patient bills. However, as reimbursement has shifted more toward risk sharing and capitation, providers and payers need to better manage risk by controlling costs, demonstrating quality, measuring outcomes and influencing utilization. Because this requires an integration of clinical and financial information, systems have evolved from processing billing information to include enterprisewide systems capable of capturing, storing and analyzing both clinical and financial data across the continuum of care. While the availability of a complete, timely and cost-effective patient-focused information system is essential to providing quality care and controlling costs, the source of patient information usually covers a number of different sites. Therefore, current and historical paper records must be made available by computer at all points of care. All players in the delivery network need information systems that can capture data at the point of care, communicate data across the continuum of care and process and store large volumes of data necessary for the development of a lifelong computer-based patient record. STRATEGY HBOC's strategy is to provide a comprehensive range of computer-based information systems and services designed to meet the evolving needs of health enterprises while protecting as much as possible the current systems investments of those enterprises. The key elements of this strategy are as follows: LEVERAGE THE EXISTING CUSTOMER BASE. With one or more of its products installed in approximately 42 percent of the community hospitals in the United States, HBOC is a leader in the healthcare information systems marketplace. HBOC expands its customer base through sales and marketing efforts and through strategic acquisitions such as IBAX Healthcare Systems and First Data Health Systems Corporation, which had 475 and 500 hospital customers, respectively (see "Recent Acquisitions" below). This expanded customer base offers HBOC significant opportunities to sell both additional applications of its established product lines and its Pathways 2000 enterprisewide solutions. In addition, HBOC believes its relationships with customers and its familiarity with their existing systems give HBOC an advantage over many of its competitors in marketing applications to meet the evolving needs of these customers. HBOC also seeks to further leverage its relationships with existing customers to access additional healthcare organizations throughout newly formed health delivery networks. PROVIDE ENTERPRISEWIDE SOLUTIONS TO THE EVOLVING HEALTHCARE MARKET. HBOC offers one of the broadest product lines in the healthcare information systems industry to serve patient care, clinical, financial and strategic management needs. Through its Pathways 2000 family of enterprisewide information systems, HBOC facilitates the more efficient integration of delivery networks. HBOC's Pathways 2000 client/server applications are designed to provide a common information infrastructure that enables organizations to collect, manage and disseminate clinically oriented information organized on the basis of a patient's entire history of care. The Pathways 2000 product line provides the capability to create longitudinal computerized patient records as well as connectivity along the entire continuum of care, enabling users to access patient data from any point within an integrated delivery system. PROVIDE SUPERIOR INTEGRATION OF PRODUCTS AND DATA. HBOC's products offer healthcare organizations open system solutions with the flexibility to add incremental capabilities, which protect their capital investments. In addition, HBOC's client/server architecture facilitates the integration of clinical data with financial and administrative data from both HBOC and non-HBOC applications for 2 efficient resource allocation, allowing organizations to benefit from price/performance advances. HBOC believes that these features will be of key significance to its customers as they face industry consolidation and evolve as part of integrated care delivery systems. EXPAND INTO NEW MARKETS. HBOC strives to provide premier business-critical applications to every essential care setting as well as to the payer market. HBOC believes that as healthcare organizations expand and decentralize, management information requirements at the point of care will increase. HBOC is developing or has acquired client/server applications to meet these needs in the physician's office, home health market, reference laboratory and the payer market. Applications for other components of the care delivery network, such as long-term care, are under consideration. CONTINUE PRODUCT DEVELOPMENT. HBOC believes that a key to its growth is an ongoing focus on research and development to ensure its product offerings will continue to meet the evolving needs of its existing and potential customer base. HBOC's research efforts focus on enhancements to existing product offerings as well as new product development. In developing products, HBOC's strategy is to ensure its information systems are highly flexible and quickly adaptable and can serve the information access needs of an increasingly broad range of users. HBOC's product developers use state-of-the-art application development tools such as program generators, artificial intelligence and expert systems, which decrease development time and lower the cost of new products. While HBOC's efforts focus primarily on the internal research and development of new products, HBOC has made and continues to explore strategic acquisitions of developers of niche product software to complement and diversify its product portfolio. RECENT ACQUISITIONS A substantial portion of HBOC's recent growth has resulted from acquisitions of companies that have expanded its product lines and enhanced its installed customer base. The following table outlines these acquisitions:
DATE ACQUIRED COMPANY PRIMARY SIGNIFICANCE - --------------- ---------------------------------------- --------------------------------------------- June 1993 Biven Software, Inc. Managed care applications December 1993 Data-Med Computer Services Limited Installed base of 100 hospitals in the United Kingdom May 1994 IBAX Healthcare Systems Presence in the IBM AS/400 market; installed base of 475 hospitals September 1994 Serving Software, Inc. Health enterprise patient and resource scheduling software December 1994 Care 2000, Inc. Case management methodologies February 1995 Advanced Laboratory Systems, Inc. Laboratory software for the healthcare and commercial marketplaces June 1995 First Data Health Systems Corporation Installed base of 500 hospitals July 1995 Pegasus Medical Ltd. Electronic patient record built by physicians for physicians September 1995 CliniCom Incorporated Multidisciplinary point-of-care clinical information systems
PRODUCT SUMMARY HBOC's products and services are designed to serve the information needs of all participants in the integrated health delivery system: the caregiver, in whatever discipline or capacity; the institution or enterprise, in whatever aspect of its business; and the patient (increasingly referred to by healthcare organizations as the "customer"), in whatever setting of care. Today, the health services delivery network through which these participants relate can include acute-care hospitals, outpatient clinics, 3 physicians' offices, reference laboratories, commercial pharmacies, long-term care facilities, patients' homes and wellness centers. In addition, employers, payers and governmental agencies play a major role in directing how healthcare resources are deployed. To serve this wide-ranging and diverse network of health delivery, HBOC bases its offerings on a strategic mix of applications and technologies backed by implementation, support and other services. HBOC's portfolio of products is organized into five components: acute-care, infrastructure, clinical/ practice management, access management and enterprise management. In addition, HBOC offers a suite of services that allow healthcare organizations to select just the right level of resources to most effectively serve their needs. ACUTE-CARE -- Acute care applications automate the operation of individual departments and their respective functions within the traditional hospital setting. These hospital-based transaction and decision support systems form the core of systems that, in conjunction with other tools designed to directly support clinical decision-making, help streamline the care process over the continuum of care delivery settings. HBOC's acute-care systems include applications for patient care, laboratory, pharmacy, radiology, financials and management decision-making. INFRASTRUCTURE -- Infrastructure applications are not limited to a single department or function; rather, they form the foundation of the emerging information structures of health enterprises. HBOC's wide array of networking and database applications provides the key elements for integrating and uniting providers across the continuum of care. Components include local, metropolitan and wide area networks, as well as wireless technology and electronic data interchange (EDI) capabilities. An interface manager coordinates the flow of information, often from disparate sources, throughout the entire system, and a data repository stores all patient information for access throughout the enterprise. In bringing the enterprise together, these solutions establish the physical basis for a lifelong patient record. CLINICAL/PRACTICE MANAGEMENT -- Clinical applications facilitate and improve the actual practice of medicine in a variety of care settings, whether acute-care, physician office, home or clinic. Drawing from a common database of patient information, computer technology gives professionals immediate access to the critical information necessary to provide better quality care wherever they are in the delivery system. There are applications that allow physicians and other clinicians to document all patient information at the point of care and others that make use of patient information to create protocols and care pathways. Still other applications give them the tools they need to more efficiently manage their practices or businesses and thereby provide better service to those under their care. These clinical solutions support the need for collaboration among multiple disciplines and for integration with other information systems in the health delivery network. ACCESS MANAGEMENT -- Access management solutions allow the healthcare organization's "customers" to access health services more easily and cost-effectively. Indexing applications organize the vast information collected about a person throughout the enterprise, allowing patients to be tracked and information about them to be accessed anywhere they go for care. Scheduling systems instantly register and schedule patients from anywhere to anywhere in the enterprise, as well as the resources needed to serve them. Other system capabilities allow for information tied to specific episodes of care to be collected and managed. Besides increasing accuracy, these applications help cut patient frustration with having to provide duplicate information from one setting of care to another and therefore enhance "customer satisfaction." ENTERPRISE MANAGEMENT -- Enterprise management applications facilitate and improve the management and operation of all aspects of the healthcare enterprise payer as well as provider. These applications focus on providing managers with the clinical, financial and other information necessary to contain costs while ensuring high quality care. Examples include utilization review and accounts receivable management, as well as managed care contracting and member management applications. 4 The following table outlines the principal products in each area:
PRODUCT DESCRIPTION - -------------------------------------------------------- -------------------------------------------------------- ACUTE-CARE: STAR, SAINT, The Precision Alternative, AdVantage RISC-based patient care, clinical and financial systems (including a laboratory system that also has commercial, reference and hybrid laboratory capabilities) HealthQuest, Series 5000 IBM mainframe-based patient care, clinical, and financial systems Series, OR Series IBM AS/400-based patient care, clinical and financial systems Surgi-Server 2000, Omni-Server 2000, DME 2000 PC-based scheduling, management and equipment tracking systems Host Based Systems Tandem-based patient care management systems and remote processing systems for patient financials INFRASTRUCTURE: Pathways Interface Manager Interface engine that manages network traffic and performs protocol conversion and translation Pathways Health Network Server Relational database and repository for all patient information Pathways Image Manager Medical records document imaging and workflow management Networking technologies Local and wide area networks and wireless technology Value Added Network Electronic data interchange (EDI) capabilities that support the movement of information among various sources CLINICAL/PRACTICE MANAGEMENT: Pathways Clinical Workstation Workstation for inputting and viewing online clinical information (later phases will have multimedia capabilities) Smart Medical Record Patient information documentation tool for physicians Physician Practice Management System Billing, time management and administration for physicians' offices Pathways Care Manager Multidisciplinary point-of-care system Pathways Homecare Clinical, administrative and human resource management for home health ACCESS MANAGEMENT: Pathways Health Network Management Enterprisewide system for managing information about an enrolled population Pathways Healthcare Scheduling Enterprisewide patient and resource scheduling system
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PRODUCT DESCRIPTION - -------------------------------------------------------- -------------------------------------------------------- Pathways Encounter Management Enterprisewide system for managing information about patients' episodes of care ENTERPRISE MANAGEMENT: Pathways Contract Management Monitoring and management of multiple varied contracts for providers with managed care focus Pathways Managed Care Full-function management of contractual agreements for providers, payers, HMOs, PPOs, PHOs and others TRENDSTAR Decision support system, including cost accounting, budgeting and forecasting QUANTUM Enterprise information system Pathways Decision Support Enterprisewide decision support system
In addition to the above applications, HBOC offers software applications provided by a host of industry-leading business partners. These partnerships also include value-added reseller agreements with computer hardware manufacturers such as Data General Corp., Digital Equipment Corp., Hewlett-Packard Co. and IBM Corp. INTERNATIONAL OFFERINGS Most of the Pathways 2000 and acute-care products in HBOC's product portfolio are offered internationally. In addition, products added to the HBOC product line with the acquisition of Data-Med Computer Services in December 1993 are available in the United Kingdom. In most cases, the applications offered internationally have been customized or developed to meet the particular needs of the country in which they are implemented. SERVICES Installation and implementation services are provided for purchasers of all HBOC software products to assist with the smooth introduction of or transition to those products. HBOC also provides software maintenance and enhancement services, as well as custom programming and system modifications to meet special customer requirements. Equipment maintenance services are provided through HBOC's various hardware partners. ENTERPRISE SERVICES. HBOC provides a suite of specially developed services to serve the needs of enterprises whose dependence on information systems is growing. It includes services such as UNIX processing support, disaster recovery and single-point issue resolution. In addition, a line of service offerings called Service Tracks 2000 provides a flexible suite of implementation services that can include an enterprise project manager to assist in planning, installing and supporting Pathways 2000 products. CONNECT TECHNOLOGY GROUP. To support the connectivity needs of hospitals and their affiliates, the Connect Technology Group (CTG) provides total network installation and support. In addition, CTG offers a comprehensive Value Added Network, a suite of information services that extend local and metropolitan area networks outside of the hospital to include payers, vendors, financial institutions and the Internet. All together, HBOC's networking solutions provide customers with a complete network solution for electronic access throughout a provider enterprise. OUTSOURCING SERVICES GROUP. HBOC has been in the outsourcing business in the United States for more than 20 years and offers outsourcing services in the United Kingdom as well. With the change and uncertainty engendered by healthcare reform and resulting economic pressures, information systems outsourcing is becoming increasingly popular in the United States. Outsourcing services go 6 beyond managing hospital data processing operations (traditionally known as facilities management) to encompass strategic management services in information systems planning, receivables management, business office administration and major system conversions. SOURCES OF REVENUE Information regarding sources of revenue is included in the table "Revenue by Business Unit" on page 17 of the Company's Annual Report to Stockholders for the year ended December 31, 1995 (the Annual Report), and under the caption "Revenue Recognition" in Note 1 of "Notes to Consolidated Financial Statements" on pages 23 and 24 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference. BACKLOG Information regarding backlog as of December 31, 1995, is included in the "Financial Review" section under the caption "General" on page 14 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference. RESEARCH AND DEVELOPMENT The Company's product development effort applies advanced computer technology and installation methodologies to specific information processing needs of hospitals. The Company believes a substantial and sustained commitment to such research and development is important to the long-term success of the business. Investment in software development, including both research and development expense as well as capitalized software, has increased as the Company has addressed new software applications and enhanced existing products for installed systems. The Company expensed $42,964,000 (9% of revenue) for research and development activities during 1995, as compared to $32,130,000 (9% of revenue) and $25,829,000 (10% of revenue) during 1994 and 1993. The Company capitalized 25%, 25% and 23% of its research and development expenditures in 1995, 1994 and 1993. Information regarding research and development is included in the schedule "Five-Year Selected Financial Information" on page 13 of the Annual Report and under the captions "Capitalized Software" and "Nonrecurring Charge" in Note 1 of "Notes to Consolidated Financial Statements" on pages 23 and 24 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference. The technical concepts and codes embodied in the Company's computer programs and program documentation are not protected by patents or copyrights but constitute trade secrets that are proprietary to the Company. The Company and its subsidiaries are the owners of various trademarks and service marks, including the federally registered trademarks or service marks "MEDPRO," "IFAS," "CLINPRO," "MEDIPAC," "CML," "COSTREP," "TRENDSTAR," "TRENDSERVE," "TRENDPAC I," "BUDGET+," "CLINIPAC," "CLINSTAR," "HOSTS," "HSL," "PARAGON," "HEALTHQUEST," "QUANTUM," "ERS," "PATHWAYS 2000," "PATIENT VIEW," "SAINT," "SAINT PLUS," "THE PRECISION ALTERNATIVE," and the triangular design that forms the Company logo, but such registration provides limited protection as to the trademark or service mark. COMPETITION HBOC experiences substantial competition from many firms, including other computer services firms, consulting firms, shared service vendors, certain hospitals and hospital groups, and hardware vendors. Competition varies in size from small to large companies, in geographical coverage, and in scope and breadth of products and services offered. Although some of the Company's competitors are comparable in size to the Company, the Company believes that few competitors can offer the breadth and depth of product and service offerings it provides or the number of platforms and operating systems it supports. 7 ITEM 2: PROPERTIES The Company's principal administrative and research offices are located at 301 and 303 Perimeter Center North, Atlanta, Georgia. The offices consist of approximately 226,000 square feet of space under a lease which expires in 1999. The rental expense for these offices totaled approximately $3,939,000 for 1995. The Company also owns two buildings and leases space in 40 buildings throughout the United States, Canada, the United Kingdom, Ireland, Israel and Australia primarily for sales and customer service offices. Information regarding the Company's leases is included in Note 2 of "Notes to Consolidated Financial Statements" on page 24 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference. Information regarding the Company's principal offices is included on the back cover of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference. ITEM 3: LEGAL PROCEEDINGS Information regarding Legal Proceedings is included in Note 8 of "Notes to Consolidated Financial Statements" on page 27 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the quarter ended December 31, 1995, there were no matters submitted to a vote of security holders. 8 PART II ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on The Nasdaq Stock Market's National Market under the symbol HBOC. Information regarding the high and low closing prices, the number of holders of the Company's common stock and dividends is presented under the caption "Common Stock Data" on page 27 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K, and is incorporated herein by reference. ITEM 6: SELECTED FINANCIAL DATA The information included under the caption "Five-Year Selected Financial Information" on page 13 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K, is incorporated herein by reference. ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information included in the "Financial Review" and "Revenue by Business Unit" sections on pages 14 through 17 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K, is incorporated herein by reference. ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information included on pages 18 through 27 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K, under the captions "Condensed Consolidated Quarterly Statements of Income," "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements" is incorporated herein by reference. ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES The Company has neither changed its independent public accountants nor had any disagreements on accounting and financial disclosures with such accountants. 9 PART III ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding the executive officers of the Company as of March 1, 1996. Additional information regarding the Board of Directors is included in the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 1996, under the captions "Election of Directors" and "Security Ownership of Certain Beneficial Owners and Management," which is incorporated herein by reference.
NAME AGE POSITION WITH THE COMPANY - -------------------- --- -------------------------------------------------- Charles W. McCall 51 Director, President and Chief Executive Officer Albert J. Bergonzi 46 Executive Vice President -- Sales and Pathways 2000 James A. Gilbert 47 Senior Vice President -- Charlotte Product Group, Mainframe Products Group, Series Product Group, General Counsel and Secretary Jay P. Gilbertson 35 Senior Vice President -- Finance, Chief Financial Officer, Principal Accounting Officer, Treasurer and Assistant Secretary Russell G. Overton 48 Senior Vice President -- Business Development
Charles W. McCall has served as a Director, President and Chief Executive Officer of the Company since 1991. Prior to joining the Company, he served as President and Chief Executive Officer of CompuServe Inc., a wholly owned subsidiary of H&R Block, from 1985 to 1991. Mr. McCall is also a Director of EIS International, Inc. and WestPoint Stevens Inc. Albert J. Bergonzi has served as Executive Vice President -- Sales of HBOC since June 1995 and Pathways 2000 since March 1996. From 1985 through 1995 he served as the Vice President and General Manager of HBOC's Amherst Product Group. James A. Gilbert has served as Senior Vice President -- Charlotte Product Group, Mainframe Products Group and Series Product Group since 1995. Prior to that he served as Vice President from 1988 through 1995. He has served as General Counsel since joining the Company in 1988 and as Secretary since 1992. Jay P. Gilbertson has served as Senior Vice President -- Finance since 1995. Since 1993 he has served as Vice President -- Finance, Chief Financial Officer, Principal Accounting Officer, Treasurer and Assistant Secretary. In 1992, he served as Vice President -- Controller and Chief Accounting Officer. From 1988 through 1991, he served in a financial management capacity at Medical Systems Support, Inc., HBOC's hardware maintenance subsidiary sold in 1991. Russell G. Overton has served as Senior Vice President -- Business Development since 1992. From 1989 through 1991, he served as Vice President -- Business Development for HealthQuest Ltd. (a wholly owned subsidiary of HBOC). ITEM 11: EXECUTIVE COMPENSATION The Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 1996, contains under the captions "Compensation of Directors" and "Executive Compensation," information relating to director and executive compensation for the year ended December 31, 1995, all of which are incorporated herein by reference. ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 1996, contains under the caption "Security Ownership of Certain Beneficial Owners and Management" information relating to security ownership of beneficial owners and management, which is incorporated herein by reference. ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained in the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 1996, under the caption "Certain Relationships and Related Transactions" is incorporated herein by reference. 10 PART IV ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following documents are filed as part of this report: (a) 1. Financial Statements The Annual Report contains the following information on pages 18 through 27: "Condensed Consolidated Quarterly Statements of Income," "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements." The report of Arthur Andersen LLP on these financial statements is on page 28 of the Annual Report. These financial statements and the report of Arthur Andersen LLP are incorporated herein by reference. (a) 2. Financial Statement Schedules - Report of Independent Public Accountants as to Schedules Supporting Financial Statements - Schedules Supporting Financial Statements SCHEDULE NUMBER - -------- II Valuation and Qualifiying Accounts for the Three Years Ended December 31, 1995.
Schedules not listed have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto. (a) 3. Exhibits The following exhibits filed with the Securities and Exchange Commission are incorporated by reference as shown below. Items marked with an asterisk, "*," relate to management contracts or compensatory plans or arrangements.
EXHIBIT NUMBER DESCRIPTION - ------- ------------------------------------------------------------------------ ON MAY 13, 1981, AS PART OF ITS REGISTRATION STATEMENT ON FORM S-1 (REGISTRATION NUMBER 2-72275): 4(a) -- Specimen forms of certificates for Common Stock of Registrant. 10(e) -- Standard Form of EPLA Agreement. ON JANUARY 22, 1985, AS PART OF ITS FORM S-14 (REGISTRATION NUMBER 2-95208): 3(a) -- Certificate of Incorporation of Registrant. ON MARCH 21, 1989, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1988: 10(a) -- Standard Form of Software License Agreement. 10(b) -- Standard Form of Hardware Purchase Agreement. ON FEBRUARY 15, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 2-75987): *4 -- HBO & Company 1981 Incentive Stock Option Plan, as amended. ON FEBRUARY 22, 1991, AS PART OF ITS FORM 8-K: *4 -- HBO & Company Rights Agreement. ON MARCH 26, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 2-92030): *4 -- HBO & Company Nonqualified Stock Option Plan, as amended. ON MARCH 27, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-12051): *4 -- HBO & Company 1986 Employee Nonqualified Stock Option Plan, as amended. ON MARCH 27, 1991, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1990: 3(a) -- Amendments to the Certificate of Incorporation of Registrant. 10(c) -- Standard Form of HealthQuest Ltd. Software License and Maintenance Agreement.
11
EXHIBIT NUMBER DESCRIPTION - ------- ------------------------------------------------------------------------ ON MARCH 27, 1992, AS A PART OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1991: 10(a) -- Standard Form of Credit Agreement with recourse between the Company and Sanwa Business Credit Corporation. 10(b) -- Standard Form of Credit Agreement without recourse between the Company and Sanwa Business Credit Corporation. ON MARCH 26, 1993, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1992: 10(d) -- Standard Form of Credit Agreement without recourse between the Company and The First National Bank of Boston. ON AUGUST 12, 1993, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-67300): *4 -- HBO & Company 1993 Stock Option Plan for Nonemployee Directors. ON AUGUST 13, 1993, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1993: 10(a) -- Acquisition Agreement, dated June 28, 1993, of Biven Software, Inc. ON MARCH 23, 1994, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1993: 10(a) -- Grid Note between the Company and Continental Bank N.A., dated June 25, 1993. 10(b) -- Acquisition of Data-Med Computer Services Limited -- Sale and Purchase Agreement, dated December 16, 1993. 10(e) -- Co-ownership agreement between HTG Corp. and the Company of Falcon 20 airplane, dated July 15, 1993. ON MAY 6, 1994, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1994: 10(a) -- Termination of the Amended and Restated Revolving Credit Agreement with Continental Bank N.A., effective April 20, 1994. ON JUNE 14, 1994, AS PART OF ITS FORM 8-K REPORT DATED JUNE 13, 1994, AS AMENDED BY FORM 8-KA DATED JUNE 30, 1994, AND FILED WITH THE COMMISSION ON JULY 1, 1994: 2 -- Asset Purchase Agreement among IBAX Healthcare Systems, Baxter Healthcare Corporation, International Business Machines Corporation, Baxter Systems, Inc., HCPG Corporation, HBO & Company and HBO & Company of Georgia, dated May 31, 1994. ON JULY 20, 1994 AS PART OF ITS FORM S-4 REGISTRATION STATEMENT DATED JULY 19, 1994, AS AMENDED BY AMENDMENT NO. 1 TO FORM S-4 DATED AUGUST 10, 1994, AND FILED WITH THE COMMISSION ON AUGUST 11, 1994, AND FURTHER AMENDED BY AMENDMENT NO. 2 TO FORM S-4 DATED AUGUST 10, 1994, AND FILED AUGUST 11, 1994: 2 -- Agreement of Merger dated June 30, 1994, by and among HBO & Company, HBO & Company of Georgia and Serving Software, Inc. 3 -- Amended Bylaws of Registrant. 10(a) -- Receivables Purchase Agreement, dated as of June 24, 1994, among HBO & Company of Georgia, as seller, and The First National Bank of Boston and NationsBank of Georgia, N.A., as purchasers, and The First National Bank of Boston, as agent. 10(b) -- Credit Agreement, dated June 13, 1994, between the Company and Wachovia Bank of Georgia, N.A. 10(c) -- Note payable to Baxter Healthcare Corporation, dated May 31, 1994. 10(d) -- Note payable to International Business Machines Corporation, dated May 31, 1994. 10(e) -- Amended and Restated Revolving Credit and Term Loan Agreement, dated as of May 27, 1994, among HBO & Company and HBO & Company of Georgia and The First National Bank of Boston and NationsBank of Georgia, N.A. and The First National Bank of Boston, as agent. 10(f) -- First Amendment to the May 27, 1994, Amended and Restated Revolving Credit and Term Loan Agreement and First Amendment to Revolving Credit Notes, dated as of June 30, 1994.
12
EXHIBIT NUMBER DESCRIPTION - ------- ------------------------------------------------------------------------ *10(g) -- Letter Agreement between John E. Haugo, Ph.D. and HBO & Company, dated June 29, 1994, re: employment. ON AUGUST 11, 1994, AS PART OF ITS FORM 10-Q REPORT FOR THE QUARTER ENDED JUNE 30, 1994: 10 -- Second Amendment to the Amended and Restated Revolving Credit and Term Loan Agreement by and among HBO & Company, HBO & Company of Georgia, The First National Bank of Boston, NationsBank of Georgia, N.A. and other lending institutions, dated as of June 30, 1994. ON AUGUST 17, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-82962): *4 -- HBO & Company 1990 Executive Incentive Plan, as amended. ON SEPTEMBER 15, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-84034): *4 -- 1986 Incentive Stock Option Plan of Serving Software, Inc. ON NOVEMBER 10, 1994, AS PART OF ITS FORM 10-Q REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 1994: 10(a) -- First Amendment to the Receivables Purchase Agreement by and among HBO & Company of Georgia, The First National Bank of Boston, NationsBank of Georgia, N.A. and other financial institutions, dated September 30, 1994. 10(b) -- Third Amendment to the May 27, 1994, Amended and Restated Revolving Credit and Term Loan Agreement by and among HBO & Company, HBO & Company of Georgia, The First National Bank of Boston, NationsBank of Georgia, N.A. and other lending institutions, dated August 31, 1994. ON MARCH 17, 1995, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994: *4 -- Chief Executive Officer Incentive Plan. ON MAY 9, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-59173): *4 -- HBO & Company 1986 Nonqualified Stock Option Agreement, HBO & Company 1991 Nonqualified Stock Option Agreement 1 and HBO & Company 1991 Nonqualified Stock Option Agreement 2. ON MAY 9, 1995, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995: 10 -- Second Amendment to Receivables Purchase Agreement dated March 31, 1995. ON JUNE 23, 1995, AS PART OF ITS FORM 8-K DATED JUNE 23, 1995, AS AMENDED BY FORM 8-KA DATED JULY 31, 1995, AND FILED WITH THE COMMISSION ON JULY 31, 1995, AS FURTHER AMENDED BY FORM 8-KA2 DATED AUGUST 8, 1995, AND FILED WITH THE COMMISSION ON AUGUST 8, 1995: 2 -- Stock Purchase Agreement, dated as of May 16, 1995, among First Data Corporation, FDC Health, Inc., First Data Health Systems Corporation, HBO & Company, and HBO & Company of Georgia, as amended by letter agreement dated June 17, 1995. ON JULY 31, 1995, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995: 10(a) -- Interim Loan and Security Agreement between General Electric Capital Corporation, HTG Corp. and HBO & Company of Georgia and letter agreement between HTG Corp. and HBO & Company of Georgia, dated June 26, 1995. ON AUGUST 17, 1995, AS PART OF ITS FORM S-4 REGISTRATION STATEMENT DATED AUGUST 17, 1995, AS AMENDED BY AMENDMENT NO. 1 TO FORM S-4 DATED SEPTEMBER 1, 1995, AND FILED WITH THE COMMISSION ON SEPTEMBER 1, 1995: 2 -- Agreement of Merger dated July 14, 1995, by and among HBO & Company, HBO & Company of Georgia and CliniCom Incorporated. ON OCTOBER 5, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-63213): *4 -- 1985 Employee Stock Option Plan of CliniCom Incorporated.
13
EXHIBIT NUMBER DESCRIPTION - ------- ------------------------------------------------------------------------ ON OCTOBER 5, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-63217): *4 -- Nonemployee Director Stock Option Plan of CliniCom Incorporated. THE FOLLOWING EXHIBITS ARE INCLUDED IN THIS FORM 10-K: *4 -- HBO & Company 1983 Employee Discount Stock Purchase Plan, as restated. 11 -- Computation of Earnings (Loss) Per Share of Common Stock for the Years Ended December 31, 1995, 1994 and 1993. 13 -- Annual Report to Stockholders for the year ended December 31, 1995. 21 -- Subsidiaries of Registrant. 23 -- Consent of Arthur Andersen LLP. 27a -- Financial Data Schedule. 27b -- Financial Data Schedule restated for December 31, 1994. 27c -- Financial Data Schedule restated for March 31, 1995. 27d -- Financial Data Schedule restated for June 30, 1995. (b) Reports on Form 8-K during the quarter ended December 31, 1995, or subsequent to that date but prior to the filing date of this Form 10-K: FORM 8-K DATED OCTOBER 4, 1995: -- Reporting under Item 2 that the Company completed the acquisition of CliniCom Incorporated, a Boulder, Colorado-based developer of point-of-care clinical information systems. The following financial statements of CliniCom were incorporated by reference from HBOC's Form 8-K, Item 5, dated August 16, 1995: CliniCom Incorporated Condensed Balance Sheets, Condensed Statements of Operations, Condensed Statements of Cash Flows and Notes to Condensed Financial Statements for the quarter ended June 30, 1995. CliniCom Incorporated Report of Independent Public Accountants, Balance Sheets as of December 31, 1994 and 1993, Statements of Operations, Statements of Stockholders' Equity and Statements of Cash Flows for each of the three years ended December 31, 1994, 1993 and 1992 and Notes to Financial Statements. FORM 8-K DATED NOVEMBER 16, 1995: -- Reporting under Item 5 that the Company announced the election of Philip A. Incarnati, President and Chief Executive Officer of McLaren Health Care Corporation, to the HBOC Board of Directors. FORM 8-K DATED FEBRUARY 27, 1996: -- Reporting under Item 5 that the Company's Board of Directors: i) approved an amendment to the Certificate of Incorporation to increase the number of shares of authorized Common Stock from 60 million to 250 million subject to Stockholder approval; ii) anounced its intention to declare a two-for-one stock split in the form of a stock dividend contingent upon Stockholder approval of the increase in authorized shares and iii) declared a quarterly dividend of $.04 per share payable April 22, 1996 to Stockholders of Record on March 29, 1996.
14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of HBO & Company: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in HBO & Company's annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 6, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in item 14(a)2 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Atlanta, Georgia February 6, 1996 15 SCHEDULE II HBO & COMPANY AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (000 OMITTED)
BALANCE AT CHARGED TO BALANCE AT BEGINNING OF COSTS AND END OF PERIOD EXPENSES ADJUSTMENTS PERIOD ------------ ----------- ------------ ----------- Year Ended December 31, 1993: Allowance for Doubtful Accounts............................ $ 1,919 $ 303 $ (597) $ 1,625 Inventory Reserves......................................... $ 280 $ 504 $ (166) $ 618 ------------ ----------- ------------ ----------- ------------ ----------- ------------ ----------- Year Ended December 31, 1994: Allowance for Doubtful Accounts............................ $ 1,625 $ 815 $ 35 $ 2,475 Inventory Reserves......................................... $ 618 $ 252 $ -- $ 870 ------------ ----------- ------------ ----------- ------------ ----------- ------------ ----------- Year Ended December 31, 1995: Allowance for Doubtful Accounts............................ $ 2,475 $ 644 $ 5,211* $ 8,330 Inventory Reserves......................................... $ 870 $ 2,075** $ (233) $ 2,712 ------------ ----------- ------------ ----------- ------------ ----------- ------------ -----------
- ------------------------ * Adjustment associated with the purchase of First Data Health Systems Corporation. ** Nonrecurring charge related to the acquisition of CliniCom Incorporated in a pooling transaction. 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By: /s/ CHARLES W. MCCALL -------------------------------------- Charles W. McCall PRESIDENT AND CHIEF EXECUTIVE OFFICER Date: February 29, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ----------------------------------------------------- ----------------------------------- ---------------------- /s/ CHARLES W. MCCALL ------------------------------------------ Director, President and February 29, 1996 (Charles W. McCall) Chief Executive Officer Senior Vice President -- Finance, /s/ JAY P. GILBERTSON Chief Financial Officer, Principal ------------------------------------------ Accounting Officer, Treasurer and February 29, 1996 (Jay P. Gilbertson) Assistant Secretary /s/ HOLCOMBE T. GREEN, JR. ------------------------------------------ Chairman of the Board February 29, 1996 (Holcombe T. Green, Jr.) of Directors /s/ ALFRED C. ECKERT III ------------------------------------------ Director February 29, 1996 (Alfred C. Eckert III) /s/ PHILIP A. INCARNATI ------------------------------------------ Director February 29, 1996 (Philip A. Incarnati) /s/ ALTON F. IRBY III ------------------------------------------ Director February 29, 1996 (Alton F. Irby III) /s/ GERALD E. MAYO ------------------------------------------ Director February 29, 1996 (Gerald E. Mayo) /s/ JAMES V. NAPIER ------------------------------------------ Director February 29, 1996 (James V. Napier) /s/ CHARLES E. THOELE ------------------------------------------ Director February 29, 1996 (Charles E. Thoele) /s/ DONALD C. WEGMILLER ------------------------------------------ Director February 29, 1996 (Donald C. Wegmiller)
17 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION PAGE - ------- -------------------------------------------------------------------------------- ---- 4 -- HBO & Company 1983 Employee Discount Stock Purchase Plan, as restated........ 11 -- Computation of Earnings (Loss) Per Share of Common Stock for years ended December 31, 1995, 1994 and 1993............................................ 13 -- Annual Report to Stockholders for the year ended December 31, 1995........... 21 -- Subsidiaries of Registrant................................................... 23 -- Consent of Arthur Andersen LLP............................................... 27a -- Financial Data Schedule...................................................... 27b -- Financial Data Schedule restated for December 31, 1994....................... 27c -- Financial Data Schedule restated for March 31, 1995.......................... 27d -- Financial Data Schedule restated for June 30, 1995...........................
EX-4 2 EXHIBIT 4 EXHIBIT 4 HBO & COMPANY 1983 EMPLOYEE DISCOUNT STOCK PURCHASE PLAN (1996 RESTATEMENT) PURPOSE Section 1. PURPOSE OF THE PLAN. The purpose of the HBO & Company 1983 Employee Discount Stock Purchase Plan (the "Plan") is to provide the eligible employees of HBO & Company, and certain of its subsidiaries, an opportunity through regular payroll savings to acquire HBO & Company Common Stock at a discount from market price, and thereby to develop the Participant's continued interest in the success of HBO & Company. This Plan was adopted by the Board of Directors on October 21, 1982, was effective on March 1, 1983, and approved by the stockholders on July 28, 1983. On October 24, 1988, the Board of Directors approved an amendment to increase the maximum shares available for purchase thereunder by an additional 1,000,000 shares and the Company's stockholders approved such an amendment on May 3, 1989. On February 8, 1994, the Board of Directors approved an amendment to the Plan to increase the maximum shares available for purchase thereunder by an additional 500,000 shares and the Company's stockholders approved such an amendment on May 10, 1994. An aggregate of 2,400,000 shares has been registered under the Securities Act of 1933 pursuant to the terms of this Plan. DEFINITIONS Section 2. DEFINITIONS. As used herein, the following terms have the meanings hereinafter set forth unless the context clearly indicates to the contrary: 2.01 "COMMITTEE" shall mean the committee appointed to administer the Plan as provided in the Plan. 2.02 "BENEFICIARY" shall mean the person, if any, named on the Payroll Deduction Authorization form by a Participant according to the Plan provisions to receive benefits in the event of the death of such Participant. If no Beneficiary is named, the Participant's estate shall receive any such benefits. 2.03 "BOARD" shall mean the Board of Directors of HBO & Company. 2.04 "COMMON STOCK" shall mean the class of stock which, at the effective date of this Plan, is designated HBO & Company Common Stock, par value $.05 and stock of any other class or classes into which such common stock may thereafter be changed or reclassified. 2.05 "COMPANY" shall mean HBO & Company and any subsidiary corporation as defined in Section 425(f) of the Internal Revenue Code of 1954, as amended (the "Code"), which may be designated by the Board of Directors of HBO & Company as entitled to participate in the Plan. As of March 1, 1996, said subsidiaries include HBO & Company of Georgia and HBO & Company Canada Ltd. 2.06 "COMPENSATION" shall mean an Eligible Employee's gross earnings for the Plan Year, inclusive of overtime earnings, bonus payments, commissions and any other type of earnings received during the Plan Year. 2.07 "DISTRIBUTION DATE" shall mean the last day of February of each Plan Year. 2.08 "ELIGIBLE EMPLOYEE" shall mean any person who is receiving remuneration through the Company's payroll system for services rendered to the Company or who is on an approved leave of absence of two months or less; provided, however, that a person shall not be an "Eligible Employee" if his customary employment is for not more than twenty (20) hours per week or for not more than five (5) months in any calendar year. 2.09 "PARTICIPANT" shall mean any Eligible Employee who has elected to participate in the Plan by filing a Payroll Deduction Authorization form as provided in the Plan. 2.10 "PAYROLL DEDUCTION AUTHORIZATION" shall mean the form prescribed by the Committee for use by Eligible Employees to authorize payroll deductions, to specify the payroll deduction amount and to designate a Beneficiary, if any, all as provided in this Plan. 2.11 "PLAN" shall mean the HBO & Company 1983 Employee Discount Stock Purchase Plan, the terms and provisions of which are herein set forth, as the same may be amended from time to time. 2.12 "PLAN YEAR" shall mean the 12-month period commencing each March 1 and ending on the last day of the succeeding February, with the first Plan Year commencing March 1, 1983. 2.13 "PROPER NOTICE" shall mean delivery to the Committee of notice of any action requested by the Participant on the form provided by the Committee for the specified action no later than twenty (20) days before the requested action. 2.14 "STOCK PURCHASE ACCOUNT" shall mean the Participant's account as described in the Plan. 2.15 "STOCK VALUE" shall mean the average of the bid and ask prices as reported by the National Association of Security Dealers in the Wall Street Journal for a particular day, provided, however, if there was no activity on that day, the stock is valued on the next subsequent day with activity. ELIGIBILITY AND PARTICIPATION 3.01 ELIGIBILITY. Any Eligible Employee may become a Participant in the Plan as of March 1 of any Plan Year only by filing with the Company not later than preceding February 10 the Payroll Deduction Authorization form which shall constitute the employee's election to participate in the Plan for the specified Plan Year only. Persons owning five percent (5%) or more of the total combined voting power or value of all classes of stock of HBO & Company or of any parent or subsidiary corporation of HBO & Company, as said terms are defined in Section 425(e) and (f) of the Code, including stock subject to options in favor of the Employee or purchasable under this Plan, may not participate. No one who is not an Eligible Employee may participate in this Plan. 3.02 ENTRY DATE. The Plan has only one entry date each Plan Year on March 1, commencing March 1, 1983. 3.03 PAYROLL DEDUCTIONS. Participant contributions to the Plan shall be made only by payroll deductions. The election with respect to contributions shall be contained in the Participant's Payroll Deduction Authorization form. Each participant may elect to contribute to the Plan any whole percentage amount with the minimum being one percent (1%) per month, but not to exceed in the aggregate during the Plan Year an amount equal to a specified percentage of a Participant's Compensation. Such percentage shall be determined by the Board prior to the start of each Plan Year. Contributions so deducted shall be allocated to a Stock Purchase Account in the name of the Participant making the contribution for the purpose of purchasing Common Stock at the end of the Plan Year. Under no circumstances may any Participant purchase more than 2,500 shares of Common Stock under this Plan with respect to each Plan Year, nor may he purchase stock under all stock purchase plans of the Company and its related corporations in excess of $25,000 in fair market value of said Common Stock (determined as of the first day of the applicable Plan Year) for each calendar year in which the Participant may purchase stock hereunder. For purposes hereof, "related corporations" shall include any parent corporation (within the meaning of Section 425(e) of the Code) and any subsidiary corporation (within the meaning of Section 425(f) of the Code) of HBO & Company. 3.04 CHANGE IN CONTRIBUTION. The contribution amount designated by a Participant shall continue in effect for the entire Plan Year, unless the Participant withdraws from the Plan in accordance with the Plan provisions. 3.05 WITHDRAWAL. 3.05.1 TERMINATION OF EMPLOYMENT, OTHER THAN DEATH, DISABILITY OR RETIREMENT. When a Participant ceases to be an employee of the Company or any related corporation as defined in Section 3.03, for reasons other than death, disability or retirement, his or her participation in the Plan terminates and the total amount credited to his or her Stock Purchase Account will be returned without interest to the Participant as soon as reasonably practicable upon termination. 3.05.2 DEATH, DISABILITY, RETIREMENT OR LEAVE OF ABSENCE (IN EXCESS OF TWO MONTHS). When a Participant dies, becomes disabled, retires or takes an approved leave of absence (in excess of two months), participation in the Plan terminates. At the option of the Participant, or the Participant's Beneficiary, where applicable, the total amount credited to the Participant's Stock Purchase Account shall be either (a) returned without interest to the Participant or the Participant's designated beneficiary, where applicable, or (b) held in the Plan until the end of the current Plan Year and distributed in Common Stock and cash in lieu of fractional shares, as provided in the Plan, to the Participant or the Participant's Beneficiary, where applicable. An employee returning to employment from disability or leave of absence may participate in the Plan during a subsequent Plan Year provided he or she meets the eligibility requirements of the Plan. 3.05.3 VOLUNTARY TERMINATION OF CONTRIBUTION. At any time during the Plan Year, a Participant may terminate his or her participation in the Plan for the current Plan Year by filing the Proper Notice and in such event (a) there will be no further payroll deductions from the Participant's earnings during the current Plan Year; (b) at the Participant's option, the total amount credited to his or her Stock Purchase Account shall be either (i) returned without interest to the Participant or (ii) held in the Plan until the end of the current Plan Year and distributed in Common Stock and cash in lieu of fractional shares, as provided in the Plan, to the Participant; and (c) the Participant may participate in the Plan during a subsequent Plan Year provided he or she meets the eligibility requirements of the Plan. 3.06 PARTICIPANT RECORDS. The Committee or other person designated by the Company shall create and maintain adequate records to disclose the interest in the account of each Participant. Such records shall be in the form of individual Stock Purchase Accounts, and shall contain such information as herein described, as well as other information the Committee deems advisable. Actual segregation of the assets in the separate Stock Purchase Accounts of each Participant, however, shall not be required. 3.07 CASH BALANCE. The cash balance reflected in each Participant's account shall be used to purchase for such account whole shares of Common Stock immediately after the close of each Plan Year, either on the open market or from the Company, as the Committee shall direct. In any event, the Company shall pay all brokerage fees, if any, for the Participants. All purchases of Common Stock under the Plan for each Plan Year must be effected no later than fifteen (15) months after the first day (March 1) of said Plan Year. To the extent that the Participant's account balance would result in the purchase of shares of Common Stock in excess of the maximum amount permitted in Section 3.03, said excess cash shall be returned to the Participant at the time the Common Stock is distributed to him. 3.08 STOCK PURCHASE PRICE. The Stock Purchase Price in any Plan Year will be equal to eighty-five percent (85%) of the lower of the Stock Value on March 1 or the last day of the succeeding February of each Plan Year. In the event of a change in the Company's capitalization, such as a stock dividend or stock split-up, the Stock Purchase Price shall be adjusted proportionately. In the event of any other change affecting the Common Stock, such adjustments shall be made as may be deemed equitable by the Board. 3.09 VESTING. The total amounts held in each Participant's Stock Purchase Account shall at all times be fully vested in the Participants concerned. 3.10 TRANSFERABILITY. Amounts credited to a Participant's Stock Purchase Account may not be assigned, transferred or pledged in any way, except by will or by the laws of descent and distribution upon his death, and any attempted assignment, transfer, pledge or other disposition of such amounts shall be null and void. During a Participant's lifetime, only he may exercise the rights to purchase Common Stock under this Plan. 3.11 DISTRIBUTION IN STOCK. Except as provided for as to withdrawals from the Plan, all benefits shall be payable in whole shares of Common Stock issued in the name of each Participant or Beneficiary, if applicable, with cash paid in lieu of fractional shares, as soon as practical after the end of each Plan Year. 3.12 FOREIGN EMPLOYEES. The Committee may provide for such special terms for Participants who are foreign nationals, or who are employed by the Company outside of the United States of America, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of this Plan as in effect for any other purpose; PROVIDED, HOWEVER, that no such supplements, amendments, restatements or alternative versions shall include any provisions that are inconsistent with the terms of this Plan, as then in effect, unless this Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Company, or which would cause the Plan to fail to meet the requirements of Section 423 of the Code. The remaining provisions of the Plan not inconsistent herewith are hereby ratified and confirmed. ADMINISTRATION 4.01 ADMINISTRATIVE COMMITTEE. The Plan shall be administered by a Committee appointed by the Board. Such Committee shall have authority to establish, administer and interpret such rules with respect to the Plan that it deems appropriate or necessary, including without limitation, rules providing for payroll deductions. Any decision of the Committee with respect to such rules and the interpretation, construction, administration and application of the Plan shall be conclusive and binding. The Company shall pay all costs of administration of the Plan, including any reasonable expenses incurred by members of the Committee in the performance of their duties. 4.02 PLAN TERMINATION AND AMENDMENT. The Board may terminate the Plan at any time and may amend the Plan in any respect at any time or from time to time, except that the Board may not without the approval of the Company's stockholders, alter the maximum number of shares of Common Stock to be sold pursuant to the Plan; and the Board may at any time or from time to time amend the Plan for the sole purpose of providing the inclusion or exclusion from participation therein of Eligible Employees of corporations which are subsidiaries of the Company, as provided in Section 2.05, but may not otherwise amend the Plan as to eligibility to participate, except with the approval of the Company's stockholders; provided, however, that no such termination or amendment shall adversely affect the rights of any Participant with respect to amounts previously credited to his Stock Purchase Account. MISCELLANEOUS 5.01 OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect any incentive or other compensation plans in effect for the Company nor shall the adoption of the Plan preclude the Company from establishing any other forms of incentive or other compensation for employees of the Company. 5.02 PLAN BINDING ON SUCCESSORS. The Plan shall be binding upon the successors and assigns of the Company. 5.03 SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender. 5.04 HEADINGS, ETC., NOT PART OF PLAN. Headings of articles and paragraphs hereof are inserted for convenience and reference; they constitute no part of the Plan. 5.05 NO CONTRACT OF EMPLOYMENT. This Plan shall not constitute a contract of employment, and the participation herein by any Employee shall not of itself create any rights of future employment with the Company. The Company remains free to terminate the employment of any Participant according to its standard employment practices. 5.06 RIGHTS AS A STOCKHOLDER. No participant shall possess any rights of a stockholder in the Company as to Common Stock being purchased under this Plan until said Common Stock has been issued to him in accord with the terms hereof. 5.07 INVESTMENT REPRESENTATIONS. No shares of Common Stock shall be issued pursuant to this Plan unless and until the Participant or Beneficiary to whom issuance is to be made shall have executed any letter or agreement required by the Company for the purpose of stating the investment intentions of said individual with regard to the Common Stock. The Company may, on advice of its counsel, waive this requirement. 5.08 ADJUSTMENTS FOR STOCK SPLIT, ETC. In the event that the outstanding shares of Common Stock of the Company are changed into or exchanged for a different number of shares of Common Stock by reason of recapitalization, combination of shares, stock split-up, stock dividend or similar action, then the maximum number of shares which may be purchased pursuant to Section 1 hereof and the maximum number of shares which any Participant hereunder may purchase with respect to any Plan Year pursuant to Section 3.03 hereof and the stock purchase price shall, without further action of the Board of the Committee, including, without limitation, amendment of this Plan, be apportionately adjusted in a manner identical to the changes in the outstanding number of shares of Common Stock and in the Stock Value. EX-11 3 EXHIBIT 11 EXHIBIT 11 HBO & COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (000 OMITTED EXCEPT FOR PER SHARE DATA)
1995 1994 1993 ---------- --------- --------- Weighted Average Number of Common Shares Outstanding.......................... 37,822 34,848 33,862 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*................................................ -- 1,685 1,787 ---------- --------- --------- Number of Common and Common Equivalent Shares Outstanding..................... 37,822 36,533 35,649 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*........................... -- 134 361 ---------- --------- --------- Number of Common and Common Equivalent Shares Outstanding Assuming Full Dilution..................................................................... 37,822 36,667 36,010 ---------- --------- --------- ---------- --------- --------- Net Earnings (Loss) for Primary and Fully Diluted Earnings Per Share.......... $ (25,235) $ 31,555 $ 18,897 ---------- --------- --------- ---------- --------- --------- Earnings (Loss) Per Share: Primary..................................................................... $ (.67) $ .86 $ .53 ---------- --------- --------- ---------- --------- --------- Fully Diluted............................................................... $ (.67) $ .86 $ .52 ---------- --------- --------- ---------- --------- ---------
- ------------------------ * Common Equivalent shares are not presented for 1995 because the effect is anti-dilutive. All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. EX-13 4 EXHIBIT 13 HBOC Annual Report 1995
COMPANY PROFILE 1 RECENT ACQUISITIONS 2 FINANCIAL HIGHLIGHTS AND 1995 ORGANIZATIONAL HIGHLIGHTS 3 INFORMATION FOR THOSE WHO CARE (LETTER TO STOCKHOLDERS) 4 INFORMATION - PATIENT 6 INFORMATION - CAREGIVER 8 INFORMATION - ENTERPRISE 10 FINANCIAL REPORT 12 STOCKHOLDER INFORMATION 28 BOARD OF DIRECTORS AND CORPORATE OFFICERS IBC HBO & COMPANY OFFICES BACK
AT HBO & COMPANY, OUR PEOPLE, PRODUCTS AND SERVICES HAVE A PRIMARY GOAL: TO SERVE HEALTH ENTERPRISES BY PUTTING THE RIGHT INFORMATION IN THE RIGHT HANDS AT THE RIGHT TIME. IN ALL THAT WE DO, WE ARE COMMITTED TO A CONTINUOUS PURSUIT OF QUALITY IN FACT AND QUALITY IN PERCEPTION, SO THAT EVERY PRODUCT AND SERVICE WE OFFER IS KNOWN AS THE BEST IN THE INDUSTRY. -- HBOC MISSION STATEMENT COMPANY PROFILE -- HBO & COMPANY (HBOC) IS A HEALTHCARE INFORMATION SOLUTIONS COMPANY THAT PROVIDES INFORMATION SYSTEMS AND TECHNOLOGY FOR THE HEALTH ENTERPRISE -- HOSPITALS, INTEGRATED DELIVERY NETWORKS AND MANAGED CARE ORGANIZATIONS. THE COMPANY OFFERS PRODUCTS AND SERVICES TO ADDRESS VIRTUALLY EVERY NEED THE ENTERPRISE HAS FOR INFORMATION, WHETHER FOR PATIENT CARE, CLINICAL, FINANCIAL OR STRATEGIC MANAGEMENT. HBOC has approximately 2,700 healthcare customers, of which 2,200 are community hospitals in the United States. Currently, there are a total of 5,300 U.S. community hospitals. The Company also sells its products and services internationally through subsidiaries and/or distribution agreements in the United Kingdom, Ireland, Canada, Saudi Arabia, Australia, Puerto Rico and New Zealand. Its comprehensive portfolio of open systems solutions can be implemented in a variety of combinations from stand-alone to enterprisewide, enabling customers to choose their own paths for reaching their information management goals. The Company's offerings are based on a strategic mix of applications, technologies and services that support the continued restructuring of healthcare delivery. This product/service mix meets the needs of healthcare organizations in five key areas: supporting the information needs of the acute-care setting, building an enterprise information infrastructure, facilitating clinical/practice management, reducing service fragmentation through access management solutions and strategically managing the enterprise. HBOC's comprehensive local, metropolitan and wide area network services and its client/ server-based Pathways 2000-Registered Trademark- family of applications provide the key elements for integrating and uniting providers across the continuum of care and provide the basis for a lifelong patient record. Through the use of open systems architecture, HBOC offers healthcare organizations the flexibility to add incremental capabilities, thereby helping to preserve capital investment in current hospital information systems. In addition, HBOC's client/server solutions facilitate the integration of clinical, financial and administrative data from both HBOC and non-HBOC applications for efficient resource allocation, allowing healthcare customers to benefit from price/ performance advances. Wrapped around HBOC's offerings is a full set of services that includes planning, implementation and support as well as education and training. HBOC also offers a range of outsourcing services that includes transition management, facilities management, integration services and information services organizations (ISOs). 1 RECENT ACQUISITIONS -- IN ADDITION TO INTERNAL PRODUCT DEVELOPMENT AND STRATEGIC ALLIANCES, OVER THE PAST THREE YEARS THE FOLLOWING ACQUISITIONS HAVE PLAYED A KEY ROLE IN HBOC'S STRATEGY TO BUILD CRITICAL MASS AND EXPAND ITS CAPABILITIES AND PRODUCT OFFERINGS. "EVERY ADDITION HAS MET THE CRITERIA OF A PLAN THAT WE BEGAN MAPPING OUT WITH THE HELP OF OUR CUSTOMERS MORE THAN THREE YEARS AGO TO ADDRESS THE CHALLENGES OF MANAGED CARE AND CAPITATION." -- HBOC'S GROWTH STRATEGY, A MESSAGE FROM CHARLIE MCCALL (1995)
DATE ACQUISITION DESCRIPTION - ---------------------------------------------------------------------- JUNE 1993 Biven Software, Inc. Managed care applications ...................................................................... DECEMBER 1993 Data-Med Computer Installed base of 100 Services Limited hospitals in the United Kingdom ...................................................................... MAY 1994 IBAX Healthcare Presence in the IBM Systems AS/400 market; installed base of 475 hospitals ...................................................................... SEPTEMBER 1994 Serving Software, Inc. Health enterprise patient and resource scheduling software ...................................................................... DECEMBER 1994 Care 2000, Inc. Case management methodologies ...................................................................... FEBRUARY 1995 Advanced Laboratory Laboratory software Systems, Inc. for the healthcare and commercial marketplaces ...................................................................... JUNE 1995 First Data Health Installed base of 500 Systems Corporation hospitals ...................................................................... JULY 1995 Pegasus Medical Ltd. Electronic patient record built by physicians, for physicians ...................................................................... SEPTEMBER 1995 CliniCom Incorporated Multidisciplinary point-of- care clinical information systems
2 FINANCIAL HIGHLIGHTS --
1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------ (Operating Income, Net Income and Fully Diluted Earnings Per Share Exclude Nonrecurring Charges) (000 Omitted Except Per Share Data and Employees) Revenue $495,595 $357,436 $267,147 $228,988 $184,859 Operating Income $ 95,722 $ 53,042 $ 31,883 $ 22,600 $ 6,560 Net Income $ 56,654 $ 31,555 $ 18,897 $ 14,629 $ 3,949 Fully Diluted Earnings Per Share $ 1.43 $ .86 $ .52 $ .42 $ .12 Total Assets $535,134 $264,132 $156,182 $125,689 $114,490 Long-Term Debt $ 582 $ 252 $ -- $ -- $ 20,752 Stockholders' Equity $318,730 $124,777 $ 83,182 $ 61,608 $ 25,706 Employees at Year-End 3,363 2,542 2,153 1,946 1,765 Revenue Per Average Number of Employees $ 166 $ 145 $ 130 $ 123 $ 101 - ----------------------------------------------------------------------------------
NOTES 1991 amounts are shown before Discontinued Operations. 1992 amounts are shown before CliniCom's Cumulative Effect of an Accounting Change. All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction.
STOCK HIGH AND LOW CLOSING PRICES 1993 1994 1995 $85.75 $36.13 - $23.00 - $33.50 - $20.75 $8.44 - ----------------------
REVENUE (000 OMITTED) 1993 1994 1995 $495,595 $357,436 $267,147 - ----------------------------
FULLY DILUTED EARNINGS PER SHARE (Excluding Nonrecurring Charges) 1993 1994 1995 $1.43 $.86 $.52 - -------------------
All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. 95 ORGANIZATIONAL HIGHLIGHTS -- IN ADDITION TO SEVERAL STRATEGIC ACQUISITIONS (SEE OPPOSITE PAGE), 1995 ORGANIZATIONAL HIGHLIGHTS INCLUDED THE FOLLOWING: - -- Introduced service track methodology for STAR and Pathways 2000 product lines to streamline implementation processes, control costs and encourage customer independence. - -- Purchased rights to the Crescendo nursing information system from CHC (UK) Ltd., adding another 60 National Health Service hospital customers to HBOC's United Kingdom operations. - -- Announced the general availability of STAR Navigator, a Windows-Registered Trademark--based graphical user interface that will serve as the foundation for developing a common "look and feel" among HBOC applications. - -- Signed five new outsourcing contracts totaling approximately $79 million. - -- Signed a sales agreement with Science Applications International Corporation (SAIC) to install TRENDSTAR-Registered Trademark- decision support in 120 U.S. Department of Defense hospitals. 3 INFORMATION FOR THOSE WHO CARE TO OUR STOCKHOLDERS -- FEW THINGS ARE MORE REWARDING THAN MEETING A CHALLENGE HEAD-ON -- AND WINNING. THAT'S WHAT 1995 WAS ALL ABOUT FOR HBO & COMPANY. WE BEGAN THE YEAR WITH THE BAR SET HIGH FOR OURSELVES -- WITH GOALS TO COMPLETE THE REPOSITIONING HBOC HAS BEEN WORKING TOWARD FOR THE PAST THREE YEARS, TO DELIVER ON OUR PATHWAYS 2000 ENTERPRISE SOLUTION COMMITMENTS AND TO SET NEW RECORDS IN REVENUE AND EARNINGS PER SHARE. [PHOTO] CHARLES W. MCCALL PRESIDENT AND CHIEF EXECUTIVE OFFICER By year-end, HBOC had achieved those goals. Revenue reached an all-time high of $495.6 million, and earnings per share stood at $1.43 excluding nonrecurring charges, a 66 percent increase over 1994. Several Pathways 2000 applications were "live" at development and early adopter sites across the country. And an aggressive growth strategy resulted in four more acquisitions in 1995 that added significant critical mass and strategic capabilities, most notably in the clinical arena. As a result, we believe HBOC is better equipped than any other vendor -- in terms of people, products and technology -- to quickly and effectively put information tools in the hands of those who provide care. As healthcare continues to evolve rapidly toward a future where wellness is the goal and managed care is the norm, providing information for those who care has taken on new meaning. It's no longer enough to capture charges or produce a correct bill. "Those who care" need real-time access to information that takes them beyond the confines of the hospital and across the care continuum into physician offices, outpatient clinics and even private homes. Only then can caregivers make decisions that control costs and improve the quality of the care they deliver. That's why 1996 will find HBOC continuing to build clinical strength and flexibility into its product offerings. Multidisciplinary and point-of-care applications, critical pathways, physician computing, clinical workstations and home health 4 are just some of the areas where we've invested heavily and will continue to devote resources. We'll also continue to refine key infrastructure pieces such as Pathways Health Network Server, HBOC's clinical data repository, which serves as the foundation for merging clinical data from disparate sources. While caregivers are the most visible of "those who care," behind the scenes enterprise managers and other financial and executive personnel need information to operate efficiently and to support their new roles as managers of risk. HBOC is ready with a wide range of solutions, including financial, decision support, contract management and managed care applications, as well as networking technologies and services to facilitate information sharing across all the settings of an enterprise or integrated delivery network. As a company that today encompasses multiple product lines, technologies and employee groups, HBOC understands the challenges facing healthcare customers as they attempt to merge disparate organizations and information systems. Those are our challenges as well. With most of the strategic enterprise pieces assembled, HBOC is executing an integration plan that calls for facilitated data exchange, a common "look and feel" across applications, and clear migration paths for existing transaction systems into the enterprise. In doing so, we're helping to ensure that organizations have the flexibility to choose their own pathway to the future and to grow according to their own priorities, not an HBOC agenda. That means continuing to invest in existing HIS solutions to ensure that they continue to address the business needs of hospitals. That also means listening to customer input as we seek to balance investment in those systems with the need for new "horizontal" applications that span multiple care settings in the enterprise. Finally, that means continually seeking new ways to re-engineer service and support processes to improve customer satisfaction and provide the best value possible. [PHOTO] HBOC'S ASSAF MORAG, M.D., WITH PATHWAYS SMART MEDICAL RECORD Much of the territory in this "brave new world" of healthcare is still uncharted, but one thing is certain -- just as diagnostic technology has radically improved disease intervention and survival rates, information technology has the potential to do the same for personal health and well-being. That's why at HBOC we've made it our business to lead the industry in providing information for those who care. /s/ Charlie McCall Charles W. McCall President & CEO January 31, 1996 5 INFORMATION PATIENT -- EVERY SECOND COUNTS IN THE E.R. WHEN YOUR CHILD IS SICK OR INJURED, YOU DON'T WANT TO WASTE TIME FILLING OUT FORMS OR ANSWERING THE SAME QUESTIONS YOU ANSWERED LAST WEEK IN THE PEDIATRICIAN'S OFFICE. ALL YOU CAN THINK ABOUT IS FINDING HELP -- RIGHT NOW. "THE EASIER WE MAKE IT TO ACCESS SERVICE, THE MORE PATIENTS WE'LL ATTRACT INTO OUR SYSTEM AND THE MORE SATISFIED THEY WILL BE." JOHN P. MCDANIEL, CHIEF INFORMATION OFFICER, MCLAREN HEALTH CARE CORPORATION, FLINT, MICH. Unfortunately, most clinics or emergency rooms today probably won't know that your child was treated for an allergic reaction to a bee sting last week, that his physician is Dr. Jones or that your health plan co-payment is $25. The result -- redundant paperwork, endless delays and tremendous frustration. HBOC is striving to take the pain out of healthcare with solutions that enable information to follow a patient or healthcare consumer, wherever that person arrives for care. Our access management strategy is built on the premise that every patient is a customer who expects personal, reliable and efficient service from caregivers. To be competitive, health enterprises and integrated delivery networks must achieve high levels of customer satisfaction while streamlining operational activities and closely managing access to services. HBOC has worked side-by-side with its customer partners to develop the new service models and solutions needed to successfully address these challenges. To help reduce service fragmentation and facilitate care, our "customer notebook" provides a means to identify persons anywhere in a health system, even across disparate information systems. As a result, enterprises can capture and share relevant baseline clinical, demographic, benefits and eligibility information across various care settings. When a patient arrives for care, his or her information is readily available. On another front, enterprisewide scheduling allows caregivers to arrange tests or procedures anywhere in the health system and deliver a coordinated itinerary to the patient, eliminating long waits and improving the use of system resources. To support individual healthcare encounters, HBOC is developing a solution that will allow enterprises to positively identify the healthcare consumer, acknowledge the care delivered and incorporate each specific event into a lifetime computer-based record. 6 [PHOTO] ACCESS INFORMATION - PATIENT 7 INFORMATION CAREGIVER -- BEN ADAMS, 75, HAD A MILD HEART ATTACK LAST MONTH. NOTHING TOO SERIOUS, BUT AFTER TIME SPENT IN CARDIAC REHABILITATION, A CARE COORDINATOR NOW VISITS HIM AT HOME TWICE A WEEK -- JUST TO BE SURE HE'S STABLE AND STILL FOLLOWING THE DOCTOR'S ORDERS. "TO IMPROVE OUTCOMES, PHYSICIANS NEED TO BE ABLE TO LOOK AT ALL INFORMATION ON A SINGLE PATIENT AT ONE TIME, IN THE RIGHT FORMAT AND IN A PLACE WHERE THEY CAN REACT TO IT MEANINGFULLY." ROBERT WEARS, M.D., FACEP, CLINICAL DIRECTOR OF INFORMATION SYSTEMS, UNIVERSITY OF FLORIDA COLLEGE OF MEDICINE JACKSONVILLE To provide Ben Adams with the best care possible, his caregivers -- from the cardiologist who treated him in the I.C.U. to the homecare nurse who now monitors his progress -- need easy access to patient information that will enable them to make the right decisions at the point of care, no matter where that may be. Today, much of that information is likely to be found piecemeal, captured using diverse technologies throughout a health system. The challenge is to bring that data together into a common technology, integrate it and present it in a way that's logical to those who provide care. But what's logical to a nurse in the I.C.U. is different from a nurse who works in labor and delivery, even though the type of information collected and displayed may be much the same. Portability and outcomes documentation are important to both acute-care nurses and home health professionals, but those who work in the home need information that can travel with them even to remote locations. And physicians seeking productivity enhancements want systems that think the way they do. Building on the capabilities of its hospital information systems, HBOC is leveraging its clinical expertise to provide solutions that meet the needs of caregivers across the care spectrum. For example, our point-of-care solutions allow nurses and other caregivers to capture or access information at the bedside, whether at home or in the hospital, while HBOC's staff physicians draw from "real-life" medical practice to build the clinical documentation tools that can be used in a physician's office. And clinical professionals are applying their expertise to enable all providers to implement coordinated care plans, measure patient outcomes and document care on a real-time basis. 8 [PHOTO] CARE INFORMATION - CAREGIVER 9 INFORMATION ENTERPRISE -- IT'S NO LONGER ENOUGH TO SIMPLY PROVIDE CARE FOR THOSE WHO ARE ILL. AS MANAGED CARE AND CAPITATION BECOME MORE COMMON, THE SUCCESS OF HEALTH ENTERPRISES WILL BE TIED TO HOW THEY MANAGE THE WELLNESS OF A POPULATION. "IN A MANAGED CARE ENVIRONMENT, INFORMATION TECHNOLOGY BECOMES A CORE BUSINESS COMPETENCY THAT'S NECESSARY TO ACQUIRE BUSINESS, SELL PRODUCTS, SUPPORT DELIVERY AND DOCUMENT HOW WELL ALL THAT IS DONE." RICK SKINNER, CHIEF INFORMATION OFFICER, PROVIDENCE HEALTH SYSTEM, PORTLAND, ORE. The healthcare industry is moving toward tightly managed, primary-care based networks where the goal is to keep people out of the hospital, not keep them in. To do that, healthcare organizations must acquire the technological infrastructure to pull together disparate systems and facilitate the flow of data throughout the enterprise. They must also re-engineer business processes to reflect a new model of healthcare delivery -- one that emphasizes health over healthcare. And to support that model, they need solutions that enable them to manage risk like an insurance company and to measure and document quality, outcomes and member satisfaction. HBOC has both the expertise and the solution sets to help health-care organizations move from where they are to where they want to be. For those that need improved infrastructure, we offer a full range of networking technologies, Value Added Network services and electronic data interchange capabilities. HBOC's interface manager allows enterprises to manage transactions among disparate applications, while our enterprise repository brings together patient data into a meaningful, integrated longitudinal record of care. For organizations that are committed to business process re-engineering, HBOC offers solutions that allow them to extend functions such as registration, scheduling, order entry and budgeting horizontally across multiple sites in the enterprise. Those searching for decision support, contract management or full managed care applications will find that HBOC solutions are among the best in the industry. Most importantly, HBOC is mapping its priorities to mirror those of its customers -- preserving investment in current systems, maintaining a commitment to open, scalable architecture, developing new solutions where they're most needed and focusing its expertise on the integration of the delivery network itself. That's how we'll fulfill our mission and enable enterprises to provide information that will make a difference for those who care. 10 [PHOTO] MANAGEMENT INFORMATION - ENTERPRISE 11 FINANCIAL REPORT FIVE-YEAR SELECTED FINANCIAL INFORMATION 13 FINANCIAL REVIEW 14 REVENUE BY BUSINESS UNIT 17 CONDENSED CONSOLIDATED QUARTERLY STATEMENTS OF INCOME 18 CONSOLIDATED STATEMENTS OF INCOME 19 CONSOLIDATED BALANCE SHEETS 20 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 21 CONSOLIDATED STATEMENTS OF CASH FLOWS 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23 COMMON STOCK DATA 27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 28
FIVE-YEAR SELECTED FINANCIAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------- (000 Omitted Except for %s, Per Share Data, Ratios, Stockholders and Employees) OPERATIONS (EXCLUDING NONRECURRING CHARGES) Revenue $495,595 $357,436 $267,147 $228,988 $184,859 Operating Income $ 95,722 $ 53,042 $ 31,883 $ 22,600 $ 6,560 Income Before Income Taxes $ 94,423 $ 52,592 $ 31,495 $ 22,165 $ 5,129 Net Income $ 56,654 $ 31,555 $ 18,897 $ 14,629 $ 3,949 - ----------------------------------------------------------------------------------------------------------- AS A PERCENT OF REVENUE (EXCLUDING NONRECURRING CHARGES) Operating Income 19% 15% 12% 10% 4% Income Before Income Taxes 19% 15% 12% 10% 3% Net Income 11% 9% 7% 6% 2% - ----------------------------------------------------------------------------------------------------------- PERCENT CHANGE FROM PRIOR YEAR (EXCLUDING NONRECURRING CHARGES) Revenue 39% 34% 17% 24% -- Operating Income 80% 66% 41% 245% (34%) Income Before Income Taxes 80% 67% 42% 332% (46%) Net Income 80% 67% 29% 270% (20%) - ----------------------------------------------------------------------------------------------------------- SHARE INFORMATION (EXCLUDING NONRECURRING CHARGES) Weighted Average Shares Outstanding (Fully Diluted) 39,511 36,667 36,010 34,952 32,074 Stockholders of Record 1,686 1,746 1,662 1,827 1,810 Fully Diluted Earnings Per Share $ 1.43 $ .86 $ .52 $ .42 $ .12 Cash Dividends Per Share $ .16 $ .16 $ .15 $ .15 $ .15 Book Value at Year-End Per Share $ 7.94 $ 3.55 $ 2.44 $ 1.80 $ .82 Closing Stock Price Per Share - High $ 85.75 $ 36.13 $ 23.00 $ 12.88 $ 5.81 - Low $ 33.50 $ 20.75 $ 8.44 $ 4.88 $ 2.50 - ----------------------------------------------------------------------------------------------------------- CAPITALIZED SOFTWARE Research and Development Expenditures $ 57,510 $ 42,589 $ 33,628 $ 28,374 $ 26,677 Capitalized Software Expenditures $ 14,546 $ 10,459 $ 7,799 $ 6,298 $ 5,775 Research and Development Capitalization Rate 25% 25% 23% 22% 22% Amortization of Capitalized Software $ 5,791 $ 6,184 $ 3,801 $ 2,979 $ 2,749 - ----------------------------------------------------------------------------------------------------------- FINANCIAL RATIOS (EXCLUDING NONRECURRING CHARGES) Return on Average Stockholders' Equity 25% 31% 29% 35% 16% Current Ratio 1.2:1 1.1:1 1.5:1 1.4:1 1.3:1 Long-Term Debt to Stockholders' Equity -- -- -- -- .8:1 - ----------------------------------------------------------------------------------------------------------- FINANCIAL POSITION AT YEAR-END Cash and Cash Equivalents $ 65,263 $ 14,951 $ 41,150 $ 12,348 $ 4,279 Working Capital $ 47,250 $ 11,160 $ 34,627 $ 23,969 $ 18,369 Total Assets $535,134 $264,132 $156,182 $125,689 $114,490 Long-Term Debt $ 582 $ 252 $ -- $ -- $ 20,752 Stockholders' Equity $318,730 $124,777 $ 83,182 $ 61,608 $ 25,706 - ----------------------------------------------------------------------------------------------------------- OTHER FINANCIAL INFORMATION Employees at Year-End 3,363 2,542 2,153 1,946 1,765 Revenue Per Average Number of Employees $ 166 $ 145 $ 130 $ 123 $ 101 - -----------------------------------------------------------------------------------------------------------
NOTES 1995 Income Statement related items exclude the Nonrecurring Charge of $136,481. The Net Loss is ($25,235) and Fully Diluted Loss Per Share is ($.67) including the Nonrecurring Charge. 1992 is presented before CliniCom's Cumulative Effect of an Accounting Change. 1991 is presented before Discontinued Operations. Income Statement related items exclude the Nonrecurring Charge of $10,883. The Net Loss is ($4,442) and Fully Diluted Loss Per Share is ($.14) including the Nonrecurring Charge. All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. 13 - -- FINANCIAL REVIEW GENERAL After a record year in 1994, HBO & Company accepted the challenge of continuing to expand rapidly in 1995 with confidence that the Company's people, products and strategic acquisitions would lead to another record year. The result -- a 66% increase in earnings per share to $1.43 in 1995 (excluding nonrecurring charges), from $.86 in 1994 -- is proof of the Company's success in meeting that challenge. HBOC generated revenue of $496 million in 1995, a 39% increase over 1994, and increased operating income as a percent of revenue to 19% in 1995, excluding nonrecurring charges, compared to 15% in 1994 and 12% in 1993. In 1995, the Company recorded nonrecurring charges related to acquisitions totaling $137 million. Inclusive of the nonrecurring charges, HBOC had a loss per share for the year of ($.67). The 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 nonrecurring charges is presented above to aid in financial analysis. The Company's revenue growth resulted from its success in selling HBOC's enterprisewide information system solutions that address the complex needs of today's healthcare marketplace. HBOC believes that the best way to meet these needs is by offering strong transaction-based systems that populate enterprisewide financial and clinical data repositories, which in turn can be accessed by a number of specialized, client/server-based applications. The Company enters 1996 with its strongest backlog in history. At December 31, 1995, future contracted outsourcing service fees totaled $115 million. Contracted software license and hardware fees not yet delivered and installed totaled $31 million. Future payments from systems sold under monthly service fee agreements totaled $7 million. HBOC's position is further strengthened by the fact that the Company's revenue mix has shifted toward recurring revenue. In 1995, 42% of the Company's revenue was recurring in nature, compared to 35% in 1994. The Company also derives a large portion of its revenue from automatically renewable maintenance and support agreements. In addition, the Company derives significant recurring revenue from its multiyear remote processing contracts. For 1995, operating expense excluding the nonrecurring charges grew at a slower rate than revenue due to the Company's successful cost control programs and productivity enhancements. The Company experienced improvement in the productivity of its implementation personnel partially as the result of the introduction of service tracks methodology, which encourages customers to take a more active role in the implementation process. Revenue per average number of employees increased to a record $166,000 in 1995 compared to $145,000 in 1994 and $130,000 in 1993.
REVENUE PER AVERAGE NUMBER OF EMPLOYEES (000 Omitted) 1993 1994 1995 $166 $145 $130 - ----------------
Cash flow from operations reached a record $91.4 million for 1995. HBOC utilized $37.6 million in investing activities and $3.5 million in net financing activities. As a result of this activity, the Company's cash balance increased by $50.3 million to $65.3 million at December 31. HBOC has been able to finance its acquisitions either through equity or with cash from operations. The Company had no bank debt as of year-end. Strategic acquisitions played a vital role in HBOC's success during 1995. These acquisitions, detailed on page 2, increased the Company's customer base and rounded out its product portfolio. The CliniCom acquisition was accounted for as a pooling of interests and thus all prior period financial information has been restated. Unless otherwise noted, management's discussion of financial results is based on restated figures. RESULTS OF OPERATIONS The following table presents as a percent of revenue certain categories included in the Company's consolidated statements of income for 1993 through 1995:
1995 1994 1993 - ------------------------------------------------- Revenue 100% 100% 100% Operating Expense: Cost of Operations 47% 52% 53% Marketing 14% 13% 14% Research and Development 9% 9% 10% General and Administrative 11% 11% 11% - ------------------------------------------------- Operating Income 19%* 15% 12% - ------------------------------------------------- Net Income 11%* 9% 7% - -------------------------------------------------
* Including the nonrecurring charges, operating income was (8%) of revenue and net income was (5%) of revenue for 1995. Revenue increased to $496 million in 1995, a 39% increase over 1994. This growth was primarily the result of dramatic increases in revenue from maintenance contracts and software license fees, as well as the addition of remote processing revenue from the aquisition of First Data Health Systems Corporation (now known as the Charlotte Product Group or CPG). 14 - -- FINANCIAL REVIEW Software license fee revenue increased 35% in 1995 compared to 1994 and represented 25% of the Company's revenue for the year. The driving force behind software license fee growth was the success of the Company's Pathways 2000 family of enterprise solutions, applications which are crucial to hospitals operating in an environment of increasing consolidation, capitated rates and managed care. Software license fees for the Company's STAR products continued to provide a strong base of revenue. The Company's TRENDSTAR decision support products also had another year of success as hospitals continued to invest in applications designed to make better use of the increasing amounts of information available. The addition of CPG's software products contributed to overall growth, as did software from Advanced Laboratory Systems, Inc. (ALG) and the Serving Software Group's (SSG) enterprise scheduling product. Hardware revenue increased 10% in 1995 compared to 1994. Although the price of hardware continues to decline even as performance and processing power increase, HBOC has successfully maintained hardware margins and continues to pursue an open systems approach by designing products to run on a variety of platforms. Revenue from implementation services increased 23% in 1995 over 1994 and represented 18% of total revenue for the year. Pathways 2000, CPG and Series contributed the highest revenue growth, but almost all business units had increases as customers turned to HBOC not only for initial implementation services but also for a variety of customized services designed to enhance the value of their system investments. A dramatic increase in the customer base over the past two years has resulted in tremendous growth in recurring revenue from maintenance and support contracts. Up 61% in 1995 over 1994, maintenance and support revenue represented 29% of the Company's total revenue in 1995. STAR increased due to new product offerings and an increase in the number of installed customers, while CPG, Series and ALG were responsible for acquisition-related growth. In addition, revenue from CPG's remote processing contracts contributed a significant new source of revenue in 1995. Revenue in 1994 increased 34% over 1993 due to both internal growth and acquisitions. Strong revenue from software license fees was the result of the successful introduction of the Pathways 2000 family of products and solid revenue from STAR applications. Revenue from maintenance and support contracts also increased dramatically as the customer base expanded due to acquisitions and internal growth. Services revenue increased as the Company's implementation teams tackled a strong backlog of business, and outsourcing services increased primarily due to the success of the outsourcing business in the United Kingdom. Cost of operations as a percent of revenue decreased to 47% in 1995 from 52% in 1994, which in turn increased the gross margin to 53% in 1995 from 48% in 1994. The primary reason for the improvement in the gross margin was the 43% increase in combined maintenance, support and implementation revenue while the cost of operations salaries which support these revenue sources increased only 12%. In addition, the shift in the revenue mix away from lower margin hardware revenue had a favorable impact on the gross margin. Cost of operations expense increased over 1994 primarily as a result of higher salaries, increased software and hardware maintenance expense related to acquisitions, costs of the remote processing data center, higher hardware cost related to improved hardware sales, increased amortization expense related to acquired customer lists, higher facilities expense and increased software royalty fees. For 1994, cost of operations as a percent of revenue dropped to 52% from 53% in 1993. Personnel-related expense increased as HBOC expanded its implementation and support staff to service a growing customer base. Amortization expense increased as a result of higher amortization of capitalized software and amortization of the customer lists acquired from IBAX Healthcare Systems. In addition, software royalty expense increased due to higher sales of third-party software products, and hardware and software maintenance expense increased primarily for the support of customer's third-party business partner products. Marketing expense as a percent of revenue increased slightly to 14% in 1995 compared to 13% in 1994 and 14% in 1993. Higher commission expense due to increased sales volume and increased salaries and travel expense related to the increase in the size of the sales force were the primary reasons for the increase in total marketing expense in both 1995 and 1994. Research and development (R&D) expense as a percent of revenue remained constant at 9% in both 1995 and 1994, down from 10% in 1993. In both 1995 and 1994, total R&D expense increased mainly due to higher salaries related to acquisitions. This increase was partially offset by a higher R&D capitalization rate of 25% for both 1995 and 1994, up from 23% in 1993. This rate increase was primarily due to heavy development efforts related to the Pathways 2000 family of products. 15 - -- FINANCIAL REVIEW General and administrative expense as a percent of revenue remained constant at 11% for 1995, 1994 and 1993. In 1995, general and administrative expense increased primarily due to higher expense for incentive programs, increased facilities expense, higher salaries and increased depreciation expense resulting from a larger fixed asset base. In 1994, general and administrative expense increased due to higher depreciation related to acquisitions, increased facilities expense and higher employee benefit costs related to the growth in the number of employees. HBOC recorded two nonrecurring charges during 1995. In the second quarter, the Company recorded a $126 million purchased R&D charge related to the CPG acquisition, and in the third quarter, an $11 million nonrecurring charge related to the CliniCom acquisition. As a result, the Company experienced an operating loss of $41 million for 1995 compared to operating income of $53 million in 1994. Excluding the nonrecurring charges, operating income as a percent of revenue was 19% for the year compared to 15% in 1994 and 12% in 1993. The effective tax rate remained stable at 40% in 1995, 1994 and 1993. The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in the first quarter of 1993. Weighted average shares outstanding increased in 1995 due to the issuance of 4 million shares of HBOC common stock in connection with the CPG acquisition and shares issued under employee stock option and purchase programs. In 1994, fully diluted weighted average shares outstanding increased due to shares issued under employee stock option and purchase programs and the dilutive effect of stock options outstanding. HBOC is affected by inflation through increased salaries, benefits and other operating and administrative expenses. To the extent permitted by the marketplace, the Company attempts to pass on increased costs by periodically increasing prices of products and services. Standard software maintenance and support agreements contain clauses allowing the Company to increase fees annually to reflect changes in costs. Other products and services are generally contracted for short periods and are therefore not exposed to inflationary pressure. The Company has reviewed Statements of Financial Accounting Standards issued by the Financial Accounting Standards Board in 1995 and believes that the adoption of these standards will not have a material effect on the Company's financial statements taken as a whole. LIQUIDITY AND CAPITAL RESOURCES HBO & Company generated a record $91.4 million in cash flow from operations in 1995, 2.5 times the $36.5 million generated in 1994. As a result, the Company had $65.3 million in cash and no bank debt on its balance sheet at the end of 1995.
CASH FLOW FROM OPERATIONS (in millions) 1993 1994 1995 $91.4 $47.8 $36.5 - --------------------
During 1995, the Company used $37.6 million in cash for investing activities, including $14.6 million for capitalized software development, $12.6 million for acquisitions, net of cash acquired, and $11.2 million for capital expenditures. The Company used an additional $3.5 million for net financing activities. The strength of HBOC's cash flow has improved the Company's liquidity position. The current ratio increased to 1.2:1 at the end of 1995 compared to 1.1:1 at the end of 1994. Cash increased to 26% of current assets compared to 10% at the end of 1994, with a corresponding drop in receivables as a percent of current assets. In addition, the Company is maintaining a low delinquency rate on receivables with approximately 4% of trade receivables over 90 days past due at year-end. Management continues to focus on receivables growth as the Company expands and believes that the rapid integration of newly acquired companies ensures proper focus on this area. The stability of HBOC's liquidity has been enhanced as the revenue mix has shifted toward recurring revenue. This provides a stable, growing source of cash for operating, investing and financing needs. The Company has access to several financing sources, including $25 million available at December 31 under a revolving credit agreement, $5 million under a committed, unsecured line of credit and $5 million under an uncommitted, unsecured line of credit. HBOC is well positioned to continue generating strong cash flow from operations due to its strong base of recurring revenue, successful expense control programs and improved productivity resulting from the synergies created as acquired companies are integrated with HBOC. Management believes that with its access to financing sources, strong cash position and lack of debt, the Company has the flexibility necessary to make strategic investments to enhance quality, increase efficiency and promote growth. 16 - -- REVENUE BY BUSINESS UNIT
1995 - ----------------------------------------------------------------------------------------------------------------------- (000 OMITTED EXCEPT %S) OUTSOURCING AMHERST CONNECT SERVICES PRODUCT INTERNATIONAL TECHNOLOGY NORTH AMERICA* GROUP GROUP GROUP GROUP TOTAL PERCENT - ----------------------------------------------------------------------------------------------------------------------- RECURRING REVENUE Software Maintenance $ 123,239 $ 2,949 $ 11,366 $ 4,557 $ 577 $ 142,688 29% Outsourcing Services -- 28,299 -- 9,113 -- 37,412 8% Remote Processing 25,762 -- -- 39 -- 25,801 5% - ----------------------------------------------------------------------------------------------------------------------- Recurring Revenue 149,001 31,248 11,366 13,709 577 205,901 42% - ----------------------------------------------------------------------------------------------------------------------- ONE-TIME SALES REVENUE Software License Fees 103,675 -- 18,754 2,897 -- 125,326 25% Implementation Fees 68,869 913 4,741 3,100 12,125 89,748 18% Hardware Sales 53,974 -- 5,965 2,387 12,294 74,620 15% - ----------------------------------------------------------------------------------------------------------------------- One-Time Sales Revenue 226,518 913 29,460 8,384 24,419 289,694 58% - ----------------------------------------------------------------------------------------------------------------------- TOTAL REVENUE $ 375,519 $ 32,161 $ 40,826 $ 22,093 $ 24,996 $ 495,595 100% - -----------------------------------------------------------------------------------------------------------------------
1994 - ----------------------------------------------------------------------------------------------------------------------- (000 OMITTED EXCEPT %S) OUTSOURCING AMHERST CONNECT SERVICES PRODUCT INTERNATIONAL TECHNOLOGY NORTH AMERICA* GROUP GROUP GROUP GROUP TOTAL PERCENT - ----------------------------------------------------------------------------------------------------------------------- RECURRING REVENUE Software Maintenance $ 74,392 $ 1,777 $ 9,690 $ 2,656 $ 340 $ 88,855 25% Outsourcing Services -- 27,712 -- 6,861 -- 34,573 10% Remote Processing -- -- -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- Recurring Revenue 74,392 29,489 9,690 9,517 340 123,428 35% - ----------------------------------------------------------------------------------------------------------------------- ONE-TIME SALES REVENUE Software License Fees 77,638 -- 13,033 2,190 -- 92,861 26% Implementation Fees 56,573 530 3,929 1,900 10,305 73,237 20% Hardware Sales 48,968 -- 5,633 2,678 10,631 67,910 19% - ----------------------------------------------------------------------------------------------------------------------- One-Time Sales Revenue 183,179 530 22,595 6,768 20,936 234,008 65% - ----------------------------------------------------------------------------------------------------------------------- TOTAL REVENUE $ 257,571 $ 30,019 $ 32,285 $ 16,285 $ 21,276 $ 357,436 100% - -----------------------------------------------------------------------------------------------------------------------
* Includes the following groups in both the U.S. and Canada: STAR, Pathways 2000, Series, Mainframe Products Group, Charlotte Product Group, Advanced Laboratory Group and Serving Software Group. All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. 17 - -- CONDENSED CONSOLIDATED QUARTERLY STATEMENTS OF INCOME (UNAUDITED)
1995 - ---------------------------------------------------------------------------------------------- (000 OMITTED EXCEPT FOR PER SHARE DATA) QUARTER -------------------------------------------- 1ST 2ND 3RD 4TH TOTAL - ---------------------------------------------------------------------------------------------- REVENUE $ 99,183 $ 109,916 $ 137,907 $ 148,589 $ 495,595 Operating Expense 81,098 88,379 111,091 119,305 399,873 Nonrecurring Charge -- 125,520 10,961 -- 135,481 - ---------------------------------------------------------------------------------------------- OPERATING INCOME (LOSS) 18,085 (103,983) 15,855 29,284 (40,759) Other Expense, Net 242 543 399 115 1,299 - ---------------------------------------------------------------------------------------------- Income (Loss) Before Provision (Credit) for Income Taxes 17,843 (104,526) 15,456 29,169 (42,058) Provision (Credit) for Income Taxes 7,137 (41,810) 6,183 11,667 (16,823) - ---------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 10,706 $ (62,716) $ 9,273 $ 17,502 $ (25,235) - ---------------------------------------------------------------------------------------------- EARNINGS (LOSS) PER SHARE: Primary $ .29 $ (1.72) $ .22 $ .42 $ (.67) Fully Diluted $ .29 $ (1.72) $ .22 $ .42 $ (.67) - ---------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES OUTSTANDING: Primary 36,993 36,360 41,503 41,637 37,822 Fully Diluted 37,099 36,360 41,596 41,657 37,822 - ---------------------------------------------------------------------------------------------- CASH DIVIDENDS DECLARED PER SHARE $ .04 $ .04 $ .04 $ .04 $ .16 - ----------------------------------------------------------------------------------------------
1994 - ---------------------------------------------------------------------------------------------- (000 OMITTED EXCEPT FOR PER SHARE DATA) QUARTER -------------------------------------------- 1ST 2ND 3RD 4TH TOTAL - ---------------------------------------------------------------------------------------------- REVENUE $ 72,803 $ 84,741 $ 91,565 $ 108,327 $ 357,436 Operating Expense 64,260 71,502 78,696 89,936 304,394 - ---------------------------------------------------------------------------------------------- OPERATING INCOME 8,543 13,239 12,869 18,391 53,042 Other Expense (Income), Net (283) (105) 326 512 450 - ---------------------------------------------------------------------------------------------- Income Before Provision for Income Taxes 8,826 13,344 12,543 17,879 52,592 Provision for Income Taxes 3,530 5,338 5,017 7,152 21,037 - ---------------------------------------------------------------------------------------------- NET INCOME $ 5,296 $ 8,006 $ 7,526 $ 10,727 $ 31,555 - ---------------------------------------------------------------------------------------------- EARNINGS PER SHARE: Primary $ .15 $ .22 $ .20 $ .29 $ .86 Fully Diluted $ .15 $ .22 $ .20 $ .29 $ .86 - ---------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES OUTSTANDING: Primary 36,349 36,585 36,757 36,847 36,533 Fully Diluted 36,389 36,585 36,834 36,884 36,667 - ---------------------------------------------------------------------------------------------- CASH DIVIDENDS DECLARED PER SHARE $ .04 $ .04 $ .04 $ .04 $ .16 - ----------------------------------------------------------------------------------------------
All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. 18 - -- CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31 - ------------------------------------------------------------------------------------------------ (000 Omitted Except for Per Share Data) 1995 1994 1993 - ------------------------------------------------------------------------------------------------ REVENUE: Recurring $ 205,901 $123,428 $ 90,203 One-Time Sales 289,694 234,008 176,944 - ------------------------------------------------------------------------------------------------ Total Revenue 495,595 357,436 267,147 OPERATING EXPENSE: Cost of Operations 232,095 186,140 142,524 Marketing 70,591 47,815 37,404 Research and Development 42,964 32,130 25,829 General and Administrative 54,223 38,309 29,507 Nonrecurring Charge 136,481 -- -- - ------------------------------------------------------------------------------------------------ Total Operating Expense 536,354 304,394 235,264 - ------------------------------------------------------------------------------------------------ OPERATING INCOME (Loss) (40,759) 53,042 31,883 Other Expense, Net 1,299 450 388 - ------------------------------------------------------------------------------------------------ Income (Loss) Before Provision (Credit) for Income Taxes (42,058) 52,592 31,495 Provision (Credit) for Income Taxes (16,823) 21,037 12,598 - ------------------------------------------------------------------------------------------------ NET INCOME (LOSS) $(25,235) $ 31,555 $ 18,897 - ------------------------------------------------------------------------------------------------ EARNINGS (LOSS) PER SHARE: Primary $ (.67) $ .86 $ .53 Fully Diluted $ (.67) $ .86 $ .52 - ------------------------------------------------------------------------------------------------ WEIGHTED AVERAGE SHARES OUTSTANDING: Primary 37,822 36,533 35,649 Fully Diluted 37,822 36,667 36,010 - ------------------------------------------------------------------------------------------------
All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 19 - -- CONSOLIDATED BALANCE SHEETS
ASSETS - ------------------------------------------------------------------------------------------------ (000 Omitted) December 31, 1995 1994 - ------------------------------------------------------------------------------------------------ CURRENT ASSETS: Cash and Cash Equivalents $ 65,263 $ 14,951 Receivables, Net of Allowance For Doubtful Accounts of $8,330 and $2,475 in 1995 and 1994 156,210 115,845 Current Deferred Income Taxes 17,794 5,133 Inventories 6,757 3,526 Prepaids and Other Current Assets 6,346 7,917 - ------------------------------------------------------------------------------------------------ Total Current Assets 252,370 147,372 - ------------------------------------------------------------------------------------------------ INTANGIBLES Net of Accumulated Amortization of $13,801 and $3,567 in 1995 and 1994 184,051 57,595 - ------------------------------------------------------------------------------------------------ CAPITALIZED SOFTWARE Net of Accumulated Amortization of $22,054 and $16,878 in 1995 and 1994 34,098 27,916 - ------------------------------------------------------------------------------------------------ PROPERTY AND EQUIPMENT Net of Accumulated Depreciation of $71,263 and $63,758 in 1995 and 1994 33,609 29,103 - ------------------------------------------------------------------------------------------------ DEFERRED INCOME TAXES 25,098 -- - ------------------------------------------------------------------------------------------------ OTHER NONCURRENT ASSETS, NET 5,908 2,146 - ------------------------------------------------------------------------------------------------ $535,134 $264,132 - ------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------ (000 Omitted) CURRENT LIABILITIES: Deferred Revenue $ 71,684 $ 52,855 Other Current Liabilities 133,436 83,357 - ------------------------------------------------------------------------------------------------ Total Current Liabilities 205,120 136,212 - ------------------------------------------------------------------------------------------------ DEFERRED INCOME TAXES -- 1,746 - ------------------------------------------------------------------------------------------------ LONG-TERM DEBT 582 252 - ------------------------------------------------------------------------------------------------ OTHER LONG-TERM LIABILITIES 10,702 1,145 - ------------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES - ------------------------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY: Preferred Stock, 1,000 Shares Authorized and No Shares Issued in Both 1995 and 1994 -- -- Common Stock, $.05 Par Value, 60,000 Shares Authorized and 56,597 and 52,525 Shares Issued in 1995 and 1994 2,830 2,626 Additional Paid-In Capital 315,906 95,063 Retained Earnings 80,255 111,497 - ------------------------------------------------------------------------------------------------ 398,991 209,186 Treasury Stock, as Cost (16,478 and 17,328 Shares in 1995 and 1994) (80,261) (84,409) Total Stockholders' Equity 318,730 124,777 - ------------------------------------------------------------------------------------------------ $535,134 $264,132 - ------------------------------------------------------------------------------------------------
All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 20 - -- CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 - ----------------------------------------------------------------------------------------------------------------------------------- (000 Omitted) COMMON STOCK SHARES ADDITIONAL TOTAL ------------------------------ COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS' ISSUED TREASURY OUTSTANDING STOCK CAPITAL EARNINGS STOCK EQUITY - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1992 27,867 8,754 19,113 $1,393 $ 69,986 $ 70,337 $(80,108) $ 61,608 Common Stock Issued-* Public Offering 460 -- 460 23 10,817 -- -- 10,840 Stock Options Exercised 43 (336) 379 2 3,314 -- 3,234 6,550 Employee Stock Purchase Plan -- (63) 63 -- 116 -- 586 702 Treasury Stock Purchased -- 700 (700) -- -- -- (11,938) (11,938) Other 70 (6) 76 4 961 (74) 57 948 Cash Dividends Declared ($.15 Per Share) -- -- -- -- -- (4,425) -- (4,425) Effect of Two-For-One Stock Split 23,811 9,049 14,762 1,190 (1,190) -- -- -- Net Income for the Year -- -- -- -- -- 18,897 -- 18,897 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1993 52,251 18,098 34,153 2,612 84,004 84,735 (88,169) 83,182 Common Stock Issued-* Stock Options Exercised 264 (578) 842 14 10,029 -- 3,061 13,104 Employee Stock Purchase Plan 10 (144) 154 -- 870 -- 699 1,569 Other -- (48) 48 -- 160 147 -- 307 Cash Dividends Declared ($.16 Per Share) -- -- -- -- -- (4,940) -- (4,940) Net Income for the Year -- -- -- -- -- 31,555 -- 31,555 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1994 52,525 17,328 35,197 2,626 95,063 111,497 (84,409) 124,777 Common Stock Issued-* Business Combination 4,000 -- 4,000 200 199,800 -- -- 200,000 Stock Options Exercised 65 (765) 830 4 19,795 -- 3,770 23,569 Employee Stock Purchase Plan 7 (78) 85 -- 1,240 -- 378 1,618 Other -- (7) 7 -- 8 (223) -- (215) Cash Dividends Declared ($.16 Per Share) -- -- -- -- -- (5,784) -- (5,784) Net Loss for the Year -- -- -- -- -- (25,235) -- (25,235) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1995 56,597 16,478 40,119 $2,830 $315,906 $ 80,255 $(80,261) $318,730 - -----------------------------------------------------------------------------------------------------------------------------------
*Includes a non-cash income tax benefit reflected in additional paid-in capital of $12,314, $7,208 and $3,067 in 1995, 1994 and 1993 related to the exercise of stock options, the disqualifying disposition of stock options and the employee stock purchase plan. All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 21 - -- CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------- (000 Omitted) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) for the Year $ (25,235) $ 31,555 $ 18,897 - --------------------------------------------------------------------------------------------------------------- Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Nonrecurring Charge 136,481 -- -- Depreciation and Amortization 30,253 18,729 10,781 Provision (Credit) for Noncurrent Deferred Income Taxes (2,644) 1,474 1,572 Changes in Assets and Liabilities, Net of Acquisitions: Receivables (16,845) (52,288) 10,355 Current Deferred Income Taxes (12,643) 1,147 1,252 Inventories (5,231) (189) 745 Prepaids and Other Current Assets 2,453 (129) (1,191) Deferred Income Taxes (25,098) -- -- Other Noncurrent Assets (148) 829 296 Deferred Revenue 15,573 13,322 2,515 Other Current Liabilities (5,350) 22,580 2,371 Other, Net (190) (506) 165 - --------------------------------------------------------------------------------------------------------------- Total Adjustments 116,611 4,969 28,861 - --------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 91,376 36,524 47,758 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of Property and Equipment 814 99 1,385 Purchase of Facility -- (2,698) -- Capital Expenditures (11,231) (7,319) (9,664) Purchases of Businesses, Net of Cash Acquired (12,594) (45,085) (7,020) Capitalized Software (14,546) (10,459) (7,799) Other -- -- 1,694 - --------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (37,557) (65,462) (21,404) - --------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED (USED) BEFORE FINANCING ACTIVITIES 53,819 (28,938) 26,354 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Issuance of Common Stock 12,874 7,179 19,091 Proceeds from Long-Term Debt 70,500 63,000 -- Payment of Dividends (5,451) (4,776) (4,447) Repayment of Short-Term Debt (10,000) -- (258) Repayment of Long-Term Debt (71,430) (62,664) -- Purchase of Treasury Stock -- -- (11,938) - --------------------------------------------------------------------------------------------------------------- Net Cash Provided by (Used in) Financing Activities (3,507) 2,739 2,448 - --------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 50,312 (26,199) 28,802 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,951 41,150 12,348 - --------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 65,263 $ 14,951 $ 41,150 - --------------------------------------------------------------------------------------------------------------- CASH PAID DURING THE YEAR FOR: Interest $ 3,306 $ 2,727 $ 1,413 Income Taxes $ 15,436 $ 8,369 $ 4,838
All prior period amounts have been restated to reflect the 1995 acquisition of CliniCom Incorporated in a pooling transaction. The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 22 - -- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION The consolidated financial statements include the accounts of HBO & Company and its wholly owned subsidiaries, collectively referred to as "the Company" or "HBOC." All significant intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION HBO &Company delivers enterprisewide patient care, clinical, financial and strategic management software solutions, as well as networking technologies, outsourcing and other services to healthcare organizations in the United States, United Kingdom, Ireland, Canada, Puerto Rico, Saudi Arabia, Australia and New Zealand. SOFTWARE AND HARDWARE PRODUCTS -- Information systems are marketed under equipment purchase and software license agreements, as well as service agreements. Software and hardware are recognized at the time of delivery. SERVICES -- Implementation fees are recognized as the work is performed or on a percentage-of-completion basis. Software maintenance and support agreements are marketed under annual and multiyear renewable agreements. Maintenance and support revenue is generally billed annually and recognized ratably over the period. Fees for outsourcing and remote processing services are either recognized monthly as the work is performed or on a percentage-of-completion basis. NONRECURRING CHARGE During the second quarter of 1995, the Company recorded a $126 million nonrecurring charge primarily related to $115 million of research and development purchased as part of the Charlotte Product Group (CPG) acquisition that had not reached the stage of technological feasibility. The charge also included severance and other acquisition-related costs of $8 million and a mainframe capitalized research and development net book value adjustment of $3 million. During the third quarter of 1995, the Company recorded a nonrecurring charge of $11 million related to the acquisition of CliniCom. The nonrecurring charge consisted primarily of severance pay and acquisition costs. OTHER EXPENSE, NET Other expense, net, is comprised primarily of interest income on cash, cash equivalents, notes receivable and discounted future contract payments; interest expense on long-term debt and short-term line of credit borrowings; and miscellaneous expense related primarily to foreign exchange transaction gains and losses. EARNINGS PER SHARE Earnings per share is based upon the weighted average number of shares and the dilutive effect of stock options outstanding. Loss per share is based only upon the weighted average number of shares outstanding, since the effect of stock options is anti-dilutive. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity of three months or less from date of purchase to be cash and cash equivalents. INVENTORIES Inventories are valued at lower of cost or market. Cost is determined either by the specific identification or first-in, first-out valuation methods. CAPITALIZED SOFTWARE The Company capitalizes costs to develop software products once the project has reached the point of technological feasibility. Management monitors the net realizable value of all software development investments to ensure that the investment will be recovered through future sales. Completed projects are amortized after reaching the point of general availability using the straight-line method based on an estimated useful life of three years. HBOC capitalized software development costs of $14.5 million, $10.5 million and $7.8 million in 1995, 1994 and 1993. In addition, acquisitions resulted in a $2.3 million increase in capitalized software in 1995, a $2.4 million increase in 1994 and a $.7 million increase in 1993. The Company's 1995 nonrecurring charge included $4.7 million related to net realizable value adjustments for capitalized software. Amortization of capitalized software costs totaled $5.8 million, $6.2 million and $3.8 million in 1995, 1994 and 1993. Royalty fees in the amount of $11.3 million, $7.3 million and $2.4 million were expensed in 1995, 1994 and 1993 for third-party business partners and customers that assisted in the Company's development efforts. 23 - -- NOTES TO CONSOLIDATED FINANCIAL STATEM[caad 214]ENTS INTANGIBLES Intangibles consists of certain items related to the Company's acquisitions as follows:
December 31, (000 Omitted) 1995 1994 GROSS NET GROSS NET --------------------------------------------------------------------- Series Customer Lists $ 53,815 $ 48,105 $ 51,849 $ 49,833 CPG Customer Lists 103,927 100,232 -- -- Goodwill 37,536 34,238 6,680 5,811 Other 2,574 1,476 2,633 1,951 --------------------------------------------------------------------- Total $197,852 $184,051 $ 61,162 $ 57,595
The Series and CPG customer lists are being amortized over 15 years beginning in June 1994 and June 1995. Goodwill relates to seven acquisitions and is being amortized over periods ranging from seven to 15 years from the various acquisition dates. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Computer equipment is depreciated over a useful life of two to five years using the straight-line method. Office furniture and equipment are depreciated over useful lives of two to 10 years using the straight-line method. Real property is depreciated using the straight-line method over various lives of up to 39 years. Leasehold improvements are amortized on a straight-line basis over the remaining lease term. Expenditures for maintenance and repair of equipment are expensed as incurred and amounted to $6.6 million in 1995, $4.7 million in 1994 and $3.5 million in 1993. OTHER NONCURRENT ASSETS Other noncurrent assets consist primarily of the long-term portion of notes receivable. 2. INDEBTEDNESS AND COMMITMENTS: The Company entered into a long-term revolving credit agreement in June 1994 which replaced a similar agreement with another bank. In February 1995 the amount available under the agreement was increased from $20 million to $25 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 (6-3/4% as of December 31, 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 December 31, 1995. During 1994, the Company entered into a $25 million five-year term loan maturing on June 30, 1999, with 20 quarterly payments of $1.25 million of principal plus interest at prime or LIBOR plus 1-3/4%. The Company elected to repay the majority of the principal in 1994, leaving a short-term payable of $.4 million at December 31, 1994, which was paid in January 1995. The Company has a $5 million committed, unsecured line of credit to cover several types of credit extensions, including letters of credit and short-term borrowings. In addition, the Company has a $5 million uncommitted, unsecured line of credit at prime less 1/2%. No facility fees or compensating balances are associated with either line. 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 (6-3/4% as of December 31, 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. The Company acquired two $5 million notes payable in the 1994 acquisition of IBAX Healthcare Systems which, per the acquisition agreement, were paid in full on January 31, 1995. The Company occupies leased facilities and leases customer and other equipment under noncancelable leases that expire through 2002. Most of the leases contain certain options to renew. The future minimum lease commitments under the terms of the Company's noncancelable leases as of December 31, 1995, were as follows:
(000 Omitted) 1996 $ 18,622 1997 16,563 1998 13,017 1999 8,078 2000 and thereafter 7,312 ----------------------------------- TOTAL $ 63,592
24 - -- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. CAPITAL STOCK: In February 1994 the Company declared a two-for-one stock split of all common stock outstanding and in the treasury, effected in the form of a stock dividend payable on March 28, 1994, to stockholders of record on March 14, 1994. All financial data has been restated for this stock split. Beginning in 1987, the Board of Directors authorized open market purchase programs to purchase the Company's common stock, which resulted in the purchase of 22.6 million shares at an aggregate cost of $102.4 million between 1987 and 1995, leaving 621,000 shares authorized under this program. On February 12, 1991, the Company designated 20,000 shares of its 1,000,000 shares of authorized preferred stock with no par value as Series A Junior Participating Preferred Stock with no par value and declared a dividend distribution of one Preferred Share Purchase Right on each outstanding share of the Company's common stock. Due to the 1994 stock split, each such outstanding share is entitled to one-half of a Right. Each Right, when exercisable, entitles its holder to buy one-thousandth of a share of the newly authorized preferred stock at an exercise price of $35, subject to adjustment. The Rights initially will trade together with the Company's common stock and will not be exercisable unless certain triggering events occur. Until exercisable, the Rights will not have a dilutive effect on earnings per share. Following certain events, including the acquisition of 15% of the Company's common stock, the Board of Directors may elect to exchange each outstanding whole Right for two shares of the Company's common stock, subject to adjustment. In certain other circumstances, including the acquisition of 20% or more of the Company's common stock, the Rights may become exercisable for common stock of the Company having a market value of twice the Right's exercise price. The Company will be entitled to redeem the Rights at one cent per Right at any time prior to the time the Rights become exercisable. If the Company is acquired in a merger or other business combination transaction and the Rights have not been redeemed, each Right will entitle its holder to purchase, at the Right's then current exercise price, a number of the acquiring company's common shares having a market value at the time of two times the Right's exercise price. The Rights will expire on February 22, 2001. 4. EMPLOYEE BENEFIT PLANS: STOCK PURCHASE PLAN The Company has an employee discount stock purchase plan for all eligible employees of HBO & Company and designated subsidiaries. Participants may use up to 10% of their compensation to purchase through payroll deductions the Company's common stock at the end of each plan year for 85% of the lower of the beginning or ending stock price in the plan year. At December 31, 1995, there were 716,215 shares of stock reserved for issuance under this plan. STOCK OPTION PLANS The Company has nonqualified and incentive stock option plans to provide key employees and directors with an increased incentive to work for the success of the Company. The option price for all stock options is the market value at the dates of grant. The options expire 10 years after the dates of their respective grants. Transactions involving stock options follow:
OPTION OPTIONS PRICE RANGE - ----------------------------------------------------------------- BALANCE - DECEMBER 31, 1992 3,119,050 $ 2.85 - $13.33 - ----------------------------------------------------------------- Granted 603,171 $ 8.59 - $36.25 Exercised 715,049 $ 2.85 - $10.00 Forfeited 110,047 $ 2.85 - $12.89 - ----------------------------------------------------------------- BALANCE - DECEMBER 31, 1993 2,897,125 $ 2.85 - $36.25 - ----------------------------------------------------------------- Granted 737,699 $12.89 - $49.38 Exercised 841,811 $ 2.85 - $36.25 Forfeited 92,419 $ 4.57 - $49.38 - ----------------------------------------------------------------- BALANCE - DECEMBER 31, 1994 2,700,594 $ 3.00 - $49.38 - ----------------------------------------------------------------- Granted 1,039,084 $32.81 - $75.00 Exercised 830,134 $ 3.00 - $49.38 Forfeited 366,252 $ 8.44 - $49.38 - ----------------------------------------------------------------- BALANCE - DECEMBER 31, 1995 2,543,292 $ 3.00 - $75.00 - ----------------------------------------------------------------- EXERCISABLE AT DECEMBER 31, 1995 983,019 $ 3.00 - $49.38 - ----------------------------------------------------------------- RESERVED FOR FUTURE OPTIONS 290,032 - -----------------------------------------------------------------
PROFIT SHARING AND SAVINGS PLAN The Company has a qualified profit sharing and savings plan covering all employees with more than six months of service. Participants, except for certain highly paid employees who are subject to certain limitations, may contribute up to 15% of their compensation to the plan. The Company matches these contributions at a rate determined annually by its Board of Directors (75% of the first 4% of compensation contributed in 1995, 1994 and 1993). In addition, the Company's Board may, at its discretion, authorize within prescribed limits a profit sharing contribution to all eligible participants. Total plan expense was $3.1 million in 1995, $2.6 million in 1994 and $1.9 million in 1993. 25 - -- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. INCOME TAXES: During the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires the use of the liability method in accounting for income taxes. The Company determined that there was no cumulative adjustment due to the adoption of SFAS No. 109. Prior to the adoption of SFAS No. 109, the Company accounted for income taxes using Accounting Principles Board Opinion No. 11. The components of the Company's net deferred tax asset are as follows:
December 31, (000 Omitted) 1995 1994 -------------------------------------------------------------------------- DEFERRED TAX LIABILITIES: Capitalized Software $ (12,492) $ (9,916) Tax vs. Book Depreciation -- (641) Other -- (248) -------------------------------------------------------------------------- Total Deferred Tax Liabilities (12,492) (10,805) -------------------------------------------------------------------------- DEFERRED TAX ASSETS: Intangibles 31,608 -- Accruals 7,148 4,469 Net Operating Loss Carryforward 3,600 4,971 Inventory 2,507 852 Other 10,521 3,900 -------------------------------------------------------------------------- Total Deferred Tax Assets 55,384 14,192 -------------------------------------------------------------------------- NET DEFERRED TAX ASSET $ 42,892 $ 3,387 --------------------------------------------------------------------------
The provision (credit) for income taxes consists of the following components:
(000 Omitted) 1995 1994 1993 ----------------------------------------------------------------------- Current Portion - Federal $ 21,915 $ 16,748 $ 8,531 State 1,812 1,690 1,261 ----------------------------------------------------------------------- 23,727 18,438 9,792 ----------------------------------------------------------------------- Deferred Portion - Federal (35,407) 2,295 2,482 State (5,143) 304 324 ----------------------------------------------------------------------- (40,550) 2,599 2,806 ----------------------------------------------------------------------- Total Provision (Credit) for Income Taxes $(16,823) $ 21,037 $12,598 -----------------------------------------------------------------------
A reconciliation from the federal statutory rate to the total provision (credit) for income taxes is as follows:
(000 Omitted) 1995 1994 1993 ----------------------------------------------------------------------- Tax at Statutory Rate $(14,720) $18,407 $11,023 State Income Taxes, Net of Federal Taxes (2,103) 2,629 1,501 Tax Reserve Adjustment -- (424) -- Other, Net -- 425 74 ----------------------------------------------------------------------- $(16,823) $21,037 $12,598 -----------------------------------------------------------------------
6. OTHER CURRENT LIABILITIES: The following significant items are included in other current liabilities at year-end:
(000 Omitted) 1995 1994 ----------------------------------------------------------------------- Accounts Payable $ 29,380 $21,391 Accrued Commissions and Bonuses 20,710 11,184 Customer Deposits 20,221 10,230 Accrued Royalties 6,404 2,814 Notes Payable -- 10,000 Other 56,721 27,738 ----------------------------------------------------------------------- $133,436 $83,357 -----------------------------------------------------------------------
7. ACQUISITIONS: In February 1995 the Company completed the acquisition of Advanced Laboratory Systems, Inc. now known as the Advanced Laboratory Group (ALG), for approximately $7 million, net of cash acquired. The transaction was accounted for as a purchase. In June 1995 the Company completed the acquisition of 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. 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 assets of $58 million acquired and the liabilities assumed of $83 million. HBOC recorded approximately $115 million of intangibles after adjusting for the nonrecurring purchased research and development charge (note 1), which are being amortized on a straight-line basis over periods ranging from seven to 15 years. 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 1995 nonrecurring charge:
(000 Omitted Except for Per Share Data) 1995 1994 --------------------------------------------------------------- Revenue $563,790 $510,781 Net Income $ 60,589 $ 38,949 Earnings Per Share $ 1.47 $ .96
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. 26 - -- NOTES TO CONSOLIDATED FINANCIAL STATEM[caad 214]ENTS In July 1995 the Company completed the acquisition of Pegasus Medical Ltd. for approximately $8 million of cash and contingent payments, based on certain deliverables, of up to $7 million. Contingent payments of $3 million were made in 1995. The transaction was accounted for as a purchase. In September 1995 the Company completed the acquisition of CliniCom Incorporated in a transaction accounted for as a pooling of interests. All of CliniCom's outstanding shares were exchanged for approximately 3.5 million shares of HBOC common stock. All prior period financial information has been restated and intercompany transactions have been eliminated. Acquisition-related costs were expensed as incurred. Summarized results of operations of the separate companies for the nine-month period ended September 30, 1995, are as follows:
(000 Omitted) Nine Months Ended September 30, 1995 HBOC CLINICOM ADJUSTMENTS TOTAL - -------------------------------------------------------------------- Revenue $318,778 $35,508 $(7,280) $347,006 Net Income (Loss) $(46,471) $ 5,777 $(2,043) $(42,737) - --------------------------------------------------------------------
A reconciliation between revenue and net income as previously reported and as restated follows:
(000 Omitted) 1994 1993 -------------------------------------------------------- REVENUE: As Previously Reported $327,201 $250,791 CliniCom 35,416 20,146 Adjustments (5,181) (3,790) -------------------------------------------------------- As Restated $357,436 $267,147 -------------------------------------------------------- NET INCOME: As Previously Reported $ 28,159 $ 18,819 CliniCom 5,488 3,343 Adjustments (2,092) (3,265) -------------------------------------------------------- As Restated $ 31,555 $ 18,897 --------------------------------------------------------
8. LEGAL PROCEEDINGS: On September 6, 1995, the Eleventh Circuit Court of Appeals affirmed the decision of the Federal District Court for the Northern District of Georgia dismissing a class action lawsuit against the Company filed in 1986. The time for any further appeals by the Plaintiff has now expired with the result that the Company has prevailed on all counts and the litigation has been conclusively terminated. 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. 9. SUBSEQUENT EVENT (UNAUDITED): On February 13, 1996, the Board of Directors of HBOC approved an amendment to the Company's Certificate of Incorporation that would increase the number of shares of authorized common stock from 60 million to 250 million. The amendment is subject to stockholder approval at the Company's Annual Meeting of Stockholders to be held on May 14, 1996. In addition, the Board announced its intention to declare a two-for-one stock split to be effected in the form of a stock dividend, contingent upon stockholder approval of the increase in authorized shares. Financial information contained in this report has not been adjusted to reflect the impact of this proposed stock split. However, if the proposed split occurs and excluding the 1995 nonrecurring charge, restated fully diluted weighted average shares outstanding would be 79,022 for 1995, 73,334 for 1994 and 72,020 for 1993 and restated earnings per share would be $.72 for 1995, $.43 for 1994 and $.26 for 1993. Including the nonrecurring charge for 1995, restated fully diluted weighted average shares outstanding would be 75,644 and loss per share would be ($.33). - -- COMMON STOCK DATA The tables below present the quarterly high and low closing sales prices and dividend information for the Company's stock as furnished by The Nasdaq Stock Market's National Market. There were 1,686 holders of record of the Company's common stock as of December 31, 1995.
1995 - ---------------------------------------------------- DIVIDENDS DECLARED QUARTER HIGH LOW PER SHARE - ---------------------------------------------------- First $ 43.75 $ 33.50 $ .04 Second $ 54.50 $ 40.50 $ .04 Third $ 64.00 $ 52.81 $ .04 Fourth $ 85.75 $ 62.25 $ .04 --------- TOTAL $ .16 ---------
1994 - ---------------------------------------------------- DIVIDENDS DECLARED QUARTER HIGH LOW PER SHARE - ---------------------------------------------------- First $ 26.38 $ 20.88 $ .04 Second $ 31.13 $ 20.75 $ .04 Third $ 34.50 $ 24.50 $ .04 Fourth $ 36.13 $ 29.00 $ .04 --------- TOTAL $ .16 ---------
27 - -- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of HBO & Company: We have audited the accompanying consolidated balance sheets of HBO & Company (a Delaware Corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of HBO & Company and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Atlanta, Georgia Arthur Andersen LLP February 6, 1996 - -- STOCKHOLDER INFORMATION CORPORATE HEADQUARTERS HBO & Company 301 Perimeter Center North Atlanta, Georgia 30346 (770) 393-6000 FAX: (770) 393-6092 http://www.hboc.com STOCK LISTING HBO & Company's common stock is traded on The Nasdaq Stock Market's National Market (symbol:HBOC). Put and call options on HBO & Company common stock are traded on the Pacific Stock Exchange. ANNUAL MEETING HBO & Company's annual stockholders' meeting will be held on Tuesday, May 14, 1996, at 9:00 a.m. Eastern time at its Corporate Headquarters. You are cordially invited to attend. TRANSFER AGENT AND REGISTRAR SunTrust Bank, Atlanta Corporate Trust Department P.O. Box 4625 Atlanta, GA 30302 (800) 568-3476 (404) 588-7815 Communications regarding transfers, lost certificates, dividends or change of address should be directed to SunTrust Bank, Atlanta at the above address. INVESTOR INFORMATION The Company routinely sends its annual reports, interim quarterly reports and press releases to interested investors. To receive information, please write the Company or call (800) HBOC-411 [(800) 426-2411] INVESTOR RELATIONS Security analysts and other investor inquiries should be directed to: Anne G. Davenport Investor Relations HBO & Company (800) HBOC-411 [(800) 426-2411] S.E.C. FORM 10-K Copies of the 10-K report filed with the Securities and Exchange Commission are available without charge, except for exhibits. To request a copy, please write the Company or call (800) HBOC-411 [(800) 426-2411] AUDITORS Arthur Andersen LLP 133 Peachtree Street, N.E. Atlanta, GA 30303 (404) 658-1776 CORPORATE COUNSEL Jones, Day, Reavis & Pogue 3500 One Peachtree Center 303 Peachtree Street, N.E. Atlanta, GA 30308-3242 (404) 521-3939 28 BOARD OF DIRECTORS
HOLCOMBE T. GREEN, JR. -- CHAIRMAN GERALD E. MAYO Chairman and Chief Executive Officer Chairman and President WestPoint Stevens Inc. Midland Financial Services, Inc. CHARLES W. MCCALL JAMES V. NAPIER President and Chief Executive Officer Chairman HBO & Company Scientific-Atlanta, Inc. ALFRED C. ECKERT III CHARLES E. THOELE President Consultant Greenwich Street Capital Partners, Inc. Sisters of Mercy Health System PHILIP A. INCARNATI DONALD C. WEGMILLER President and Chief Executive Officer President and Chief Executive Officer McLaren Health Care Corporation Management Compensation Group/HealthCare Compensation ALTON F. IRBY III Principal and Deputy Chairman J O Hambro Magan & Co.
CORPORATE OFFICERS
CHARLES W. MCCALL* RALPH C. CAPASSO President and Chief Executive Officer Senior Vice President -- Pathways 2000 Services ALBERT J. BERGONZI* TIMOTHY S. HEYERDAHL Executive Vice President -- Sales, Vice President -- Controller, Pathways 2000 Accounting Officer JAMES A. GILBERT* MICHAEL L. KAPPEL Senior Vice President -- Senior Vice President -- Strategic Product Charlotte Product Group, Planning and Marketing Mainframe Products Group, Series Product Group, GLENN N. ROSENKOETTER General Counsel and Secretary Senior Vice President -- Advanced Laboratory Group, Amherst Product Group, Serving Software JAY P. GILBERTSON* Group, STAR Product Group, HBOC (UK) Limited Senior Vice President -- Finance, Chief Financial Officer, Principal E. CHRISTINE RUMSEY Accounting Officer, Treasurer Senior Vice President -- Human Resources and Assistant Secretary DAVID A. SCHENK RUSSELL G. OVERTON* Senior Vice President -- Senior Vice President -- Connect Technology Group, Business Development Outsourcing Services Group * Executive Officer
HBO & COMPANY OFFICES
CORPORATE Los Angeles, CA PUERTO RICO (310) 540-4589 Hato Rey 301 Perimeter Center North (809) 766-1097 Atlanta, GA 30346 Minneapolis, MN (770) 393-6000 (612) 623-4038 UNITED KINGDOM Mission Viejo, CA Berkshire UNITED STATES (714) 581-7125 011-44-1734-796679 Amherst, MA (413) 549-7100 Mt. Laurel, NJ Buckinghamshire (609) 234-4041 011-44-1628-470800 Boston, MA (617) 973-5151 Norcross, GA Nottingham (770) 441-7793 011-44-115-9683200 Boulder, CO (303) 443-1726 Pittsburgh, PA Romford (412) 787-7780 011-44-1708-371821 Charlotte, NC (704) 549-7000 Salt Lake City, UT Edinburgh (801) 262-0322 011-44-131-6575521 Chicago, IL (847) 956-2000 San Francisco, CA (415) 572-1920 IRELAND Dallas, TX Dublin (214) 219-4200 Tampa, FL 011-353-1-8405355 (813) 931-0158 Eugene, OR (541) 485-2338 ISRAEL CANADA Jerusalem Hauppauge, NY London, Ontario 011-972-2-433999 (516) 435-2300 (519) 432-4764 Lexington, MA Hamilton, Ontario AUSTRALIA (617) 863-0600 (905) 385-4997 Lane Cove NSW 011-44-612-408-6622 Longwood, FL (407) 831-8444
Designed by Crawford/Mikus Design, Inc., Atlanta, Ga. Photography by David Guggenheim, Atlanta, Ga. Printed by Color Graphics, Inc., Atlanta, Ga. EX-21 5 EXHIBIT 21 EXHIBIT 21 HBO & COMPANY AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT Subsidiaries of the Company are as follows:
JURISDICTION OF INCORPORATION ---------------------- HBO & Company of Georgia 100% Delaware, USA HBO & Company (UK) Limited 100% United Kingdom HBO & Company (VI), Inc. 100% U.S. Virgin Islands HBO & Company Canada Ltd. 100% Canada Data-Med Computer Services Limited 100% owned by HBO & Company (UK) United Kingdom Limited Pegasus Medical Ltd. 100% owned by HBO & Company of Israel Georgia First Data Health Systems Corporation 100% owned by HBO & Company of Delaware, USA Georgia until merged with HBO & Company of Georgia in December 1995 First Data Health Systems (Australia), Pty. Ltd. 100% owned by HBO & Company of Australia Georgia First Data Health Systems (U.K.), Ltd. 100% owned by HBO & Company of United Kingdom Georgia First Data Health Systems (Ireland), Ltd. 100% owned by HBO & Company of Ireland Georgia First Data Health Systems Training Services Ltd. 100% owned by HBO & Company of Ireland Georgia
EX-23 6 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports incorporated by reference in this Form 10-K into the Company's previously filed Registration Statements on Form S-8, which are listed in Part IV, Item 14(a)3 of this Form 10-K. ARTHUR ANDERSEN LLP Atlanta, Georgia March 7, 1996 EX-27.A 7 EXHIBIT 27A (FDS)
5 This schedule contains summary financial information extracted from HBO & Company Consolidated Statements of Income for the Twelve Months Ended 12/31/95 and HBO & Company Condensed Balance Sheets at 12/31/95 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 65,263 0 164,540 8,330 6,757 252,370 104,872 71,263 535,134 205,120 0 2,830 0 0 315,900 535,134 199,946 495,595 74,122 232,095 304,259 644 3,444 (42,058) (16,823) (25,235) 0 0 0 (25,235) (0.67) (0.67)
EX-27.B 8 EXHIBIT 27B (FDS)
5 This schedule contains summary financial information extracted from HBO & Company Consolidated Statements of Income for the Twelve Months Ended 12/31/94 and HBO & Company Condensed Balance Sheets at 12/31/94 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 14,951 0 118,320 2,475 3,526 147,372 92,861 63,758 264,132 136,212 0 2,626 0 0 122,151 264,132 160,771 357,436 61,828 186,140 118,254 849 2,909 52,592 21,037 31,555 0 0 0 31,555 0.86 0.86
EX-27.C 9 EXHIBIT 27C (FDS)
5 This schedule contains summary financial information extracted from HBO & Company Consolidated Statements of Income for the Three Months Ended 3/31/95 and HBO & Company Condensed Balance Sheets at 3/31/95 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 14,466 0 116,733 2,632 4,822 147,137 94,868 66,569 274,256 123,792 0 2,628 0 0 136,546 274,256 40,576 99,183 16,184 48,482 32,616 75 674 17,843 7,137 10,706 0 0 0 10,706 0.29 0.29
EX-27.D 10 EXHIBIT 27D (FDS)
5 This schedule contains summary financial information extracted from HBO & Company Consolidated Statements of Income for the Six Months Ended 6/30/95 and HBO & Company Condensed Balance Sheets at 6/30/95 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 15,735 0 147,967 3,465 5,268 185,105 100,721 66,091 475,656 173,326 0 2,828 0 0 275,186 475,656 86,046 209,099 32,146 98,570 196,427 599 1,647 (86,683) (34,673) (52,010) 0 0 0 (52,010) (1.45) (1.45)
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