-----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, CZ6UuxwDJN5GOTwQxvELz4UdJjdMMUUYAAXHT9wpFN7hZhjArVrASFyq44ZG7eHW v6GSDUeUSu5g2wjZ0sudVw== 0000950109-96-005315.txt : 19960816 0000950109-96-005315.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950109-96-005315 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARED MEDICAL SYSTEMS CORP CENTRAL INDEX KEY: 0000089415 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 231704148 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07416 FILM NUMBER: 96613084 BUSINESS ADDRESS: STREET 1: 51 VALLEY STREAM PKWY CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6102196300 MAIL ADDRESS: STREET 1: 51 VALLEY STREAM PKWY CITY: MALVERN STATE: PA ZIP: 19355 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 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 0-7416 SHARED MEDICAL SYSTEMS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 23-1704148 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 51 VALLEY STREAM PARKWAY MALVERN, PENNSYLVANIA 19355 (Address of principal executive offices) (Zip Code) (610) 219-6300 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address, and former fiscal year, if changed since last report) 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_____ ----- On July 31, 1996, there were 23,507,114 shares of Common Stock outstanding. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED BALANCE SHEET ---------------------------------- (Amounts in thousands)
June 30 December 31 1996 1995 ----------- ----------- (unaudited) ASSETS Current Assets: Cash and short-term investments................... $ 15,023 $ 23,310 Accounts receivable, net.......................... 192,703 171,320 Prepaid expenses and other current assets......... 25,431 25,975 ----------- ----------- Total Current Assets............................ 233,157 220,605 Property and Equipment, net........................ 101,027 101,164 Computer Software, net............................. 46,035 42,955 Other Assets....................................... 67,509 70,249 ----------- ----------- $447,728 $434,973 =========== =========== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Notes payable..................................... $ 41,424 $ 20,920 Current portion of long-term debt and capital leases................................... 3,223 4,654 Dividends payable................................. 4,934 4,885 Accounts payable.................................. 15,554 28,301 Accrued expenses.................................. 31,313 39,469 Current deferred revenues......................... 26,454 23,557 Accrued and current deferred income taxes......... 9,687 10,913 ----------- ----------- Total Current Liabilities....................... 132,589 132,699 ----------- ----------- Deferred Revenues.................................. 9,612 13,209 ----------- ----------- Long-Term Debt and Capital Leases.................. 15,805 16,960 ----------- ----------- Deferred Income Taxes.............................. 24,566 23,285 ----------- ----------- Commitments Stockholders' Investment: Preferred stock, par value $.10; authorized 1,000,000 shares; none issued........ - - Common stock, par value $.01; authorized 60,000,000 shares; 27,529,743 shares issued in 1996 and 27,288,942 in 1995..................... 275 273 Paid-in capital.................................. 46,591 39,561 Retained earnings................................ 277,340 265,010 Common stock in treasury, at cost, 4,032,963 shares in 1996 and 4,027,815 in 1995............ (55,660) (55,286) Cumulative translation adjustment................ (3,390) (738) ----------- ----------- Total Stockholders' Investment.................. 265,156 248,820 ----------- ----------- $447,728 $434,973 =========== ===========
The accompanying notes are an integral part of this statement. 2 SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF INCOME ---------------------------------- (Amounts in thousands, except for per share amounts) Three Months Ended Six Months Ended
June 30 June 30 -------------------- -------------------- 1996 1995 1996 1995 -------- -------- -------- -------- (unaudited) (unaudited) Revenues: Service and system fees.. $164,544 $143,922 $324,026 $278,060 Hardware sales........... 26,422 11,357 37,292 22,558 -------- -------- -------- -------- 190,966 155,279 361,318 300,618 -------- -------- -------- -------- Cost and Expenses: Operating and development............. 79,401 67,936 154,531 131,227 Marketing and installation............ 54,844 49,063 107,690 93,113 General and administrative.......... 14,684 12,451 29,275 25,037 Cost of hardware sales... 22,651 9,323 32,095 18,563 Interest................. 907 635 1,711 1,085 -------- -------- -------- -------- 172,487 139,408 325,302 269,025 -------- -------- -------- -------- Income Before Income Taxes............. 18,479 15,871 36,016 31,593 Provision for Income Taxes.................... 7,096 6,190 13,830 12,321 -------- -------- -------- -------- Net Income................ $ 11,383 $ 9,681 $ 22,186 $ 19,272 ======== ======= ======== ======== Net Income Per Common Share.................... $.47 $.41 $.92 $.82 ======== ======== ======== ======== Number of shares used to compute per share amounts.................. 24,209 23,641 24,147 23,603 ======== ======== ======== ======== Dividends Per Common Share.................... $.21 $.21 $.42 $.42 ======== ======== ======== ========
The accompanying notes are an integral part of this statement. 3 SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ (Amounts in thousands)
Six Months Ended June 30 ------------------- 1996 1995 -------- -------- (unaudited) Cash Flows from Operating Activities: Net Income...................................... $ 22,186 $ 19,272 Adjustments to reconcile net income to net cash used for operating activities - Depreciation and amortization................ 18,458 17,535 Asset (increase) decrease - Accounts receivable........................ (21,383) (10,827) Prepaid expenses and other current assets.. 545 (4,884) Other assets............................... 1,752 51 Liability increase (decrease) - Accounts payable and accrued expenses...... (20,903) (18,384) Accrued and current deferred income taxes.. (1,226) (203) Deferred revenues.......................... (701) (3,507) Deferred income taxes...................... 1,281 752 Other........................................ (2,067) 1,808 -------- -------- Net cash (used for) provided by operating activities................................ (2,058) 1,613 -------- -------- Cash Flows from Investing Activities: Property and equipment additions................ (13,697) (9,521) Investment in computer software................. (7,953) (5,684) Dispositions of equipment....................... 221 141 Acquisition of business......................... - (8,497) -------- -------- Net cash used for investing activities..... (21,429) (23,561) -------- -------- Cash Flows from Financing Activities: Dividends paid.................................. (9,805) (9,665) Change in treasury stock........................ (374) (67) Payments on long-term obligations............... (2,157) (1,508) Increase in notes payable....................... 20,504 26,405 Exercise of stock options....................... 7,032 4,865 -------- -------- Net cash provided by financing activities.. 15,200 20,030 -------- -------- Net Decrease in Cash and Short-Term Investments.. (8,287) (1,918) Cash and Short-Term Investments, Beginning of Period....................................... 23,310 21,249 -------- -------- Cash and Short-Term Investments, End of Period... $ 15,023 $ 19,331 ======== ========
The accompanying notes are an integral part of this statement. 4 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Notes to Consolidated Financial Statements June 30, 1996 (unaudited) - Note 1 - The information furnished in this Form 10-Q reflects all normal ------ and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial statements as of June 30, 1996. Note 2 - At June 30, 1996 and December 31, 1995, the Company's trade ------ accounts receivable were reduced by allowances for doubtful accounts of $4,671,000 and $4,847,000, respectively. Note 3 - The major classes of property and equipment at ------ June 30, 1996 and December 31, 1995 were as follows (amounts in thousands):
June 30 December 31 1996 1995 ----------- ----------- (unaudited) Land and land improvements......... $ 10,712 $ 10,719 Buildings.......................... 60,718 60,597 Equipment.......................... 179,095 172,335 ----------- ----------- 250,525 243,651 Less accumulated depreciation and amortization................ 149,498 142,487 ----------- ----------- $101,027 $101,164 =========== ===========
Note 4 - The accumulated amortization for capitalized internally produced ------ computer software and purchased software at June 30, 1996 and December 31, 1995 was $49,653,000 and $45,317,000, respectively. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Material Changes in Financial Condition - --------------------------------------- The Company's financial condition has remained strong throughout the six months ended June 30, 1996. Management is not aware of any potential material impairments to, or material changes in, the Company's current financial position. The most significant requirements for funds now anticipated are for purchases of equipment and payment of cash dividends. The Company plans to fund anticipated expenditures primarily through internally generated funds supplemented from time to time by bank borrowings. At June 30, 1996, the Company had lines of credit with banks of approximately $73,600,000, generally at their prime interest rates. At June 30, 1996, approximately $32,200,000 of these lines of credit were unused. 5 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Material Changes in Results of Operations - ----------------------------------------- Three Months Ended June 30, 1996 Compared to the Three Months Ended June 30, 1995. Revenues -------- Service and system fees revenues were $164,544,000, an increase of 14.3% compared to the second quarter of 1995. This increase was primarily due to higher levels of professional services, system processing fees, and system sales. The higher level of professional services was generally attributable to system installations, support, and facilities management service fees. The increase in system processing fees was primarily due to the higher level of customer applications processed at the Company's Information Services Center. Also affecting this change were revenues associated with the acquisitions of two businesses in Europe in June and September 1995. Hardware sales revenues increased to $26,422,000 for the second quarter of 1996 from $11,357,000 in the second quarter of 1995. The higher level of hardware sales revenues was primarily due to the installation of IBM mainframe systems to new and existing customers that process the Company's INVISION product at their site. Cost and Expenses ----------------- Operating and development expenses increased to 48.3% of service and system fees revenues in the second quarter of 1996 from 47.2% for the second quarter 1995. This change was primarily due to increases in certain customer related expenses and personnel costs, partially offset by efficiencies gained from a lower rate of growth for computer hardware and associated costs to support the growth in the base of customers operating their systems at the Company's Information Services Center. Marketing and installation expenses decreased to 33.3% of service and system fees revenues in the second quarter of 1996 from 34.1% in the second quarter of 1995, primarily due to a lower rate of growth for personnel and related costs as compared to the growth in service and system fees revenues. General and administrative expenses, as a percentage of service and systems fees revenues, increased to 8.9% in the second quarter of 1996 from 8.7% in the second quarter of 1995, primarily due to increased personnel and related costs to support the business. Cost of hardware sales increased to 85.7% of hardware sales revenues in the second quarter of 1996 from 82.1% in the second quarter of 1995. This change was primarily due to the different product mixes of systems installed in each quarter. Interest expense was $907,000 in the quarter ended June 30, 1996 compared to $635,000 in the same period in 1995. This change was primarily due to a higher level of outstanding borrowings throughout the current period, which was partially attributable to funds used for the acquisitions of two businesses in Europe in June and September 1995. 6 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Provision for Income Taxes -------------------------- Income taxes increased $906,000 in the quarter ended June 30, 1996 when compared to the same period in 1995. This change was primarily due to an increase of $2,608,000 in income before income taxes. The Company's effective tax rate for federal, state, and foreign income taxes was 38.4% in the second quarter of 1996 and 39.0% in the second quarter of 1995. The change in the effective tax rate was primarily due to a decrease in the Company's effective state income tax rate. Net Income ---------- Net income was $11,383,000 in the quarter ended June 30, 1996 compared to $9,681,000 in the quarter ended June 30, 1995 for the reasons discussed above. Six Months Ended June 30, 1996 Compared to the Six Months Ended June 30, 1995. Revenues -------- Service and system fees revenues were $324,026,000, an increase of 16.5% compared to the same period in 1995. This increase was primarily due to higher levels of professional services, system processing fees, and system sales. The higher level of professional services was generally attributable to system installations, support, and facilities management service fees. The increase in system processing fees was primarily due to the higher level of customer applications processed at the Company's Information Services Center. Also affecting this change were revenues associated with the acquisitions of two businesses in Europe in June and September 1995. Hardware sales revenues increased to $37,292,000 for the six months ended June 30, 1996 from $22,558,000 for the same period in 1995. The higher level of hardware sales revenues was primarily due to the installation of IBM mainframe systems to new and existing customers that process the Company's INVISION product at their site. Cost and Expenses ----------------- Operating and development expenses increased to 47.7% of service and system fees revenues in the first two quarters of 1996 from 47.2% in the first two quarters of 1995. This change was primarily due to increases in certain customer related expenses and personnel costs, partially offset by efficiencies gained from a lower rate of growth for computer hardware and associated costs to support the growth in the base of customers operating their systems at the Company's Information Services Center. Marketing and installation expenses decreased to 33.2% of service and system fees revenues in the first two quarters of 1996 from 33.5% in the first two quarters of 1995. This decrease was primarily due to a lower rate of growth for personnel and related costs as compared to the growth in service and system fees revenues. General and administrative expenses, as a percentage of service and system fees revenues, remained at 9.0% in the first two quarters of 1996 and 1995. 7 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Cost of hardware sales increased to 86.1% of hardware sales revenues in the first two quarters of 1996 from 82.3% in the first two quarters of 1995. This change was primarily due to the different product mixes of systems installed in each quarter. Interest expense was $1,711,000 in the six months ended June 30, 1996 compared to $1,085,000 in the same period in 1995. This change was primarily due to a higher level of outstanding borrowings throughout the current period, which was partially attributable to funds used for the acquisitions of two businesses in Europe in June and September 1995. Provision for Income Taxes -------------------------- The provision for income taxes increased $1,509,000 in the first two quarters of 1996 when compared to the same period in 1995. This change was due to an increase of $4,423,000 in income before income taxes. The Company's effective tax rate for federal, state, and foreign income taxes was 38.4% in the first two quarters of 1996 and 39.0% in the first two quarters of 1995. The change in the effective tax rate was primarily due to a decrease in the Company's effective state income tax rate. Net Income ---------- Net income was $22,186,000 in the first two quarters of 1996 compared to $19,272,000 in the first two quarters of 1995 for the reasons discussed above. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The annual meeting of stockholders of the Company was held on April 25, 1996. At the meeting, the stockholders were requested to elect six directors for one year terms. a) The following is a summary of the votes for elected directors:
Votes Broker Nominee Votes For Withheld Non-votes - -------------------------------------------------------------- R. James Macaleer........ 20,809,555 303,732 0 Raymond K. Denworth, Jr.. 20,581,404 531,883 0 Frederick W. DeTurk...... 20,797,348 315,939 0 Josh S. Weston........... 20,799,301 313,986 0 Jeffrey S. Rubin......... 20,803,426 309,861 0 Marvin S. Cadwell........ 20,806,026 307,261 0
There are no other persons whose terms as directors continued after this meeting. 8 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following exhibits are included in this report: No. Description ---- ----------------------------------------------------------- (10) Material Contracts - Performance bonus plans - 1996: R. James Macaleer Marvin S. Cadwell (27) Financial Data Schedule (b) No reports on Form 8-K were filed during the three-month period ended June 30, 1996. 9 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- 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. SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Registrant August 14, 1996 /S/ Terrence W. Kyle - --------------- ---------------------------------- Date Terrence W. Kyle Vice President of Finance Principal Financial Officer and Duly Authorized Officer 10 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- EXHIBIT INDEX No. Description - --- ----------------------------------- (10) Material Contracts - Performance bonus plans - 1996: R. James Macaleer Marvin S. Cadwell (27) Financial Data Schedule 11 EX-10 2 1996 INCENTIVE COMPENSATION PLANS Exhibit (10) 1996 INCENTIVE COMPENSATION PLANS FOR R. JAMES MACALEER AND MARVIN S. CADWELL --------------------------------------- The incentive compensation plans for Messrs. Macaleer and Caldwell for 1996 were not set forth in formal documents. The plans operate as follows: If SMS achieves its earnings per share (EPS) goal for 1996, the Incentive Compensation for 1996 will be based on the combined sales results (NPV) of all SMS business units for software and processing services, less any existing ongoing processing revenues anticipated to be lost due to competitive losses and losses due to mergers, acquisitions, and bankruptcies, of an installed account, as follows: If overall software sales and processing services attainment exceeds 90% of the targeted amount, Messrs. Macaleer and Cadwell's bonuses shall be $80,000 and $160,000, respectively, multiplied by the actual software sales and processing services percentage attainment, up to but not exceeding a maximum of 110%. If overall sales attainment is 90% or less than the targeted amount, then the actual bonuses will be $40,000 and $80,000, respectively. If SMS misses its 1996 EPS goal by one cent per share, the calculated bonuses shall be reduced by 10%. If the EPS goal is missed by two cents per share, the calculated bonuses shall be reduced by 30%. If the EPS goal is missed by three cents per share, the calculated bonuses shall be reduced by 45%. If the EPS goal is missed by four cents per share, the calculated bonuses shall be reduced by 60%. If SMS misses its EPS goal by more than four cents per share, there will be no bonuses. EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 15,023 0 197,374 4,671 0 233,157 250,525 149,498 447,728 132,589 15,805 0 0 275 264,881 447,728 37,292 361,318 32,095 262,221 29,275 0 1,711 36,016 13,830 22,186 0 0 0 22,186 .92 .92
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