-----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, OMC9oAF1uIfLcmHpA0Ph0oBPV4KzDWmwSyu4EATq9ZO6sZ0KSo615/q/QKWR6BrP U9/eZGobCugb9sy7T6JfVw== 0000950147-96-000346.txt : 19960816 0000950147-96-000346.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950147-96-000346 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96611780 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 10Q 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: JUNE 30, 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 August 12, 1996, 5,067,670 shares of common stock were outstanding, net of 1,030,287 shares of treasury stock. INDEX CYCARE SYSTEMS, INC.
PART I. FINANCIAL INFORMATION PAGE NO. - ------------------------------ -------- Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - June 30, 1996 and December 31, 1995. 3 Condensed Consolidated Income Statements Three months ended June 30, 1996 and 1995; Six months ended June 30, 1996 and 1995. 4 Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 1996 and 1995. 5 Notes to Condensed Consolidated Financial Statements - June 30, 1996. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 7 - 8 PART II. OTHER INFORMATION - ---------------------------- Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits 10 SIGNATURE 10 - ----------
2 PART I FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 1996 and December 31, 1995 (In thousands, except per share data)
Unaudited 1996 1995 --------- -------- Cash and cash equivalents $ 9,963 $ 13,570 Accounts receivable, net 11,845 6,975 Unbilled work at estimated realizable value 2,054 1,922 Supply and equipment inventories 1,038 1,000 Prepaid and other assets 3,515 3,378 Deferred income taxes 561 42 -------- -------- Total Current Assets 28,976 26,887 Property and equipment at cost, net 9,837 9,806 Software products, net 8,641 7,587 Goodwill, net 924 938 Other intangibles, net 653 754 Other assets 288 301 -------- -------- Total Assets $ 49,319 $ 46,273 ======== ======== Current portion of long-term debt $ 1,279 $ 1,300 Accounts payable 4,073 2,563 Accrued expenses 3,143 3,270 Accrued payroll 1,811 1,021 Client deposits and unearned income 1,117 824 Current and deferred income taxes 350 302 -------- -------- Total Current Liabilities 11,773 9,280 -------- -------- Long-term debt, less current portion 2,213 2,853 -------- -------- Other long-term liabilities 377 1,674 -------- -------- Deferred income taxes 3,161 2,381 -------- -------- Shareholders' equity: Common stock 61 61 Capital in excess of par value 31,333 31,436 Retained earnings 10,574 8,110 Less treasury stock (10,173) (9,522) -------- -------- Total Shareholders' Equity 31,795 30,085 -------- -------- Total Liabilities and Shareholders' Equity $ 49,319 $ 46,273 ======== ======== Book value per share $6.27 $5.90 Common shares outstanding excluding treasury shares of 1,030,287 at June 30, 1996 and 1,003,037 at December 31, 1995. 5,068 5,095
See notes to condensed consolidated financial statements. 3 CONDENSED CONSOLIDATED INCOME STATEMENTS Periods Ended June 30, 1996 and 1995 (In thousands, except per share data) (Unaudited)
Three Months Six Months 1996 1995 1996 1995 ------- ------- ------- ------- Revenues: Services $12,766 $12,325 $25,452 $24,373 Systems sales 5,413 3,763 8,034 7,124 Interest and dividends 146 208 337 403 Other income 111 167 257 324 ------- ------- ------- ------- 18,436 16,463 34,080 32,224 ------- ------- ------- ------- Costs and Expenses: Cost of services 4,744 4,621 9,380 9,218 Cost of systems sold 3,714 2,565 5,218 4,941 Software product amortization 408 570 851 1,152 Research and development 1,288 1,095 2,555 2,282 Selling and administrative 6,161 5,739 12,006 10,987 Interest 87 119 174 242 ------- ------- ------- ------- 16,402 14,709 30,184 28,822 ------- ------- ------- ------- Income before income taxes 2,034 1,754 3,896 3,402 Income taxes 743 641 1,432 1,276 ------- ------- ------- ------- Net Income $ 1,291 $ 1,113 $ 2,464 $ 2,126 ======= ======= ======= ======= Earnings per share $.25 $.21 $.47 $.41 ======= ======= ======= ======= Common and common equivalent shares used in the calculation of net income per share 5,223 5,205 5,206 5,158
See notes to condensed consolidated financial statements. 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 1996 and 1995 (In thousands) (Unaudited)
1996 1995 -------- -------- Operating activities Net income $ 2,464 $ 2,126 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of goodwill and intangibles 115 53 Depreciation and amortization 898 839 Software product amortization 851 1,152 Provision for losses on accounts receivable 188 200 Provision for deferred income taxes 261 63 Loss on sale or retirement of equipment 7 3 Changes in operating assets and liabilities: Accounts receivable and unbilled work (5,190) (2,177) Other assets (163) (760) Accounts payable and accrued expenses 2,466 (167) Current income taxes 127 1,234 Other long-term liabilities (1,297) (658) -------- -------- Net cash provided by operating activities 727 1,908 Investing activities Purchase of property and equipment (940) (891) Proceeds from sale of equipment 6 3 Capitalized software products (1,905) (1,848) -------- -------- Net cash used in investing activities (2,839) (2,736) Financing activities Principal payments on revolving line of credit, long-term borrowings and capital lease obligations (661) (884) Translation adjustment (28) Net proceeds from sale of common stock, warrants, options and treasury stock 192 1,831 Purchase of treasury stock (1,026) (148) -------- -------- Net cash provided by (used in) financing activities (1,495) 771 Decrease in cash and cash equivalents (3,607) (57) Cash and cash equivalents at beginning of period 13,570 13,760 -------- -------- Cash and cash equivalents at end of period $ 9,963 $ 13,703 ======== ========
See notes to condensed consolidated financial statements. 5 CYCARE SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 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 and six month periods ended June 30, 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 net income for the three months ended June 30, 1996 increased 16% to $1,291,000 as compared to $1,113,000 for the corresponding prior year period. Net income for the first six months of 1996 increased to $2,464,000 from $2,126,000, or 16%, a year ago. These increases are the result of additional demand for the Company's CS3000 system and the electronic data interchange (EDI) services offered by CyData, the Company's wholly-owned subsidiary. For the second quarter, systems sales hit an eight year high of $5,413,000 versus $3,763,000, up 44% or $1,650,000 compared to second quarter 1995. Year to date systems sales increased to $8,034,000 from $7,124,000, up 13% or $910,000. Quarter to quarter, systems margins decreased slightly to 31%. Year to date margins increased 4% over a year ago to 35%. This increase in margin is attributable to additional software sales which typically reflect a higher margin. Aggressive sales efforts in the Company's CS3000 and SpectraMED products contributed to the $1,159,000 increase in year over year software sales. The Company reported services revenues for the second quarter of $12,766,000 compared to $12,325,000 during the second quarter 1995, an increase of $441,000 or 4%. Year to date services revenues totaled $25,452,000 up 4% or $1,079,000, from $24,373,000 a year ago. Growth in these revenues is attributable to an increase in ancillary services associated with the CS3000 and SpectraMED products, primarily software maintenance, systems integration, conversions and installations. CyData year to date claims volumes increased to 26,000,000 from approximately 22,000,000 a year ago. CyData continues to expand its remittance and eligibility functions to further enhance its suite of EDI products. Margins on services revenues remained constant for the quarter at 63% as compared to the second quarter 1995. Year over year margins increased slightly to 63% from 62% in the prior year. Second quarter software product amortization decreased to $408,000 from $570,000, down $162,000, or 28%. Year to date amortization decreased to $851,000 from $1,152,000, down $301,000, or 26% from the prior year. During the fourth quarter of 1995, the Company recorded a technology charge for previously developed software products. 1996 amortization decreased from prior year as a result of this charge. 7 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net research and development expenses totaled $1,288,000 as compared to $1,095,000, an increase of $193,000, or 18% from the comparable period last year. On a year to date basis, net expense increased to $2,555,000 from $2,282,000, up $273,000, or 12% from a year ago. These expenses increased as the Company continues its concentration on further enhancements to its core products. Selling and administrative expenses for the second quarter increased to $6,161,000 versus $5,739,000 in the second quarter 1995, an increase of 7% or $422,000. Year to date selling and administrative expenses increased to $12,006,000 from $10,987,000 the prior year, an increase of 9% or $1,019,000. Much of this increase can be attributed to additional staffing in the sales and sales support areas of the Company's various business units. Incentive compensation directly related to the Company's 1996 performance also led to the increase in selling and administrative expenses for the year. Interest expense continues to decrease as the Company's outstanding debt is reduced. Second quarter expenses totaled $87,000 as compared to $119,000 a year ago, a decrease of $32,000 or 27%. Year to date interest expense decreased to $174,000 from $242,000 in 1995, a decrease of $68,000 or 28%. LIQUIDITY AND CAPITAL RESOURCES Significant items affecting cash flow in 1996 were as follows: cash provided from operations was $727,000; purchases of property and equipment were $940,000; capitalization of software products was $1,905,000; principal payments on long term debt were $661,000; and, purchase of treasury stock was $1,026,000. Cash and cash equivalents as of June 30, 1996 were $9,963,000. The Company has not committed to any material capital expenditures. The Company has a $3,500,000 line of credit with a financial institution. The entire line was available as of June 30, 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 six months 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. 8 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Company's Annual Shareholder's Meeting held on May 21, 1996, the shareholders elected by a vote of 4,333,213 for and 243,491 abstain to elect Jim H. Houtz and James L. Schamadan, M.D. for additional terms on the Company's Board of Directors. The following directors continued their term of office after the meeting: Richard J. Burgmeier, A. Theodore Engkvist and Frank H. Bertsch. The following proposals were also approved at the Company's Annual Meeting: 1. Approval of the Amendment to Certificate of Incorporation to increase authorized shares of common stock. For: 2,774,208 Against: 1,802,496 2. Approval of the CyCare Systems,Inc. 1995 Long-Term Incentive plan. For: 2,080,360 Against: 1,967,365 Non-Vote: 528,979 ITEM 5. OTHER INFORMATION Merger Agreement with HBOC The Company, HBO & Company ("HBOC") and HBO & Company of Georgia ("HBOC-GA") have executed an Agreement of Merger dated May 18, 1996 (the "Merger Agreement") that provides, subject to the terms and conditions thereof, for the merger of the Company with and into HBOC-GA (the "Merger"). Under the terms of the Merger Agreement, each share of the Company's common stock ("CyCare Common Stock") would be exchanged for .86 of a share of HBOC common stock ("HBOC Common Stock"), subject to possible adjustment. 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 $52.25, the exchange ratio would be adjusted upward to preserve a minimum value to the Company's stockholders of $44.93 per share of CyCare Common Stock, or (b) exceeds $65.00, the exchange ratio would be adjusted downward to limit the Company's stockholders to a maximum value of $55.90 per share of CyCare Common Stock. The proposed merger is subject to customary conditions, including, but not limited to, approval of the stockholders of the Company. All regulatory approvals have been received. A special meeting of the Company's stockholders has been called to vote on the Merger and will be held at 9:00 A.M. on August 21, 1996. 9 ITEM 6. EXHIBITS (a) Exhibits Exhibit No. Description ----------- ----------- 27 Financial Data Schedule SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. - -------------------------------------------------------------------------------- Date August 13, 1996 Mark R. Schonau ---------------- ------------------------------- Mark R. Schonau Chief Financial Officer Secretary and Treasurer CYCARE SYSTEMS, INC. Index to Exhibits 27. Financial Data Schedule 10 EX-27 2 FINANCIAL DATA SCHEDULE
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 1,000 U.S. DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 9,963 0 11,845 0 1,038 28,976 9,837 0 49,319 11,773 2,213 0 0 61 31,734 49,319 8,034 34,080 5,218 9,380 15,412 0 174 3,896 1,432 2,464 0 0 0 2,464 .47 .47
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