-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UGZmSsnfB/LdaxfR9Hfo79lH0t+TvvmJHjuPUNOsiCWLacbLZcClFzJpIv73KgGq P8AFun6gd5wy/vkT8mfeiA== 0000950109-95-003107.txt : 19950814 0000950109-95-003107.hdr.sgml : 19950814 ACCESSION NUMBER: 0000950109-95-003107 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARED MEDICAL SYSTEMS CORP CENTRAL INDEX KEY: 0000089415 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] 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: 95561589 BUSINESS ADDRESS: STREET 1: 51 VALLEY STREAM PKWY CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 2152196300 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, 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 0-7416 SHARED MEDICAL SYSTEMS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 23-1704148 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 51 VALLEY STREAM PARKWAY MALVERN, PENNSYLVANIA 19355 (Address of principal (Zip Code) executive offices) (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, 1995, there were 23,179,924 shares of Common Stock outstanding. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED BALANCE SHEET ----------------------------------
June 30 December 31 1995 1994 ------------ ------------ (unaudited) ASSETS Current Assets: Cash and short-term investments............. $ 19,331,000 $ 21,249,000 Accounts receivable, net of reserve of $5,224,000 in 1995 and $5,317,000 in 1994.. 151,452,000 138,554,000 Prepaid expenses and other current assets... 22,560,000 17,675,000 ------------ ------------ Total Current Assets...................... 193,343,000 177,478,000 ------------ ------------ Property and Equipment, at cost: Land and land improvements.................. 10,718,000 10,711,000 Buildings................................... 60,035,000 59,402,000 Equipment................................... 172,921,000 169,487,000 ------------ ------------ 243,674,000 239,600,000 Less: Accumulated depreciation and amortization....................... 139,907,000 134,513,000 ------------ ------------ 103,767,000 105,087,000 ------------ ------------ Computer Software, net of accumulated amortization of $40,436,000 in 1995 and $36,158,000 in 1994......................... 40,094,000 38,801,000 ------------ ------------ Other Assets.................................. 64,415,000 58,699,000 ------------ ------------ $401,619,000 $380,065,000 ============ ============
The accompanying note is an integral part of this statement. 2 SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED BALANCE SHEET (Continued) --------------------------------------
June 30 December 31 1995 1994 ------------ ------------ (unaudited) LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Notes payable..................................... $ 38,788,000 $ 12,383,000 Current portion of long-term obligations under capital leases............................ 3,693,000 3,100,000 Dividends payable................................. 4,864,000 4,818,000 Accounts payable.................................. 20,210,000 23,633,000 Accrued expenses.................................. 23,228,000 38,189,000 Current deferred revenues......................... 27,240,000 28,133,000 Accrued and current deferred income taxes......... 6,388,000 6,591,000 ------------ ------------ Total Current Liabilities....................... 124,411,000 116,847,000 ------------ ------------ Deferred Revenues................................... 14,738,000 17,352,000 ------------ ------------ Long-Term Obligations Under Capital Leases.......... 4,300,000 4,974,000 ------------ ------------ Deferred Income Taxes............................... 22,448,000 21,696,000 ------------ ------------ Stockholders' Investment: Preferred stock, par value $.10; authorized 1,000,000 shares; none issued........ - - Common stock, par value $.01; authorized 60,000,000 shares;.............................. 1995 1994 ---------- ---------- Shares issued........ 27,188,455 26,964,821 Less- Treasury shares: Donated........ 1,114,400 1,114,400 Purchased...... 2,909,905 2,907,875 Shares outstanding. 23,164,150 22,942,546 272,000 270,000 Paid-in capital................................... 37,228,000 32,365,000 Retained earnings................................. 254,260,000 244,698,000 Purchased common stock in treasury, at cost....... (55,183,000) (55,116,000) Cumulative translation adjustment................. (855,000) (3,021,000) ------------ ------------ Total Stockholders' Investment.................. 235,722,000 219,196,000 ------------ ------------ $401,619,000 $380,065,000 ============ ============
3 SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF INCOME ----------------------------------
Three Months Ended Six Months Ended June 30 June 30 -------------------------- -------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ (unaudited) (unaudited) Revenues: Service and system fees.. $143,922,000 $122,708,000 $278,060,000 $238,122,000 Hardware sales........... 11,357,000 9,899,000 22,558,000 19,655,000 ------------ ------------ ------------ ------------ 155,279,000 132,607,000 300,618,000 257,777,000 ------------ ------------ ------------ ------------ Cost and Expenses: Operating and development............. 67,936,000 57,399,000 131,227,000 110,563,000 Marketing and installation............ 49,063,000 42,012,000 93,113,000 80,299,000 General and administrative.......... 12,451,000 11,036,000 25,037,000 22,213,000 Cost of hardware sales... 9,323,000 7,834,000 18,563,000 16,083,000 Interest................. 635,000 290,000 1,085,000 576,000 ------------ ------------ ------------ ------------ 139,408,000 118,571,000 269,025,000 229,734,000 ------------ ------------ ------------ ------------ Income Before Income Taxes............. 15,871,000 14,036,000 31,593,000 28,043,000 Provision for Income Taxes.................... 6,190,000 5,474,000 12,321,000 10,937,000 ------------ ------------ ------------ ------------ Net Income................ $ 9,681,000 $ 8,562,000 $ 19,272,000 $ 17,106,000 ============ ============ ============ ============ Net Income Per Common Share.................... $.41 $.37 $.82 $.74 ============ ============ ============ ============ Number of shares used to compute per share amounts.................. 23,641,000 23,235,000 23,603,000 23,230,000 ============ ============ ============ ============ Dividends Per Common Share.................... $.21 $.21 $.42 $.42 ============ ============ ============ ============
The accompanying note is an integral part of this statement. 4 SHARED MEDICAL SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------
Six Months Ended June 30 ---------------------------- 1995 1994 ------------- ------------- (unaudited) Cash Flows from Operating Activities: Net Income..................................... $ 19,272,000 $ 17,106,000 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization.................. 17,535,000 15,157,000 Asset (increase) decrease - Accounts receivable........................... (10,827,000) (8,524,000) Prepaid expenses and other current assets..... (4,884,000) (2,840,000) Other assets.................................. 51,000 (4,998,000) Liability increase (decrease) - Accounts payable and accrued expenses......... (18,384,000) (6,210,000) Accrued and current deferred income taxes..... (203,000) (6,175,000) Deferred revenues............................. (3,507,000) (1,481,000) Deferred income taxes......................... 752,000 (1,940,000) Other.......................................... 1,808,000 718,000 ------------ ------------ Net cash provided by operating activities..... 1,613,000 813,000 ------------ ------------ Cash Flows from Investing Activities: Property and equipment additions............... (9,521,000) (8,342,000) Investment in computer software................ (5,684,000) (5,859,000) Dispositions of equipment...................... 141,000 187,000 Investment in subsidiary....................... (8,497,000) - ------------ ------------ Net cash used for investing activities........ (23,561,000) (14,014,000) ------------ ------------ Cash Flows from Financing Activities: Dividends paid................................. (9,665,000) (9,574,000) Change in treasury stock....................... (67,000) (55,000) Payments on long-term obligations under capital leases.......................... (1,508,000) (1,277,000) Increase in notes payable...................... 26,405,000 7,295,000 Exercise of stock options...................... 4,865,000 1,791,000 ------------ ------------ Net cash provided by (used for) financing activities......................... 20,030,000 (1,820,000) ------------ ------------ Net Decrease in Cash and Short-Term Investments.. (1,918,000) (15,021,000) Cash and Short Term Investments, Beginning of Period.......................................... 21,249,000 35,826,000 ------------ ------------ Cash and Short-Term Investments, End of Period... $ 19,331,000 $ 20,805,000 ============ ============
The accompanying note is an integral part of this statement. 5 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Note to Consolidated Financial Statements June 30, 1995 (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, 1995. 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, 1995. Management is not aware of any potential material impairments to the Company's current financial position nor is it aware of any material changes. Effective June 1, 1995, the Company acquired for approximately $8,500,000 the business and assets of Professional Datacare (PDC) from the National Health Systems' North West Regional Health Authority in the United Kingdom. PDC provides various financial processing services in the United Kingdom. This acquisition was accounted for using the purchase method. PDC's results from operations for June 1995 were immaterial. The most significant requirements for funds now anticipated are for purchases of equipment and payment of cash dividends. The Company plans to fund any anticipated expenditures primarily through internally generated funds supplemented by bank borrowings as necessary. At June 30, 1995, the Company had lines of credit with banks totaling $69,452,000, primarily at their prime interest rates. At June 30, 1995, $30,664,000 of these lines of credit remained unused. Material Changes in Results of Operations - ----------------------------------------- Three Months Ended June 30, 1995 Compared to the Three Months Ended June 30, 1994. Revenues -------- Service and system fees revenues increased by $21,214,000 (17.3%) in the second quarter of 1995 compared to the second quarter of 1994. Contributing to this increase were higher levels of professional services, system processing fees, and system sales. Also affecting this increase were revenues associated with the Company's MedSeries4 division which was acquired on September 30, 1994, and the impact in 1995 of stronger foreign currencies relative to the dollar for certain international operations. No revenues for the MedSeries4 division are included in the Company's results of operations for the second quarter of 1994. The higher level of professional services was generally attributable to increases in system support and consulting 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. 6 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Hardware sales revenues increased to $11,357,000 for the second quarter of 1995 from $9,899,000 in the second quarter of 1994 due primarily to changes in the timing and product mix of systems installed and the impact in 1995 of stronger foreign currencies for certain international operations. Cost and Expenses ----------------- Operating and development expenses increased to 47.2% of service and system fees revenues in the second quarter of 1995 from 46.8% in the second quarter of 1994. This change was primarily due to increased computer hardware and associated costs related to higher levels of system processing services provided to the Company's customers. Marketing and installation expenses decreased to 34.1% of service and system fees revenues in the second quarter of 1995 from 34.2% in the second quarter of 1994. This decrease was primarily due to improved efficiency in providing installation and support services to the Company's customers and the Company's efforts to control certain marketing and installation costs. General and administrative expenses, as a percentage of service and system fees revenues, decreased to 8.7% in the second quarter of 1995 from 9.0% in the second quarter of 1994, primarily due to the Company's ongoing efforts to control administrative costs. Cost of hardware sales increased to 82.1% of hardware sales revenues in the second quarter of 1995 from 79.1% in the second quarter of 1994. This change was primarily due to the different product mixes of systems installed in each quarter. Interest expense was $635,000 in the quarter ended June 30, 1995 compared to $290,000 in the same period in 1994. This change was primarily due to a higher level of outstanding borrowings associated with the Company's short-term loan obligations. Provision for Income Taxes -------------------------- The provision for income taxes increased in the quarter ended June 30, 1995, by $716,000 (13.1%) when compared to the same period in 1994. This change was due to an increase of $1,835,000 (13.1%) in income before income taxes. The Company's effective tax rate was 39% during the second quarter of 1995 and 1994. Net Income ---------- Net income was $9,681,000 in the quarter ended June 30, 1995 compared to $8,562,000 in the quarter ended June 30, 1994 for the reasons discussed above. 7 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Six Months Ended June 30, 1995 Compared to the Six Months Ended June 30, 1994. Revenues -------- Service and system fees revenues increased by $39,938,000 (16.8%) for the six months ended June 30, 1995 compared to the same period in 1994. Contributing to this increase were higher levels of professional services, system processing fees, and system sales. Also affecting this increase were revenues associated with the Company's MedSeries4 division which was acquired on September 30, 1994, and the impact in 1995 of stronger foreign currencies relative to the dollar for certain international operations. No revenues for the MedSeries4 division are included in the Company's results of operations for the six months ended June 30, 1994. The higher level of professional services was generally attributable to increases in system support and consulting 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. Hardware sales revenues increased to $22,558,000 for the six months ended June 30, 1995 from $19,655,000 for the same period in 1994 due primarily to changes in the timing and product mix of systems installed and the impact in 1995 of stronger foreign currencies for certain international operations. Cost and Expenses ----------------- Operating and development expenses increased to 47.2% of service and system fees revenues in the first two quarters of 1995 from 46.4% in the first two quarters of 1994. This change was primarily due to increased computer hardware and associated costs related to higher levels of system processing services provided to the Company's customers. Marketing and installation expenses decreased to 33.5% of service and system fees revenues in the first two quarters of 1995 from 33.7% in the first two quarters of 1994. This decrease was primarily due to improved efficiency in providing installation and support services to the Company's customers and the Company's efforts to control certain marketing and installation costs. General and administrative expenses, as a percentage of service and system fees revenues, decreased to 9.0% in the first two quarters of 1995 from 9.3% in the first two quarters of 1994, primarily due to the Company's ongoing efforts to control administrative costs. Cost of hardware sales increased to 82.3% of hardware sales revenues in the first two quarters of 1995 from 81.8% in the first two quarters of 1994. This change was primarily due to the different product mixes of systems installed in each quarter. Interest expense was $1,085,000 in the six months ended June 30, 1995 compared to $576,000 in the same period in 1994. This change was primarily due to a higher level of outstanding borrowings associated with the Company's short-term loan obligations. 8 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Provision for Income Taxes -------------------------- The provision for income taxes increased in the first two quarters of 1995 by $1,384,000 (12.7%) when compared to the same period in 1994. This change was due to an increase in income before income taxes of $3,550,000 (12.7%). The Company's effective tax rate was 39.0% in the first two quarters of 1995 and 1994. Net Income ---------- Net income was $19,272,000 in the first two quarters of 1995 compared to $17,106,000 in the first two quarters of 1994 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 May 11, 1995. At the meeting, the stockholders were requested a) to elect six directors for one year terms, b) to consider and vote on a proposal to approve the Company's 1994 Non-Qualified Stock Option and Restricted Stock Plan, and c) to act upon a stockholder proposal regarding board nominating policy. a) The following is a summary of the votes for elected directors:
Votes Broker Nominee Votes For Withheld Non-votes - ---------------------------------------------------------------------------- R. James Macaleer........ 17,153,333 68,449 0 Raymond K. Denworth, Jr.. 17,154,431 67,351 0 Frederick W. DeTurk...... 17,155,452 66,330 0 Josh S. Weston........... 17,156,141 65,641 0 Jeffrey S. Rubin......... 17,156,170 65,612 0 Marvin S. Cadwell........ 17,156,489 65,293 0
There are no other persons whose terms as directors continued after this meeting. 9 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- b) The following is a summary of the votes on the proposal to approve the Company's 1994 Non-Qualified Stock Option and Restricted Stock Plan:
Votes Broker Votes For Against Abstentions Non-Votes ----------------- --------------- ----------- ---------- 8,800,126 6,147,659 345,071 1,928,926
c) The following is a summary of the votes on the stockholder proposal regarding board nominating policy:
Votes Broker Votes For Against Abstentions Non-Votes ----------------- --------------- ----------- ---------- 3,545,121 11,006,170 702,932 1,967,559
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following exhibits are included in this report: No. Description ---- ---------------------------------------------------------------- (10) Material Contract - Performance bonus plan - 1995:* Marion G. Tomlin (27) Financial Data Schedule (b) No reports on Form 8-K were filed during the three-month period ended June 30, 1995. * May be deemed a management contract or compensatory arrangement. 10 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Exhibit Index No. Description --- ----------------------------------------- (10) Material Contract - Performance bonus plan - 1995:* Marion G. Tomlin (27) Financial Data Schedule * May be deemed a management contract or compensatory arrangement. 12 EX-10 2 MATERIAL CONTRACT Exhibit (10) TO: Tom Tomlin FROM: R. James Macaleer DATE: June 6, 1995 SUBJECT: YOUR 1995 ICP - -------------------------------------------------------------------------------- 1. If TSD meets its PTI objective (P) (including all revenues from the sales of the products of other SMS business units, along with the associated expenses for these products), you will receive $60,000. If P is exceeded, you shall receive $60,000, plus one percent of the difference between the actual PTI (A) and P. If there is a PTI shortfall, you will receive an amount equal to $60,000 x Y/2/, where Y is defined in the chart below.
A Y - - Greater than P 1.0 P - 0.2M .87 P - 0.4M .76 P - 0.6M .68 P - 0.8M .62 P - 1.0M .57 P - 1.2M .52 P - 1.4M .48 P - 1.6M .45 P - 1.8M 0
If A is between table entries, straight line interpolation shall be used to calculate Y. 2. Sales a. If your sales attainment is 80% or better of your quota for the sale of software to new clients, you will receive $30,000 x the actual percentage sales attainment x Y. b. If your sales attainment is 70% or better of your quota for the sale of add-on software to existing customers, you will receive $15,000 x the actual percentage sales attainment x Y. 3. Accounts Receivable - Incentive compensation for TSD's average annual A/R days (D) (billed and unbilled) will be based on improvement from D as of 12/31/94, as follows: a. Current A/R Days - Participant will be eligible to receive a Current ---------------- A/R Days bonus based on TSD's 12 month average Current A/R Days for 1995 as follows: Your 1995 ICP June 6, 1995 Page 2
--------------------------------------------------- Annual Current A/R Days Average (% of D) Bonus --------------------------------------------------- 56 - 63% $5,000 --------------------------------------------------- 63 - 70% $2,500 --------------------------------------------------- 70 - 77% $1,250 --------------------------------------------------- 77 - 84% 0 --------------------------------------------------- Greater than 84% ($2,500) ---------------------------------------------------
b. Total A/R Days - Participant will earn a bonus for Total A/R based on -------------- TSD's 12 month average Total A/R Days for 1995, as follows:
--------------------------------------------------- Annual Current A/R Days Average (% of D) Bonus --------------------------------------------------- 84% $5,000 --------------------------------------------------- 84 - 90% $2,500 --------------------------------------------------- 90 - 97% $1,250 --------------------------------------------------- 97 - 104% 0 --------------------------------------------------- Greater than 104% ($2,500) ---------------------------------------------------
A/R will be computed based on the average A/R on the last working day of each quarter. 4. Development Objectives a. If PSD, CDS, and GFS are live on UNIX no later than their target date, the payment under this subparagraph shall be $12,000 x Y. b. If all of V2.0, except Nursing, is live by the target date, payment under this subparagraph shall be $17,000 x Y. c. If the full complement of Nursing software (Charting/Tracking/Assessment/ Screening, and Healthcare Guidelines) is in productive use by the customer by its target date, payment under this subparagraph shall be $11,000 x Y. No payment shall be made under each subsection above until the customer has actually paid for the software and services. If payment is not received by the end of the fourth calendar month after first productive use, there shall be no payment for each subparagraph above. The amount to be paid under each subparagraph, above, shall be reduced by 50% if the target date is missed by more than 30 days. If the target date is missed by more than 60 days, there shall be no payment. RJM/gtr cc: P. Mullen EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 19,331 0 156,676 5,224 0 193,343 243,674 139,907 401,619 124,411 4,300 272 0 0 235,450 401,619 22,558 300,618 18,563 242,903 25,037 0 1,085 31,593 12,321 19,272 0 0 0 19,272 .82 .82
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