8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported)

May 27, 2009

QUALITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

CALIFORNIA	001-12537	95-2888568
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

18111 Von Karman, Suite 600

Irvine, California 92612

(Address of Principal Executive Offices)

(949) 255-2600

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

The information in this Form 8-K and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On May 29, 2009, Quality Systems, Inc.(the “Company”)  issued a press release announcing its financial performance for the period ended March 31, 2009. On May 29, 2009, Quality Systems, Inc. conducted a conference call concerning its performance for the period ended March 31, 2009.  A copy of the news release is attached to this Form 8-K as Exhibit 99.1, which is incorporated herein by this reference.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors;

Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 27, 2009, the Company’s Board of Directors (“Board”) of Quality Systems, Inc. (the “Company”) acting in executive session and upon recommendation of the Company’s Compensation Committee, approved:

• the Company’s 2010 Compensation Program for the Company’s key personnel, including its named executive officers, for the fiscal year ending March 31, 2010, which includes new cash salary levels and both non-equity and equity incentive compensation components and is described in Exhibit 10.1 hereto, which exhibit is incorporated herein by reference;

• cash and equity bonus determinations under the Company’s 2009 Compensation Program for the fiscal year ended March 31, 2009, which includes bonus awards described in Exhibit 10.2 hereto, which exhibit is incorporated herein by reference; and

• an amended and restated Outside Director Compensation Program effective the date of the Company’s next annual meeting of shareholders, August 13, 2009, which is described in Exhibit 10.3 hereto, which exhibit is incorporated herein by reference.

Item 8.01 Other Events.

Quarterly Dividend

On May 27, 2009, the Company’s Board declared a quarterly cash dividend of $0.30 per share on the Company’s outstanding shares of common stock, payable to shareholders of record as of June 12, 2009 with an anticipated distribution date on or about July 6, 2009 pursuant to the Company’s current policy to pay a regular quarterly dividend on the Company’s outstanding shares of Common Stock each fiscal quarter subject to further Board review, approval and establishment of record and distribution dates by the Board prior to the declaration and payment of each such quarterly dividend.

Annual Shareholders’ Meeting Date

The Company is preparing to hold its 2009 annual meeting of shareholders on August 13, 2009. All holders of record of the Company’s common stock outstanding as of the close of business on June 22, 2009 will be entitled to vote at the annual meeting.

A copy of the Company’s press release announcing the dividend and annual shareholders’ meeting date is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

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Item 9.01 Financial Statements and Exhibits.

(a)  Financial Statements of Businesses Acquired. Not applicable.

(b)  Pro Forma Financial Information. Not applicable.

(c)  Shell Company Transactions. Not applicable.

(d)  Exhibits.

Exhibit No. Description

10.1 Description of 2010 Compensation Program

10.2 Cash and Equity Bonus Determinations under 2009 Compensation Program

10.3 Amended and Restated Outside Director Compensation Program

99.1 Press Release dated May 29, 2009

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 hereunto duly authorized.

Date: June 1, 2009

QUALITY SYSTEMS, INC.

By: /s/ Paul Holt                           

       Paul Holt

       Chief Financial Officer

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EXHIBITS ATTACHED TO THIS REPORT ON FORM 8-K

Exhibit

Number Description

10.1 Description of 2010 Compensation Program

10.2 Cash and Equity Bonus Determinations under 2009 Compensation Program

10.3 Amended and Restated Outside Director Compensation Program

99.1 Press Release dated May 29, 2009

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EX-10.1

Exhibit 10.1

Description of Compensation Program for Named Executive Officers

for

Fiscal Year Ending March 31, 2010

On May 27, 2009, the Company’s Board of Directors (“Board”) of Quality Systems, Inc. (the “Company”) acting in executive session and upon recommendation of the Company’s Compensation Committee, approved the Company’s 2010 Compensation Program for the Company’s key personnel, including its named executive officers, for the fiscal year ending March 31, 2010, which includes new cash salary levels and both non-equity and equity incentive compensation components as described below.

Future cash salary levels for the Company’s named executive officers were set as follows:

• Steven Plochocki – $522,500 (increased from $475,000), effective August 16, 2009;

• Patrick Cline - $750,000 (increased from $600,000), effective April 1, 2009;

• Donn Neufeld - $236,250 (increased from $225,000), effective June 1, 2009; and

• Paul Holt - $288,750 (increased from $275,000), effective July 23, 2009.

The non-equity incentive compensation component for named executive officers provides as follows:

(i) for Steve Plochocki, the Company’s President and Chief Executive Officer, cash compensation of up to $522,500 may be earned based on meeting certain target increases in earnings per share (“EPS”) performance and revenue growth during the fiscal year as well as meeting certain operational requirements established by the Board of Directors; of the total $522,500 potential cash compensation, 40% is allocated to the EPS performance criteria, 40% is allocated to the revenue growth criteria and the remaining 20% is discretionary and is allocated in part to the business performance, structuring, growth, and operational requirements criteria as well as profitability of the revenue cycle management business.  

(ii) for Pat Cline, the President of the Company’s NextGen Healthcare Information Systems Division, cash compensation of up to $750,000 may be earned based on meeting certain target increases in EPS performance and revenue growth during the fiscal year as well as meeting certain operational requirements established by the Board; of the total $750,000 potential cash compensation, 33.33% is earned upon completion of services to the Company through the period ending on the public release of financial data for the fiscal year ending March 31, 2010; 33.33% is allocated to the EPS performance criteria, and 33.33% is allocated to the revenue growth criteria.  

(iii) for Donn Neufeld, the Executive Vice President/General Manager of the Company’s QSI Division, cash compensation of up to $80,000 may be earned based upon the achievement of certain qualitative and quantitative goals related to both QSI Division performance and other corporate objectives as approved by the Compensation Committee of the Board of Directors and the Board; of the total $80,000 potential cash compensation, 37.5% is allocated to the operating income goals for the QSI Division, 37.5% is allocated to the revenue growth goals for the QSI Division, and the remaining 25% is discretionary and is allocated in part to the operational requirements criteria as directed by the Company’s CEO.  

(iv) for Paul Holt, the Company’s Chief Financial Officer and Secretary, cash compensation of up to $80,000 may be earned based upon the achievement of certain goals as approved by the Compensation Committee and the Board of Directors; of the total $80,000 potential cash compensation, 75% is allocated to specific, objective criteria approved in advance by the Board of Directors and 25% is discretionary based upon meeting certain operational, structuring, and growth objectives established by the Board.

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The equity incentive compensation component for named executive officers provides potential awards as follows:

Named Executive Officer	Options
•     Steve Plochocki	40,000
•     Donn Neufeld	10,000
•     Paul Holt	10,000
•     Pat Cline	45,000
Total	105,000

Equity Award Criteria for Steve Plochocki, Donn Neufeld and Paul Holt:

The equity incentive component of the 2010 Compensation Program provides that Messrs. Plochocki, Neufeld and Holt are eligible to receive an aggregate of up to 60,000 options to purchase the Company’s common stock based on meeting certain target increases in EPS performance and revenue growth during the fiscal year. Of the total 60,000 potential options, 50% are allocated to the EPS performance criteria and 50% are allocated to the revenue growth criteria.

Equity Award Criteria for Pat Cline:

The equity incentive component of the 2010 Compensation Program provides that Pat Cline is eligible to receive up to 45,000 options to purchase the Company’s common stock based on meeting certain target increases in EPS performance and revenue growth during the fiscal year. Of the total 60,000 potential options, 33.33% are guaranteed upon completion of services to the Company for the fiscal year; 33,33% are allocated to the EPS performance criteria; and 33.33% are allocated to revenue growth criteria.

General Terms For All Executives Under 2010 Compensation Program:

• Executive must be in good standing as a full time employee of QSI at least 2 weeks beyond the release of the 2010 earnings report.

• Executive is not allowed compensated outside work without the Board’s prior written approval.

• Executive must sign a new confidential information/non-compete agreement.

• Payment of the bonus is to be approved by the Compensation Committee and the Board, based on audited financial statements (including options and compensation). The Board’s determination will be final.

• Options shall be granted under one of the Company’s shareholder approved option plans and subject to the terms of the Company’s standard stock option agreement. The option exercise price for all options granted under the 2010 Compensation Program shall be the closing price of the Company’s shares on the date of grant. The options would vest in 5 equal annual installments commencing one year after the date of grant and have an 8 year expiration (this vesting schedule reflects the new policy that will be adopted for all new employee option grants).

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EX-10.2

Exhibit 10.2

Cash and Equity Bonus Determinations under 2009 Compensation Program

Name	Cash Bonus Earned	Equity Bonus Earned
Steve Plochocki	$59,375	0
Pat Cline	$120,000	0
Donn Neufeld	$37,000	0
Paul Holt	$50,000	0

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EX-10.3

Exhibit 10.3

Quality Systems, Inc.

Amended and Restated

Outside Director Compensation Program

Category of Director	Employee Director	Independent Director	Committee Chairman (3)	Audit Committee/Board Chairman
Base Compensation	$ ---	$ 80,000	$92,500	$100,000
Meeting Fees (1)	$ ---	$ ---	$ ---	$ ---
Committee Memberships (2)	$ ---	$ ---	$ ---	$ ---
Subtotal Cash Compensation	$ ---	$ 80,000	$92,500	$100,000
Restricted Common Stock Grant Shares (4)	0	1,000	1,250	1,250

Each Director is to be awarded shares of restricted common stock upon election or re-election to the Board. The shares will carry a restriction requiring that they not be sold for a period of 2 years from the date of grant. The grant of restricted shares shall be in lieu of the 5,000 options granted in prior years upon election or re-election to the Board.

Additionally, all board members must acquire a minimum of 1,000 shares of the Company's Common Stock through the investment of their own funds (e.g. open market purchase or option exercise), which minimum amount must be retained as long as they are a director. New directors, and existing directors after the effective date of this policy (August 13, 2009), have 9 months in which to acquire such Common Stock.

Notes:

1.    Meeting attendance at a 100% or near-100% level is mandatory. Therefore, this plan eliminates meeting fees. Board and committee meeting attendance rates for each director should be reported annually internally and to the public.

2.    Board members are expected to serve as committee members as part of their compensation.

3.    Pay Tiers: Tier 0 pay for Directors who are full-time employees, Tier 1 for Directors who do not chair committees, Tier 2 for Nominating and Compensation Committee Chairmen, Tier 3 for Audit Committee and overall Board Chair. Chairmen of other committees are paid at the highest tier otherwise eligible, according to the specifically named functions above. All Directors are only paid at one tier, which is their highest eligible tier.

4.    Grant, no vesting, must hold stock for at least two years.

5.    Misc: Compensation shall be paid quarterly. Board member shall be paid at the highest eligible tier according to his role, but not on multiple tiers.

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EX-99.1

Exhibit 99.1

Press Release dated May 29, 2009

For Further Information, Contact:

Quality Systems, Inc. Susan J. Lewis

18111 Von Karman Avenue, Suite 600 Phone: (303) 804-0494

Irvine, CA 92612 slewis@qsii.com

Phone: (949) 255-2600

Paul Holt, CFO, pholt@qsii.com

FOR IMMEDIATE RELEASE

MAY 29, 2009

QUALITY SYSTEMS REPORTS FOURTH QUARTER AND

FISCAL YEAR-END RESULTS

IRVINE, Calif. — May 29, 2009-- Quality Systems, Inc. (NASDAQ:QSII - news) today announced the results of operations for its fiscal 2009 fourth quarter and fiscal year ended March 31, 2009. The Company posted record net revenues of $65.8 million in the fourth quarter, an increase of 29% from the $51.2 million generated during the same quarter of the prior year. The Company reported net income of $11.4 million, up slightly when compared to net income of $11.3 million earned in the comparable quarter of the prior year. Fully diluted earnings per share was $0.40 in the quarter, a decrease of 2% over the fully diluted $0.41 per share earnings recorded in the same quarter last year.

The Company’s results were impacted by the delays in purchasing decisions related to uncertainty surrounding the American Recovery and Reinvestment Act of 2009, which was signed into law in February 2009.

For the quarter, the Company’s NextGen Healthcare Information Systems division posted record revenue of $62.1 million, up 31% over the same quarter of the prior year and record operating income of $21.7 million, up 13% over the same quarter of the prior year.

Revenue for the fiscal year ended March 31, 2009 was $245.5 million, an increase of 32% over fiscal year 2008 revenue of $186.5 million. Net income for fiscal year 2009 was $46.1 million, an increase of 15% over fiscal 2008’s net income of $40.1 million. Fully diluted earnings per share increased to $1.62 in fiscal year 2009 from $1.44 earned during fiscal year 2008, an increase of 13%.

Quality Systems, Inc. will hold a conference call to discuss fourth quarter and fiscal year end financial results on May 29, 2009 at 9:00 am ET (6:00 a.m. PT). All participants should dial 1-877-941-8610 at least ten minutes prior to the start of the call. International callers should dial 1-480-629-9819. To hear a live web simulcast or to listen to the archived web cast following completion of the call, please visit the company web site at www.qsii.com, click on the "Investor Relations" tab, then select "Conference Calls," to access the link to the call. To listen to a telephone replay of the conference call, please dial 1-800-406-7325 and enter reservation identification number 4085340. The replay will be available from approximately 12:00 PM ET on Friday, May 29, 2009, through 11:59 PM ET on Friday, June 5, 2009.

A transcript of the conference call will be made available on the QSII website (www.qsii.com).

Date and Location of 2009 Annual Shareholders’ Meeting

The Annual Shareholders’ Meeting will be held on August 13, 2009 at 1:00 P.M. Pacific Time at The Center Club, 650 Town Center Drive in Costa Mesa, Calif. Holders of record as of June 22, 2009 are eligible to vote and attend. A proxy statement with more information regarding these matters will be

sent to shareholders with a 2009 Annual Report and will also be available for viewing through the investor relations section of Quality Systems’ website atwww.qsii.com.

About Quality Systems, Inc.

Irvine, Calif.-based Quality Systems, Inc. and its NextGen Healthcare Information Systems subsidiary develop and market computer-based practice management, patient records and revenue cycle management applications as well as connectivity products and services for medical and dental group practices. Visit www.qsii.com and www.nextgen.com for additional information.

This news release may contain forward-looking statements within the meaning of the federal securities laws. Statements regarding future events, developments, the Company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future (including, without limitation, statements concerning revenue and net income), are forward-looking statements within the meaning of these laws and involve a number of risks and uncertainties. Moreover, these forward-looking statements are subject to a number of risks and uncertainties, some of which are outlined below. As a result, actual results may vary materially from those anticipated by the forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: the volume and timing of systems sales and installations; length of sales cycles and the installation process; the possibility that products will not achieve or sustain market acceptance; seasonal patterns of sales and customer buying behavior; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; undetected errors or bugs in software; changing economic, political or regulatory influences in the health-care industry; changes in product-pricing policies; availability of third-party products and components; competitive pressures including product offerings, pricing and promotional activities; the Company's ability or inability to attract and retain qualified personnel; possible regulation of the Company's software by the U.S. Food and Drug Administration; uncertainties concerning threatened, pending and new litigation against the Company including related professional services fees; uncertainties concerning the amount and timing of professional fees incurred by the Company generally; changes of accounting estimates and assumptions used to prepare the prior periods' financial statements; general economic conditions; and the risk factors detailed from time to time in Quality Systems' periodic reports and registration statements filed with the Securities and Exchange Commission. A significant portion of the Company's quarterly sales of software product licenses and computer hardware is concluded in the last month of the fiscal quarter, generally with a concentration of such revenues earned in the final ten business days of that month. Due to these and other factors, the Company's revenues and operating results are very difficult to forecast. A major portion of the Company's costs and expenses, such as personnel and facilities, are of a fixed nature and, accordingly, a shortfall or decline in quarterly and/or annual revenues typically results in lower profitability or losses. As a result, comparison of the Company's period-to-period financial performance is not necessarily meaningful and should not be relied upon as an indicator of future performance. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

[financial highlights follow]

QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

	Three Months Ended					Twelve Months Ended
	March 31, 2009			March 31, 2008		March 31, 2009			March 31, 2008
Revenues:
Software, hardware and supplies	$	20,384		$	20,519	$	85,386		$	76,363
Implementation and training services		3,629			3,861		13,375			13,406
System sales		24,013			24,380		98,761			89,769
Maintenance		19,340			15,593		72,862			56,455
Electronic data interchange services		7,859			6,281		29,522			22,450
Revenue cycle management and related services		8,112			259		21,431			871
Other services		6,507			4,719		22,939			16,955
Maintenance, EDI and other services		41,818			26,852		146,754			96,731
Total revenue		65,831			51,232		245,515			186,500
Cost of revenue:
Software, hardware and supplies		3,273			2,938		13,184			10,887
Implementation and training services		2,502			2,871		10,286			10,341
Total cost of system sales		5,775			5,809		23,470			21,228
Maintenance		3,004			3,155		11,859			12,446
Electronic data interchange services .		5,686			4,363		21,374			15,776
Revenue cycle management and related services		5,762			156		14,674			558
Other services		5,114			3,553		17,513			12,493
Total cost of maintenance and other services		19,566			11,227		65,420			41,273
Total cost of revenue		25,341			17,036		88,890			62,501
Gross profit		40,490			34,196		156,625			123,999
Operating expenses:
Selling, general and administrative		18,309			14,146		70,445			53,260
Research and development costs		3,692			2,988		13,777			11,350
Total operating expenses		22,001			17,134		84,222			64,610
Income from operations		18,489			17,062		72,403			59,389
Interest income		161			567		1,203			2,661
Other income (expense)		(279	)		—		(279	)		953
Income before provision for income taxes		18,371			17,629		73,327			63,003
Provision for income taxes		7,015			6,377		27,208			22,925
Net income	$	11,356		$	11,252	$	46,119		$	40,078
Net income per share:
Basic	$	0.40		$	0.41	$	1.65		$	1.47
Diluted	$	0.40		$	0.41	$	1.62		$	1.44
Weighted average shares outstanding:
Basic		28,393			27,408		28,031			27,298
Diluted		28,526			27,712		28,396			27,770
Dividends declared per common share	$	0.30		$	0.25	$	1.15		$	1.00

QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

	March 31, 2009		March 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	70,180	$	59,046
Restricted cash		1,303		—
Marketable securities		—		2,500
Accounts receivable, net		90,070		76,585
Inventories, net		1,125		1,024
Income tax receivable		5,605		—
Net current deferred tax assets		3,994		6,397
Other current assets		6,312		4,596
Total current assets		178,589		150,148
Marketable securities		7,395		20,124
Equipment and improvements, net		6,756		4,773
Capitalized software costs, net		9,552		8,852
Intangibles, net		8,403		—
Goodwill		28,731		1,840
Other assets		2,675		2,171
Total assets	$	242,101	$	187,908
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,097	$	4,685
Deferred revenue		47,584		44,389
Accrued compensation and related benefits		9,511		8,346
Income taxes payable		—		1,541
Dividends payable		8,529		6,861
Other current liabilities		8,888		4,394
Total current liabilities		79,609		70,216
Deferred revenue, net of current		521		506
Net deferred tax liabilities		4,566		1,575
Deferred compensation		1,838		1,906
Total liabilities		86,534		74,203
Commitments and contingencies
Shareholders' equity:
Common stock
$0.01 par value; authorized 50,000 shares; issued and       outstanding 28,447 and 27,448 shares at March 31, 2009 and       March 31, 2008, respectively		284		274
Additional paid-in capital		103,524		75,556
Retained earnings		51,759		38,071
Accumulated other comprehensive loss, net of tax		—		(196	)
Total shareholders’ equity		155,567		113,705
Total liabilities and shareholders’ equity	$	242,101	$	187,908