-----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, TPQzAHr8cTiM1MH5kj0Z+MsZabWxXXKU4ohBctSEnP0wdljUNzSQkWql5eXkcg7v Y4soMcFY6AF32e2qUb23CQ== 0000950109-97-004164.txt : 19970520 0000950109-97-004164.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950109-97-004164 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97608308 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 March 31, 1997 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 of (I.R.S. Employer Identification No.) incorporation or organization) 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 April 30, 1997, there were 24,875,628 shares of Common Stock outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED BALANCE SHEET ------------------------------------ (Amounts in thousands)

* Restated to reflect the acquisition of American Healthware Systems, Inc. in February 1997, which was accounted for as a pooling of interests. 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)

* Restated to reflect the acquisition of American Healthware Systems, Inc. in February 1997, which was accounted for as a pooling of interests. The accompanying notes are an integral part of this statement. 3 SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ (Amounts in thousands)

* Restated to reflect the acquisition of American Healthware Systems, Inc. in February 1997, which was accounted for as a pooling of interests. The accompanying notes are an integral part of this statement. 4 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Notes to Consolidated Financial Statements - March 31, 1997 (unaudited): 1. Basis of Presentation: 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 contained herein. Prior period financial statements have been restated to reflect the Company's business combination with American Healthware Systems, Inc. (AHS), which was completed on February 28, 1997 and accounted for as a pooling of interests. 2. Business Combination: On February 28, 1997, the Company completed a merger with AHS, a provider of financial information systems and facilities management services to health organizations in New York State. Under the terms of the merger agreement, the Company issued 1,255,325 shares of the Company's common stock in exchange for all outstanding shares of AHS. This transaction was accounted for as a pooling of interests. AHS is currently operating as a wholly owned subsidiary of the Company. Separate operating results for Shared Medical Systems Corporation (SMS) and AHS for the three months ended March 31, 1996 are as follows (amounts in thousands):

3. Accounts Receivable: At March 31, 1997 and December 31, 1996, the Company's trade accounts receivable were reduced by allowances for doubtful accounts of $8,476,000 and $8,094,000, respectively. 4. Property and Equipment: The major classes of property and equipment at March 31, 1997 and December 31, 1996 were as follows (amounts in thousands):

5 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- 5. Computer Software: The accumulated amortization for capitalized internally produced computer software and purchased software at March 31, 1997 and December 31, 1996 was $58,253,000 and $55,016,000, respectively. 6. Net Income Per Common Share: In February 1997, the Financial Accounting Standards Board issued Statement 128 (FAS 128), Earnings Per Share (EPS). This statement is effective for both interim and annual financial statements for periods ending after December 15, 1997. FAS 128 replaces primary and fully diluted EPS as required by Accounting Principles Opinion No. 15 (APB 15) with basic and diluted EPS, respectively. Under the terms of this statement, basic EPS is calculated using the weighted average shares of common stock outstanding during the applicable period, and diluted EPS is calculated using the weighted average shares of common stock outstanding during the applicable period and the effects of any potentially dilutive securities such as stock options. The Company expects that basic EPS will be approximately 2-3% greater than EPS as previously reported and that diluted EPS will be equal to EPS as previously reported by the Company under APB 15. 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 three months ended March 31, 1997. 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 March 31, 1997, the Company had lines of credit with banks of approximately $75,876,000, generally at their prime interest rates. At March 31, 1997, approximately $52,557,000 of these lines of credit were unused. Material Changes in Results of Operations - ----------------------------------------- Three Months Ended March 31, 1997 Compared to the Three Months Ended March 31, 1996. Revenues -------- Service and system fees revenues were $183,980,000, an increase of 13.4% compared to the first quarter of 1996. This increase was primarily due to higher levels of professional services and system fees. The higher level of professional services was generally attributable to facilities management, system installations and support, and consulting fees. The increase in system fees was due to the installation of systems to new and existing customers, and the sale of add-on systems during the current quarter. 6 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Hardware sales revenues increased to $25,899,000 for the first quarter of 1997 from $10,870,000 in the first quarter of 1996, 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 47.8% of service and system fees revenues in the first quarter of 1997 from 47.5% for the first quarter 1996. This change was primarily due to increased personnel and related costs to support the higher levels of professional services provided to customers. Marketing and installation expenses decreased to 32.1% of service and system fees revenues in the first quarter of 1997 from 32.8% in the first quarter of 1996, primarily due to a slower rate of growth for personnel and related costs as compared to the growth in service and system fees revenues, partially offset by increased costs for certain customer-related expenses caused by higher levels of system installations provided to customers. General and administrative expenses, as a percentage of service and systems fees revenues, increased to 9.3% in the first quarter of 1997 from 9.1% in the first quarter of 1996. This change was primarily attributable to costs associated with the Company's business combination with American Healthware Systems, Inc., partially offset by a slower rate of growth for personnel and related costs to support the business when compared to the growth in service and system fees revenues. Cost of hardware sales decreased to 86.3% of hardware sales revenues in the first quarter of 1997 from 86.9% in the first quarter of 1996. This change was primarily due to the different product mixes of systems installed in each quarter. Interest expense was $685,000 in the quarter ended March 31, 1997 compared to $804,000 in the same period in 1996. This change was generally attributable to a lower level of average outstanding borrowings during the current period. Provision for Income Taxes -------------------------- Income taxes increased $1,906,000 in the quarter ended March 31, 1997 when compared to the same period in 1996. This change was primarily due to an increase of $4,834,000 in income before income taxes. The Company's effective tax rate for federal, state and foreign income taxes was 38.0% in the first quarter of 1997 and 37.6% in the first quarter of 1996. The increase in the effective tax rate was primarily due to the change in the tax status of AHS from an "S" Corporation, which is not subject to federal income taxes, to a "C" Corporation upon its merger with the Company. Net Income ---------- Net income was $14,096,000 in the quarter ended March 31, 1997 compared to $11,168,000 in the quarter ended March 31, 1996 for the reasons discussed above. 7 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- PART II - OTHER INFORMATION Item 2. Changes in Securities On February 28, 1997 the Company issued 1,255,325 shares of its Common Stock to the two former shareholders of American Healthware Systems, Inc. (AHS) in exchange for all of the outstanding shares of AHS, in a transaction exempt under Section 4(2) and Regulation D of the Securities Act of 1933, as amended. On March 20, 1997 the Company filed a registration statement on Form S-3 registering for resale the shares of its Common Stock issued in connection with the business combination with AHS. Such registration statement was declared effective by the Securities and Exchange Commission on April 10, 1997. A post- effective amendment to the registration statement was filed April 30, 1997 and was declared effective on May 7, 1997. Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibits are included in this report: No. Description ---- ----------------------------------------------------------- (27) Financial Data Schedules: For the Three Months Ended March 31, 1997 Restated for the Year Ended December 31, 1996 Restated for the Nine Months Ended September 30, 1996 Restated for the Six Months Ended June 30, 1996 Restated for the Three Months Ended March 31, 1996 Restated for the Year Ended December 31, 1995 Restated for the Nine Months Ended September 30, 1995 Restated for the Six Months Ended June 30, 1995 Restated for the Three Months Ended March 31, 1995 Restated for the Year Ended December 31, 1994 (b) No reports on Form 8-K were filed during the three-month period ended March 31, 1997. 8 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 May 15, 1997 /S/Terrence W. Kyle - ------------ ------------------------------------------- Date Terrence W. Kyle Senior Vice President, Treasurer, and Assistant Secretary, Principal Financial Officer and Duly Authorized Officer 9 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Exhibit Index No. Description --- ------------------------------------------------------------ (27) Financial Data Schedules: For the Three Months Ended March 31, 1997 Restated for the Year Ended December 31, 1996 Restated for the Nine Months Ended September 30, 1996 Restated for the Six Months Ended June 30, 1996 Restated for the Three Months Ended March 31, 1996 Restated for the Year Ended December 31, 1995 Restated for the Nine Months Ended September 30, 1995 Restated for the Six Months Ended June 30, 1995 Restated for the Three Months Ended March 31, 1995 Restated for the Year Ended December 31, 1994 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 10,838 0 235,274 8,476 0 271,394 255,830 157,656 494,302 151,030 14,342 0 0 289 292,412 494,302 25,899 209,879 22,345 147,004 17,109 0 685 22,736 8,640 14,096 0 0 0 14,096 .56 .56

EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 40,286 0 220,155 8,094 0 277,327 255,409 152,877 507,478 171,678 15,361 0 0 288 285,049 507,478 80,695 779,074 68,493 566,472 62,198 0 3,589 78,322 29,322 49,000 0 0 0 49,000 1.93 1.93

EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 20,852 0 203,918 7,111 0 245,122 249,136 147,980 470,472 141,946 15,919 0 0 287 277,599 470,472 51,590 556,456 43,922 407,899 45,871 0 2,667 56,097 21,026 35,071 0 0 0 35,071 1.38 1.38

EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 17,727 0 201,403 6,171 0 238,442 250,525 149,498 454,985 134,927 16,616 0 0 287 268,977 454,985 37,292 366,816 32,095 266,081 30,102 0 1,711 36,827 13,830 22,997 0 0 0 22,997 .91 .91

EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 18,426 0 188,521 6,095 0 228,713 243,024 144,771 439,258 124,581 17,664 0 0 286 262,609 439,258 10,870 173,094 9,444 130,241 14,703 0 804 17,902 6,734 11,168 0 0 0 11,168 .44 .44

EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 25,473 0 180,480 6,347 0 225,614 243,651 142,487 442,518 134,818 17,939 0 0 285 252,982 442,518 58,132 662,111 47,872 489,518 55,232 0 3,043 66,446 25,437 41,009 0 0 0 41,009 1.64 1.64

EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 23,988 0 172,197 6,315 0 215,313 243,090 140,456 433,617 146,427 4,453 0 0 284 245,540 433,617 41,148 478,234 33,887 352,671 40,629 0 2,067 48,980 18,714 30,266 0 0 0 30,266 1.22 1.22

EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 21,316 0 161,215 5,974 0 199,179 243,674 139,907 409,688 126,299 5,454 0 0 284 240,465 409,688 22,558 306,325 18,563 227,594 26,659 0 1,119 32,390 12,321 20,069 0 0 0 20,069 .81 .81

EX-27 10 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 17,422 0 150,050 5,981 0 181,682 243,065 140,183 384,026 109,086 5,445 0 0 283 231,348 384,026 11,201 148,242 9,240 108,981 13,397 0 467 16,157 6,131 10,026 0 0 0 10,026 .40 .40

EX-27 11 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 23,425 0 147,465 5,317 0 183,314 239,600 134,513 388,054 118,929 6,379 0 0 282 223,416 388,054 46,383 559,793 38,362 410,171 49,181 0 1,533 60,546 22,441 38,105 0 0 0 38,105 1.55 1.55

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