-----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, HwNn3PB78qqC4qwOapgWu6dxGLyikkrlhKfcrognQCYo3X+uWS5BqgEqKK7HOlKM 4DsuQ3tRYfFvwSik09m5GQ== 0000950147-96-000182.txt : 19960517 0000950147-96-000182.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950147-96-000182 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYCARE SYSTEMS INC CENTRAL INDEX KEY: 0000354888 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 910842322 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09815 FILM NUMBER: 96564829 BUSINESS ADDRESS: STREET 1: 7001 NORTH SCOTTSDALE RD. CITY: SCOTTSDALE STATE: AZ ZIP: 85253 BUSINESS PHONE: 6025964300 MAIL ADDRESS: STREET 1: 7001 N SCOTTSDALE RD STREET 2: STE 1000 CITY: SCOTTSDALE STATE: AZ ZIP: 85253 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (X) Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: MARCH 31, 1996 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from _______________ to _______________ Commission file number 1-9815 CYCARE SYSTEMS, INC. ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 91-0842322 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite 1000, 7001 North Scottsdale Road, Scottsdale, Arizona 85253 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code...............................................(602) 596-4300 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. At April 24, 1996, 5,064,295 shares of common stock were outstanding, net of 1,033,662 shares of treasury stock. INDEX CYCARE SYSTEMS, INC. PART I. FINANCIAL INFORMATION PAGE NO. - ------------------------------ -------- Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - March 31, 1996 and December 31, 1995. 3 Condensed Consolidated Income Statements - Three months ended March 31, 1996 and 1995. 4 Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 1996 and 1995. 5 Notes to Condensed Consolidated Financial Statements - March 31, 1996. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 7 - 8 PART II. OTHER INFORMATION - ---------------------------- Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K. 9 SIGNATURES 10 - ---------------------------- PART I FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 1996 and December 31, 1995 (In thousands, except per share data) Unaudited 1996 1995 --------- ------- Cash and cash equivalents $ 12,317 $ 13,570 Accounts receivable, net 7,714 6,975 Unbilled work at estimated realizable value 1,974 1,922 Supply and equipment inventories 995 1,000 Prepaid and other assets 3,423 3,378 Deferred income taxes 6 42 -------- -------- Total Current Assets 26,429 26,887 Property and equipment at cost, net 9,847 9,806 Software products, net 8,074 7,587 Goodwill, net 931 938 Other intangibles, net 704 754 Other assets 271 301 -------- -------- Total Assets $ 46,256 $ 46,273 ======== ======== Current portion of long-term debt $ 1,288 $ 1,300 Accounts payable 2,308 2,563 Accrued expenses 2,276 3,270 Accrued payroll 1,674 1,021 Client deposits and unearned income 952 824 Income taxes payable 814 302 -------- -------- Total Current Liabilities 9,312 9,280 -------- -------- Long-term debt, less current portion 2,533 2,853 -------- -------- Other long-term liabilities 1,590 1,674 -------- -------- Deferred income taxes 2,476 2,381 -------- -------- Shareholders' equity: Common stock 61 61 Capital in excess of par value 31,400 31,436 Retained earnings 9,283 8,110 Less treasury stock (10,399) (9,522) -------- -------- Total Shareholders' Equity 30,345 30,085 -------- -------- Total Liabilities and Shareholders' Equity $ 46,256 $ 46,273 ======== ======== Book value per share $6.00 $5.90 Common shares outstanding excluding treasury shares of 1,039,787 at March 31, 1996 and 1,003,037 at December 31, 1995. 5,058 5,095 See notes to condensed consolidated financial statements 3 CONDENSED CONSOLIDATED INCOME STATEMENTS Three Months Ended March 31, 1996 and 1995 (In thousands, except per share data) (Unaudited) 1996 1995 ------- ------- Revenues: Services $12,686 $12,048 Systems sales 2,621 3,361 Interest and dividends 191 195 Other income 146 157 -------- -------- 15,644 15,761 -------- -------- Costs and Expenses: Cost of services 4,636 4,597 Cost of systems sold 1,504 2,376 Software product amortization 443 582 Research and development 1,267 1,187 Selling and administrative 5,845 5,248 Interest 87 123 -------- -------- 13,782 14,113 -------- -------- Income before income taxes 1,862 1,648 Income taxes 689 635 -------- -------- Net Income $ 1,173 $ 1,013 ======== ======== Earnings per share $.23 $.20 ======== ======== Common and common equivalent shares used in the calculation of earnings per share 5,189 5,094 See notes to condensed consolidated financial statements 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 1996 and 1995 (In thousands) (Unaudited)
1996 1995 -------- --------- Operating activities Net income $ 1,173 $ 1,013 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of goodwill and intangibles 57 27 Depreciation and amortization 435 416 Software product amortization 443 582 Provision for losses on accounts receivable 107 103 Provision for deferred income taxes 131 207 Loss on sale or retirement of equipment 5 1 Changes in operating assets and liabilities: Accounts receivable and unbilled work (898) (1,856) Other assets (10) (299) Accounts payable and accrued expenses (466) (298) Income taxes payable 557 453 Other long-term liabilities (84) (42) -------- -------- Net cash provided by operating activities 1,450 307 Investing activities Purchase of property and equipment (486) (531) Proceeds from sale of equipment 4 0 Capitalized software products (931) (989) -------- -------- Net cash used in investing activities (1,413) (1,520) Financing activities Principal payments on revolving line of credit, long-term borrowings and capital lease obligations (332) (542) Translation adjustment 0 (28) Net proceeds from sale of common stock, warrants, options and treasury stock 68 1,412 Purchase of treasury stock (1,026) (148) -------- -------- Net cash provided by (used in) financing activities (1,290) 694 Decrease in cash and cash equivalents (1,253) (519) Cash and cash equivalents at beginning of period 13,570 13,760 -------- -------- Cash and cash equivalents at end of period $ 12,317 $ 13,241 ======== ========
See notes to condensed consolidated financial statements 5 CYCARE SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1996 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report for the year ended December 31, 1995. 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's first quarter 1996 net income was $1,173,000, an increase of $160,000, or 16%, as compared to the first quarter of 1995. First quarter revenues were $15,644,000 as compared to $15,761,000 in 1995, a 1% decrease, attributed to reduced systems sales. Systems revenues for the first quarter 1996 were $2,621,000, down 22%, or $740,000, from $3,361,000 reported in the first quarter of 1995. The reduction in systems sales can be attributed primarily to the increasing complexity of, and longer and more involved, negotiating cycles. In the first quarter, this resulted in the delay of the anticipated award of several contracts, which adversely affected systems revenues. Quarterly systems margin percentages grew from 29% to 43% from 1995 to 1996, as a result of a more favorable mix of higher-margin software versus hardware in the systems sold. Services revenues increased 5% to $12,686,000 during the first quarter of 1996 as compared to $12,048,000 for the first quarter of 1995. The increase in services revenues was primarily due to increases in support and networking services and monthly license fees for the Company's CS3000 customers, and additional services revenue as a result of the fourth quarter 1995 acquisition of R.D. Jugel and Company. These increases were partially offset by the significant reduction of statement business from a client in the second half of 1995. Services margins improved slightly to 63%, up from 62% in the previous quarter. Software product amortization was $443,000 in the first quarter of 1996, a decrease of 24% from the first quarter of the previous year. The reduction of amortization costs is attributable to a technology charge recorded by the Company in the fourth quarter of 1995. The charge related primarily to previously developed software technology, which the Company is replacing with more advanced products. Gross research and development dollars for 1996 were comparable to those reported in 1995. Net research and development increased $80,000, or 7%, to $1,267,000. The increase is the result of a reduction in the capitalization of various software products. Selling and administrative expenses were $5,845,000 during the first quarter of 1996, an increase of $597,000, or 11%, over first quarter 1995. As a percentage of revenues, selling and administrative costs were 37% of total revenues as compared to 33% for the same quarter in 1995. The increase in these costs is mainly due to the expansion of the Company's sales and marketing teams, which focus primarily on the new electronic medical records product, CS-CIS. First quarter 1996 interest expense decreased $36,000, or 29%, from the first quarter of 1995 because of average debt outstanding. LIQUIDITY AND CAPITAL RESOURCES Significant items affecting cash flow during the first quarter of 1996 were as follows: cash provided from operations was $1,450,000; purchase of property and equipment was $486,000; capitalization of software products was $931,000; principal payments on long-term debt were $332,000; and, purchase of treasury stock was $1,026,000. Cash and cash equivalents as of March 31, 1996 were $12,317,000. The Company has not committed to any material capital expenditures. 7 The Company has a $3,500,000 line of credit with a financial institution. The entire line is available as of March 31, 1996. The Company's Board of Directors has authorized the repurchase of up to 1,500,000 shares of its common stock at prevailing market rates. To date, the Company has purchased 1,455,700 shares at an average price of $10.03 per share. This includes 43,000 shares purchased at an average price of $23.86 per share during the first quarter of 1996. The Company anticipates that funds generated from operations and the Company's remaining cash and cash equivalents will be sufficient to meet its working capital requirements, debt obligations and to finance any capital expenditures. RECENT DEVELOPMENTS See "Letter of Intent with HBOC" in Part II, Item 5 for information regarding a letter of intent between the Company and HBO & Company. 8 PART II OTHER INFORMATION ITEM 5. OTHER INFORMATION Letter of Intent with HBOC On May 10, 1996, the Company and HBO & Company ("HBOC") jointly announced that they had signed a letter of intent, dated May 9, 1996 (the "Letter of Intent") whereby HBOC will acquire the Company in a merger transaction. Under the terms of the Letter of Intent, each share of the Company's common stock ("CyCare Common Stock") would be exchanged for .43 of a share of HBOC common stock ("HBOC Common Stock"). If the average HBOC Common Stock closing price during the twenty (20) consecutive trading days ending on the third trading day before the date of the Company's special meeting of stockholders to consider the merger (a) falls below $106.50, the exchange ratio would be adjusted upward to preserve a minimum value to the Company's stockholders of $45.79 per share of CyCare Common Stock, or (b) exceeds $125.50, the exchange ratio would be adjusted downward to limit the Company's stockholders to a maximum value of $53.96 per share of CyCare Common Stock. The proposed merger is subject to customary conditions, including the execution of a mutually acceptable merger agreement and the approval of the Boards of Directors of the Company and HBOC. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (b) Reports on Form 8-K During the quarter ended March 31, 1996, and the period ended May 13, 1996, the Company did not file any Reports on Form 8-K. 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. - -------------------------------------------------------------------------------- Date May 13, 1996 /s/ Mark R. Schonau ---------------------- ------------------------------- Mark R. Schonau Chief Financial Officer Secretary and Treasurer 10 EX-27 2 ARTICLE 5 FDS FOR 1ST QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 354888 CYCARE SYSTEMS, INC. 1,000 U.S.DOLLARS 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 12,317 0 7,714 0 995 26,429 9,847 0 46,256 9,312 2,533 0 0 61 30,284 46,256 2,621 15,644 1,504 4,636 7,555 0 87 1,862 689 1,173 0 0 0 1,173 .23 .23
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