-----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, LeuAiTDFf+1AIueCm/e4p1++Bhez89VKOF/98cXcLo8+pHfI2tTpnlezEYyObMWl yD0ZvksJWbhf6QvHEWhAFQ== 0000708818-95-000004.txt : 19951118 0000708818-95-000004.hdr.sgml : 19951118 ACCESSION NUMBER: 0000708818-95-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951109 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUALITY SYSTEMS INC CENTRAL INDEX KEY: 0000708818 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 952888568 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13801 FILM NUMBER: 95588502 BUSINESS ADDRESS: STREET 1: 17822 E 17TH ST SUITE 210 CITY: TUSTIN STATE: CA ZIP: 92680 BUSINESS PHONE: 7147317171254 MAIL ADDRESS: STREET 1: 178222 E 17TH STREET SUITE 210 CITY: TUSTIN STATE: CA ZIP: 92680 10QSB 1 QUARTERLY REPORT FOR QUARTER ENDING 09/30/95 1 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________ FORM 10-QSB (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [ X ] SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 __________________ OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [ ] SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ___________________ Commission file number 0-13801 _______ QUALITY SYSTEMS, INC. _________________________________________________________________ (Exact name of small business issuer as specified in its charter) California 95-2888568 _______________________________ ___________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17822 East 17th Street, Tustin, California 92680 __________________________________________ __________ (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (714) 731-7171 ______________ NOT APPLICABLE ________________________________________________________________ (Former name, former address and former fiscal year, if changed, since last year) Indicate by check mark whether the issuer (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 XX No _____ _____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 4,589,241 shares of Common Stock, $.01 par value, as of November 8, 1995 Exhibit Index on sequentially numbered Page 11 Page 1 of 13 2 PART I FINANCIAL INFORMATION ------ --------------------- Item 1. Financial Statements ----------------------------- QUALITY SYSTEMS, INC. BALANCE SHEETS ASSETS
September 30, March 31, 1995 1995 ------------- ----------- Current assets: Cash and cash equivalents $ 5,008,300 $ 6,085,300 Short-term investments 1,286,700 1,237,200 Accounts receivable, net 4,721,400 2,996,500 Inventories 763,800 782,900 Deferred tax asset 104,300 199,000 Other current assets 78,200 74,300 ------------- ----------- Total current assets 11,962,700 11,375,200 Equipment and improvements, net 491,700 535,300 Capitalized software costs, net 587,400 501,300 Investment, Clinitec International, Inc. 982,300 - Cash surrender value of life insurance 270,400 185,100 Other assets 68,500 70,900 ------------- ----------- Total assets $ 14,363,000 $12,667,800 ============= =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,014,300 $ 597,400 Accrued payroll and related expenses 555,100 427,100 Accrued expenses 489,000 492,400 Deferred service revenue 1,010,500 951,500 Deferred compensation 270,400 185,100 Estimated costs to complete system installations 247,000 216,500 Income taxes payable 175,600 473,400 ----------- ----------- Total current liabilities 3,761,900 3,343,400 Deferred tax liability 130,200 136,800 ----------- ----------- Total liabilities 3,892,100 3,480,200 ----------- ----------- Stockholders' equity: Common stock, $.01 par value, 20,000,000 shares authorized, 4,569,241 and 4,535,866 shares issued and outstanding respectively 45,700 45,400 Additional paid-in capital 6,169,400 5,977,600 Unrealized loss on available-for-sale securities (56,800) (83,000) Retained earnings 4,312,600 3,247,600 ----------- ----------- Total stockholders' equity 10,470,900 9,187,600 ----------- ----------- Total liabilities and stockholders' equity $14,363,000 $12,667,800 =========== ===========
3 QUALITY SYSTEMS, INC. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended --------------------- --------------------- September 30, September 30, 1995 1994 1995 1994 ---------- ---------- ---------- ---------- Net revenues: Sales of computer systems, upgrades and supplies $2,523,700 $1,147,500 $4,647,400 $2,729,500 Maintenance and other services 1,659,600 1,646,300 3,340,300 3,137,500 ---------- ---------- ---------- ---------- 4,183,300 2,793,800 7,987,700 5,867,000 Costs and expenses: ---------- ---------- ---------- ---------- Cost of products and services 2,071,500 1,456,400 3,784,900 3,108,200 Selling, general and administrative 1,001,500 844,000 1,927,400 1,679,800 Research and development 301,200 386,600 656,200 716,400 ---------- ---------- ---------- ---------- 3,374,200 2,687,000 6,368,500 5,504,400 ---------- ---------- ---------- ---------- Income from operations 809,100 106,800 1,619,200 362,600 interest and investment income 100,500 132,300 204,300 120,700 Equity loss (7,800) - (17,700) - ---------- ---------- ---------- ---------- Income before income tax provision 901,800 239,100 1,805,800 483,300 Income tax provision 374,000 54,000 740,800 97,800 ---------- ---------- ---------- ---------- Net income $ 527,800 $ 185,100 $1,065,000 $ 385,500 ========== ========== ========== ========== Earnings per share: Primary $.12 $.04 $.23 $.08 Fully diluted $.12 $.04 $.23 $.08 Equivalent number of shares outstanding: Primary 4,699,853 4,632,295 4,678,777 4,642,913 Fully diluted 4,714,491 4,644,562 4,709,550 4,642,913
The accompanying notes are an integral part of the financial statements. 4 QUALITY SYSTEMS, INC. STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended -------------------------- September 30 1995 1994 ------------ ------------ Cash flows from operating activities: Net earnings $1,065,000 $ 385,500 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization of equipment and improvements 110,700 114,800 Amortization of capitalized software costs 127,300 94,600 Realized (gains) losses from sales of short-term investments 11,200 135,200 Unrealized gains on trading securities (33,300) (170,600) Equity loss 17,700 - Deferred income taxes 88,100 - Changes in: Accounts receivable (1,724,900) 99,500 Inventories 19,100 49,100 Other current assets (3,900) (9,000) Accounts payable 416,900 (171,700) Accrued expenses 124,600 (40,800) Deferred service revenue 59,000 60,500 Estimated costs to complete system installations 30,500 (81,600) Income taxes payable, and taxes related to equity accounts (179,800) 97,800 --------- --------- Net cash provided by operating activities 128,200 563,300 --------- --------- Cash flows from investing activities: Proceeds from sales of short-term investments 1,068,400 6,784,800 Purchases of short-term investments (1,049,500) (5,605,000) Net additions to equipment and improvements, net (67,100) (48,700) Additions to capitalized software costs (213,400) (76,700) Investment in Clinitec (1,000,000) - Change in other assets 2,400 30,200 --------- --------- Net cash provided by (used in) investing activities: (1,259,200) 1,084,600 ---------- ---------- Cash flows from financing activities: Proceeds from exercise of stock options 54,000 44,200 ----------- ----------- Net increase (decrease) in cash and cash equivalents (1,077,000) 1,692,100 ----------- ----------- Cash and cash equivalents, beginning of period 6,085,300 1,092,900 ----------- ----------- Cash and cash equivalents, end of period $5,008,300 $2,785,000 =========== ===========
Supplemental information - During the six months ended September 30, 1995 and 1994 the Company made income tax payments of $832,500 and $9,600, respectively. The accompanying notes are an integral part of the financial statements. 5 QUALITY SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS September 30, 1995 and 1994 NOTE 1 - BASIS OF PRESENTATION ------ --------------------- The accompanying unaudited condensed financial statements have been prepared in accordance with the requirements of Form 10-QSB and, therefore, do not include all information and footnotes which would be presented were such financial statements prepared in accordance with generally accepted accounting principles, and should be read in conjunction with the audited financial statements presented in the Company's Annual Report for the fiscal year ended March 31, 1995. In the opinion of management, the accompanying financial statements reflect all adjustments which are necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations for such interim periods are not necessarily indicative of results of operations to be expected for the full year. NOTE 2 - EARNINGS PER SHARE ------ ------------------ Earnings per share for the six months ended September 30, 1995 and September 30, 1994 was computed based on the weighted average number of shares actually outstanding, plus the shares that would be outstanding, using the treasury stock method, assuming the exercise of all outstanding options which were considered to be common stock equivalents. Primary and fully diluted net earnings per share amounts are based on weighted average number of shares outstanding of 4,678,777 and 4,709,550 for September 30, 1995 respectively and 4,642,913 for both primary and fully diluted net earnings per share for September 30, 1994. 6 Item 2. Management's Discussion and Analysis of Financial Condition ------- ----------------------------------------------------------- and Results of Operations ------------------------- Results of Operations --------------------- Three months ended September 30, 1995 compared to three months ended -------------------------------------------------------------------- September 30, 1994. ------------------- Revenues increased to $4,183,300, for the three months ended September 30, 1995, a 50% increase over the revenues of $2,793,800 for the three months ended September 30, 1994. Sales of computer systems, upgrades and supplies increased $1,376,200, from $1,147,500 in the same quarter of last year to $2,523,700 in the current quarter. The increase was due to both increased sales of larger systems and to increased sales of upgrades. Revenues from maintenance and other services increased nominally, from $1,646,300 in the quarter ended September 30, 1994 to $1,659,600 in the current quarter. There was an $87,400 increase in maintenance revenues, but revenues from time and material billings for additional services was down slightly from the same quarter of last year. Costs of products and services, as a percentage of revenues, decreased from 52% for the quarter ended September 30, 1994 to 50% for the quarter ended September 30, 1995 due to changes in sales mix. Selling, general and administrative expenses increased from $844,000 in the same quarter of last year to $1,001,500 in the current quarter, due to an increase in selling expense of $62,900 and an increase in general and administrative expense of $94,600. However, these increases were more than compensated for by increased sales during the current quarter, with the result that selling, general and administrative expenses, as a percentage of revenues, decreased from 30% to 24%. Research and development expenditures decreased from $386,600 to $301,200 due to a redeployment of staff to capitalized software projects. The expenditures for capitalized software increased from $26,500 in the three months ended September 30, 1994 to $126,500 in the three months ended September 30, 1995. Interest and investment income was $100,500 for the quarter ended September 30, 1995 compared to investment and interest income of $132,300 for the quarter ended September 30, 1994. Investment results in the current quarter represent an annualized yield of about 6% on the Company's average combined balances for cash and cash equivalents and short-term investments. 7 Six months ended September 30, 1995 compared to six months ended ---------------------------------------------------------------- September 30, 1994. ------------------- Revenues increased to $7,987,700 for the six months ended September 30, 1995, a 36% increase over the revenues of $5,867,000 for the six months ended September 30, 1994. Sales of computer systems, upgrades and supplies increased $1,917,900, from $2,729,500 in the prior year to $4,647,400 in the current year, for the same reasons as discussed above. Revenues from maintenance and other services increased $202,800, from $3,137,500 in the prior year to $3,340,300 in the current year, with most of the increase attributable to an increase in recurring maintenance revenues. Costs of products and services, as a percentage of revenues, decreased from 53% for the six months ended September 30, 1994 to 47% for the six months ended September 30, 1995 and selling, general and administrative expenses decreased from 29% to 24% for the same reasons as discussed above. Interest and investment income was $204,300 for the six months ended September 30, 1995 compared to $120,700 for the six months ended September 30, 1994. Current year investment results represent an annualized yield of about 6% on the Company's combined balances for cash and cash equivalents and short-term investments. Interest and investment income for the six months ended September 30, 1994 included prior year first quarter realized losses from sales of short-term investments of $81,000 and unrealized losses from trading securities of $10,100. Liquidity and Capital Resources ------------------------------- A comparison of the Company's balance sheet amounts for cash and cash equivalents and for short-term investments at September 30, 1995 with the comparable balances at March 31, 1995 is as follows:
September 30, March 31, Increase 1995 1995 (Decrease) Cash and cash equivalents $5,008,300 $6,085,300 ($1,077,000) Short-term investments 1,286,700 1,237,200 49,500 ---------- ---------- ------------ $6,295,000 $7,322,500 ($1,027,500)
The decrease of $1,027,500 was due primarily to an acquisition of a 25% ownership position in Clinitec International, Inc. for $1,000,000. Net cash from operating activities during the six months ended September 30, 1995 was $128,200. Positive cash flows from net income of $1,065,000, and an increase in accounts payable of $416,900, were more then offset by an increase in accounts receivable of $1,724,900. The increase in accounts receivable was due to technical delays in collecting $578,000 from one large client, which was subsequently collected in October 1995, and to the increase in revenues as previously discussed. 8 The Company generally receives substantially all of the cash months after a computer system or enhancement is delivered. The Company structures its maintenance contracts so that billings under the contract are made on a monthly basis and in advance of the period of coverage. The Company believes that cash generated from operations, cash on hand and short-term investments readily convertible into cash will provide sufficient liquidity to provide continued working capital for operations for the foreseeable future. Due to its available cash resources, the Company has not relied on borrowings to meet its working capital requirements. The Company is not capital intensive and has traditionally purchased and capitalized only equipment which is to be used for in-house hardware and software development and testing efforts. Technological improvements in the computer industry have often resulted in price declines for hardware and other electronic components which have lessened the impact of inflation. 9 PART II. OTHER INFORMATION -------- ------------------ Item 6. Exhibits and Reports on Form 8-K ----------------------------------------- (a) Exhibits: --------- The Exhibits listed on the accompanying Index to Exhibits on page 11 are file as part of this report. (b) Reports on Form 8-K: None -------------------- 10 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. QUALITY SYSTEMS, INC. Date November 8, 1995 By /s/ Sheldon Razin ---------------- ---------------------------------- Sheldon Razin President and Chairman of the Board of Directors; Principal Executive Officer Date November 8, 1995 By /s/ Irma G. Carmona ---------------- ---------------------------------- Irma G. Carmona Corporate Controller; Principal Accounting Officer
11 INDEX TO EXHIBITS Sequential Page Exhibit No. ------- ---------- 11.0 Earnings per share computation, is filed herewith 12 27.0 Financial Data Schedule, is filed herewith. 13 12 EXHIBIT 11.0 ------------ Earnings per share for the six months ended September 30, 1995 and September 30, 1994 was computed based on the weighted average number of shares actually outstanding, plus the shares that would be outstanding, using the treasury stock method, assuming the exercise of all outstanding options which were considered to be common stock equivalents. Primary and fully diluted net earnings per share amounts are based on weighted average number of shares outstanding of 4,678,777 and 4,709,550 for September 30, 1995 respectively and 4,642,913 for both primary and fully diluted net earnings per share for September 30, 1994. EX-27 2
5 6-MOS MAR-31-1996 SEP-30-1995 5,008,300 1,286,700 4,721,400 0 763,800 11,962,700 491,700 0 14,363,000 3,761,900 0 45,700 0 0 10,425,200 14,363,000 4,647,400 7,987,700 0 3,784,900 2,583,600 0 0 1,805,800 740,800 1,065,000 0 0 0 1,065,000 .23 .23
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