CALIFORNIA (State or other jurisdiction of incorporation) | 001-12537 (Commission File Number) | 95-2888568 (IRS Employer Identification Number) |
⃞ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
⃞ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
⃞ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
⃞ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
• | Mr. Metcalfe shall be paid an annual base salary of $400,000. |
• | Mr. Metcalfe shall receive a signing bonus of $190,000 (the “Signing Bonus”) to be paid within 30 days of his first date of employment. The Signing Bonus is subject to forfeiture and repayment to the Company if Mr. Metcalfe is terminated for Cause or resigns for any reason: (i) prior to or on the one-year anniversary of his first day of employment, in the full amount of $190,000, and (ii) prior to or on the two-year anniversary of his first day of employment, in the amount of $95,000 (i.e. 50% of the Signing Bonus). Cause will have the meaning given in the terms and provisions of the Company's 2015 Equity Incentive Plan (the "2015 Plan") filed with the Securities and Exchange Commission (the “Commission”) as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 14, 2015, and incorporated herein by reference. |
• | On the first day of his employment with the Company, Mr. Metcalfe shall receive a non-qualified stock option grant to purchase 200,000 shares of the Company’s common stock, pursuant to the terms and provisions of the 2015 Plan. The options will have an exercise price equal to the closing price of a share of the Company’s common stock on the date of the grant, a term of eight years from the date of grant, and will vest in equal, annual, 25% installments over a four-year period, beginning on the one-year anniversary of the date of grant. The options will be subject to accelerated vesting in full in accordance with the “double trigger” change of control provisions of the 2015 Plan and the Company’s standard form of stock option agreement for the 2015 Plan filed with the Commission as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on August 14, 2015 and incorporated herein by reference. |
• | Mr. Metcalfe is eligible to receive a fiscal year 2016 cash bonus of up to 60% of his base salary, subject to the Company’s attainment of the financial objectives and achievement of certain performance targets established under the 2016 Executive Compensation Program previously approved by the Compensation Committee of the Board and described in the Company’s 2015 Proxy Statement, provided that Mr. Metcalfe continues to be employed by the Company on the date such bonus is payable. Any bonus payable for the Company’s 2016 fiscal year will be pro-rated for the number of full months of Mr. Metcalfe’s employment during such fiscal year. |
• | Mr. Metcalfe and his family will be eligible for participation in the Company’s health and welfare benefit plans to the same extent generally applicable to all executive officers of the Company. |
• | Mr. Metcalfe will be entitled to three weeks of paid vacation leave per year, prorated for calendar year 2016, and will be entitled to accrue a maximum of four weeks of paid vacation leave. |
Exhibit No. | Description | |
10.1 | Employment Offer Letter, dated January 27, 2016, between David Metcalfe and Quality Systems, Inc. | |
99.1 | Press Release dated January 28, 2016 |
Date: January 28, 2016 | QUALITY SYSTEMS, INC. | |
By: | /s/ John K. Stumpf | |
John K. Stumpf | ||
Interim Chief Financial Officer |
Exhibit No. | Description | |
10.1 | Employment Offer Letter, dated January 27, 2016, between David Metcalfe and Quality Systems, Inc. | |
99.1 | Press Release dated January 28, 2016 |
1. | You will receive an initial base salary of $400,000 per year ($16,666.66 semi-monthly), payable in accordance with QSI’s normal payroll practices and subject to all legally required deductions. |
2. | You will be paid a signing bonus of $190,000 to be paid within 30 days of your first date of employment. Your signing bonus is subject to forfeiture and repayment to QSI if you are terminated for Cause or resign for any reason: (i) prior to or on the one-year anniversary of your first day of employment, in the full amount of $190,000, and (ii) prior to or on the two-year anniversary of your first day of employment, in the amount of $95,000 (i.e., 50% of the signing bonus). Cause will have the meaning given in the terms and provisions of QSI’s 2015 Equity Incentive Plan (the “2015 Incentive Plan”). |
3. | You will be eligible to receive a 2016 fiscal year cash bonus opportunity of up to 60% of your base salary, subject to QSI’s attainment of the financial objectives and achievement of certain performance targets established under the 2016 Executive Compensation Program previously approved by QSI’s Compensation Committee, provided that you continue to be |
4. | On your first day of employment, you will receive a non-qualified stock option grant to purchase 200,000 shares of QSI’s common stock, pursuant to the terms and provisions of the 2015 Incentive Plan. The option will have an exercise price equal to the closing price of a share of QSI common stock on the date of grant, a term of eight years from the date of grant, and will vest in equal, annual, 25% installments over a four-year period beginning on the one-year anniversary of the date of grant. The option will be subject to accelerated vesting in full in accordance with the “double trigger” change of control provisions of the 2015 Incentive Plan and QSI’s standard form of option grant award. |
5. | To align your interests with those of QSI’s shareholders, you will be required to comply with the terms and conditions of QSI’s Executive Stock Ownership Program and to acquire and hold the minimum number of shares of QSI common stock set forth in such policy. |
6. | You will be entitled to accrue three weeks of vacation time per year, which may be used in accordance with QSI’s current policy as described in the Employee Handbook. Pursuant to QSI’s current policy, you will be entitled to accrue a maximum of four weeks of paid vacation leave. |
7. | You will be eligible for group insurance coverage (with a participant eligibility date to be determined by the plan documents currently in effect), together with such other employment benefits generally made available to other similarly situated QSI employees. |
8. | By undertaking employment with QSI, you agree to abide by all current and future employment policies, rules and regulations of QSI. You also acknowledge that your position with QSI is a full-time position, and accordingly, you agree that you will not accept, during your employment with QSI, employment with any other person or entity without the prior written consent of QSI’s Chief Executive Officer. As with all QSI employees, on your first day of employment, you will be required to execute (i) an Acknowledgement and Certification of your receipt of, and agreement with, QSI’s Employee Handbook and (ii) the Agreement for Protection of Company Information, which, among other things, requires you to protect QSI’s confidential information and includes certain non-solicitation provisions. As required by the Immigration Reform and Control Act of 1986 (“IRCA”), you also must establish your identity and authorization to work in the United States. You will be required to complete the Employment Verification Form (I-9) on your first day of employment. |
9. | You and QSI expressly understand and agree that your employment with QSI is in all respects “at will,” meaning that either you or QSI can terminate the employment relationship at any time without advance notice to the other, with or without Cause, for any reason or no reason. QSI also can discipline, demote or alter the terms of employment of its employees at any time, with or without Cause or advance notice. This letter and the employment documents referenced in preceding paragraph 8 will be our entire understanding concerning the subjects |
10. | This offer is conditioned upon: (i) final approval of your offer for employment and the terms of this offer letter by the Board, (ii) the Board’s satisfaction with the results of a background check to be performed on behalf of QSI, (iii) your written acceptance of this offer letter, and (iv) your execution of the Agreement for Protection of Company Information and other documents described in paragraph 8. If you provide materially false or misleading information in your employment application or other documents submitted in connection with your seeking employment with QSI, you will be subject to immediate termination. |
Very truly yours, |
/s/ John R. Frantz |
John R. Frantz |
Chief Executive Officer |
/s/ David Metcalfe |
David Metcalfe |
For Further Information, Contact: | |
Quality Systems, Inc. | Susan J. Lewis |
18111 Von Karman Avenue, Suite 700 | Phone: (954) 389-3700 |
Irvine, CA 92612 | slewis@qsii.com |
Phone: (949) 255-2600 | |
Mark Davis, Executive Vice President, Corporate Development and Strategy | |
mdavis@qsii.com |
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues: | |||||||||||||||
Software license and hardware | $ | 16,150 | $ | 21,428 | $ | 52,026 | $ | 60,505 | |||||||
Software related subscription services | 11,705 | 11,864 | 36,388 | 31,266 | |||||||||||
Total software, hardware and related | 27,855 | 33,292 | 88,414 | 91,771 | |||||||||||
Support and maintenance | 39,519 | 43,045 | 125,408 | 125,985 | |||||||||||
Revenue cycle management and related services | 21,594 | 20,392 | 62,630 | 54,517 | |||||||||||
Electronic data interchange and data services | 20,643 | 19,051 | 61,413 | 56,276 | |||||||||||
Professional services | 7,421 | 7,644 | 26,700 | 33,288 | |||||||||||
Total revenues | 117,032 | 123,424 | 364,565 | 361,837 | |||||||||||
Cost of revenue: | |||||||||||||||
Software license and hardware | 6,530 | 7,295 | 20,149 | 22,326 | |||||||||||
Software related subscription services | 5,533 | 5,194 | 17,454 | 15,029 | |||||||||||
Total software, hardware and related | 12,063 | 12,489 | 37,603 | 37,355 | |||||||||||
Support and maintenance | 7,537 | 7,365 | 23,874 | 21,064 | |||||||||||
Revenue cycle management and related services | 14,381 | 14,246 | 43,573 | 40,154 | |||||||||||
Electronic data interchange and data services | 12,437 | 11,956 | 37,302 | 35,970 | |||||||||||
Professional services | 7,367 | 8,304 | 24,008 | 32,780 | |||||||||||
Total cost of revenue | 53,785 | 54,360 | 166,360 | 167,323 | |||||||||||
Gross profit | 63,247 | 69,064 | 198,205 | 194,514 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 39,395 | 41,482 | 115,962 | 116,893 | |||||||||||
Research and development costs | 14,518 | 18,468 | 49,584 | 51,602 | |||||||||||
Amortization of acquired intangible assets | 897 | 904 | 2,692 | 2,795 | |||||||||||
Total operating expenses | 54,810 | 60,854 | 168,238 | 171,290 | |||||||||||
Income from operations | 8,437 | 8,210 | 29,967 | 23,224 | |||||||||||
Interest income (expense), net | 49 | (82 | ) | 392 | 41 | ||||||||||
Other expense, net | (43 | ) | — | (147 | ) | (17 | ) | ||||||||
Income before provision for income taxes | 8,443 | 8,128 | 30,212 | 23,248 | |||||||||||
Provision for income taxes | 1,141 | 1,452 | 8,233 | 6,659 | |||||||||||
Net income | $ | 7,302 | $ | 6,676 | $ | 21,979 | $ | 16,589 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.12 | $ | 0.11 | $ | 0.36 | $ | 0.28 | |||||||
Diluted | $ | 0.12 | $ | 0.11 | $ | 0.36 | $ | 0.27 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 60,867 | 60,272 | 60,548 | 60,250 | |||||||||||
Diluted | 61,279 | 60,855 | 61,190 | 60,813 | |||||||||||
Dividends declared per common share | $ | 0.175 | $ | 0.175 | $ | 0.525 | $ | 0.525 |
December 31, | March 31, | ||||||
2015 | 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 92,648 | $ | 118,993 | |||
Restricted cash and cash equivalents | 4,452 | 2,419 | |||||
Marketable securities | 12,165 | 11,592 | |||||
Accounts receivable, net | 92,592 | 107,669 | |||||
Inventories | 662 | 622 | |||||
Income taxes receivable | 10,565 | 3,147 | |||||
Deferred income taxes, net | 24,074 | 24,080 | |||||
Prepaid expenses and other current assets | 14,111 | 11,535 | |||||
Total current assets | 251,269 | 280,057 | |||||
Equipment and improvements, net | 23,171 | 20,807 | |||||
Capitalized software costs, net | 44,573 | 40,397 | |||||
Intangibles, net | 22,287 | 27,689 | |||||
Goodwill | 73,513 | 73,571 | |||||
Other assets | 18,577 | 18,000 | |||||
Total assets | $ | 433,390 | $ | 460,521 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 10,250 | $ | 10,018 | |||
Deferred revenue | 55,146 | 66,343 | |||||
Accrued compensation and related benefits | 16,345 | 24,051 | |||||
Income taxes payable | 53 | 10,048 | |||||
Dividends payable | 10,726 | 10,700 | |||||
Other current liabilities | 38,575 | 33,924 | |||||
Total current liabilities | 131,095 | 155,084 | |||||
Deferred revenue, net of current | 1,127 | 1,349 | |||||
Deferred compensation | 6,667 | 5,750 | |||||
Other noncurrent liabilities | 9,918 | 14,798 | |||||
Total liabilities | 148,807 | 176,981 | |||||
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Common stock | |||||||
$0.01 par value; authorized 100,000 shares; issued and outstanding 60,886 and 60,303 shares at December 31, 2015 and March 31, 2015, respectively | 609 | 603 | |||||
Additional paid-in capital | 210,184 | 198,650 | |||||
Accumulated other comprehensive loss | (517 | ) | (192 | ) | |||
Retained earnings | 74,307 | 84,479 | |||||
Total shareholders' equity | 284,583 | 283,540 | |||||
Total liabilities and shareholders' equity | $ | 433,390 | $ | 460,521 |
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Income before provision for income taxes - GAAP | $ | 8,443 | $ | 8,128 | $ | 30,212 | $ | 23,248 | |||||||
Plus items included in cost of revenue: | |||||||||||||||
Amortization of acquired software technology | 903 | 858 | 2,710 | 2,575 | |||||||||||
Share-based compensation | 101 | 104 | 300 | 282 | |||||||||||
Total adjustments to cost of revenue | 1,004 | 962 | 3,010 | 2,857 | |||||||||||
Plus items included in operating expenses: | |||||||||||||||
Acquisition costs | 4,451 | 738 | 5,743 | 2,482 | |||||||||||
Loss on disposition of Hospital Solutions Division* | 1,753 | — | 1,753 | — | |||||||||||
Amortization of acquired intangible assets | 897 | 904 | 2,692 | 2,795 | |||||||||||
Securities litigation defense costs, net of insurance | (3,075 | ) | 1,173 | (281 | ) | 2,460 | |||||||||
Share-based compensation | 642 | 865 | 2,028 | 2,344 | |||||||||||
Other non-run-rate expenses** | 335 | — | 1,722 | 315 | |||||||||||
Total adjustments to operating expenses | 5,003 | 3,680 | 13,657 | 10,396 | |||||||||||
Total adjustments to GAAP income before provision for income taxes: | 6,007 | 4,642 | 16,667 | 13,253 | |||||||||||
Income before provision for income taxes - Non-GAAP | 14,450 | 12,770 | 46,879 | 36,501 | |||||||||||
Provision for income taxes | 4,407 | 3,074 | 14,298 | 11,294 | |||||||||||
Net income - Non-GAAP | $ | 10,043 | $ | 9,696 | $ | 32,581 | $ | 25,207 | |||||||
Diluted net income per share - Non-GAAP | $ | 0.16 | $ | 0.16 | $ | 0.53 | $ | 0.41 | |||||||
Weighted-average shares outstanding (diluted): | 61,279 | 60,855 | 61,190 | 60,813 |
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