-----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, QdF2nM+6aXM0CwfDmQPbql+Y6E/iFG9d6RzfNiFHJzSFBp3Dw0NgURDBPVp479Iu kAJenCUAk1h+s2a5aqoVKQ== 0001036050-98-000897.txt : 19980518 0001036050-98-000897.hdr.sgml : 19980518 ACCESSION NUMBER: 0001036050-98-000897 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE 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: SEC FILE NUMBER: 001-13303 FILM NUMBER: 98624525 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 SHARED MEDICAL SYSTEMS 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, 1998 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 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, 1998, there were 26,311,603 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 Data-Plan Software GmbH in January 1998, 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 Data-Plan Software GmbH in January 1998, 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 Data-Plan Software GmbH in January 1998, 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, 1998 (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 Data-Plan Software GmbH (Data-Plan), which was completed on January 28, 1998 and accounted for as a pooling of interests. 2. Businesses Acquired: On January 28, 1998, the Company acquired Data-Plan Software GmbH, a provider of client/server clinical, financial, and administrative health information systems. Under the terms of the agreement, the Company issued 1,119,428 shares of the Company's common stock. This transaction was accounted for as a pooling of interests. Separate operating results for Shared Medical Systems Corporation (SMS) and Data-Plan for the three months ended March 31, 1997 are as follows (amounts in thousands):

On January 31, 1998, the Company increased its ownership interest in Delta Health Systems from 50% to 100% by purchasing the remaining equity from Delta Computer Systems, Inc. for $21,176,000. 3. Accounts Receivable: At March 31, 1998 and December 31, 1997, the Company's trade accounts receivable were reduced by allowances for doubtful accounts of $10,931,000 and $10,828,000, respectively. 4. Property and Equipment: The major classes of property and equipment at March 31, 1998 and December 31, 1997 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, 1998 and December 31, 1997 was $52,620,000 and $50,640,000, respectively. 6. Goodwill: Goodwill included in other assets, net of accumulated amortization, was $50,668,000 and $26,639,000 as of March 31, 1998 and December 31, 1997, respectively. The increase in goodwill from December 31, 1997 was primarily the result of the Company increasing its ownership interest in Delta Health Systems as further described in Note 2. 7. Comprehensive Income: In June 1997, the Financial Accounting Standards Board issued Statement 130, Reporting Comprehensive Income, which established standards for reporting of comprehensive income and its components. The Company's only component of other comprehensive income at March 31, 1998 consisted of foreign currency translation adjustments. The adoption of this statement had no impact on the Company's net income or stockholders' equity. The Company's comprehensive income for the three months ended March 31 was:

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, 1998. 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 construction of an office building at the Company's corporate headquarters, purchases of equipment, and payment of cash dividends. The Company plans to fund construction of the office building principally through external financing. All other anticipated expenditures will be funded primarily through internally generated funds supplemented from time to time by external borrowings. At March 31, 1998, the Company had lines of credit with banks of approximately $173,065,000, generally at their prime interest rates. At March 31, 1998, approximately $57,498,000 of these lines of credit were unused. 6 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Material Changes in Results of Operations - ----------------------------------------- Three Months Ended March 31, 1998 Compared to the Three Months Ended March 31, 1997. Revenues -------- Service and system fees revenues were $213,731,000, an increase of 13.5% compared to the first quarter of 1997. This increase was primarily due to higher levels of professional services and software fees. The higher level of professional services was generally attributable to system support, consulting fees, and system installations. The increase in software fees was due to higher levels of sales and installations to new and existing customers. Hardware sales revenues increased to $41,735,000 for the first quarter of 1998 from $29,055,000 in the first quarter of 1997, primarily due to the installation of IBM mainframe systems to new and existing customers that process the Company's INVISION product at their site, and changes in the timing and product mix of systems installed. Cost and Expenses ----------------- Operating and development expenses increased to 48.4% of service and system fees revenues in the first quarter of 1998 from 48.2% for the first quarter 1997. This change was principally due to a higher rate of growth, as compared to the growth in service and system fees revenues, for personnel and related costs associated with software development and facilities management services provided to customers, partially offset by a lower rate of growth for computer hardware and associated costs at the Company's Information Services Center. Marketing and installation expenses decreased to 31.4% of service and system fees revenues in the first quarter of 1998 from 32.3% in the first quarter of 1997, primarily due to a lower rate of growth, as compared to the growth in service and system fees revenues, for customer implementation costs. General and administrative expenses, as a percentage of service and systems fees revenues, decreased to 9.1% in the first quarter of 1998 from 9.7% in the first quarter of 1997. This change was primarily due to a lower rate of growth for personnel and related costs as part of the Company's continuing efforts to leverage administrative costs over an increasing revenue base. Cost of hardware sales increased to 84.9% of hardware sales revenues in the first quarter of 1998 from 83.3% in the first quarter of 1997. This change was primarily due to the different product mixes of systems installed in each quarter. Interest expense was $1,412,000 in the quarter ended March 31, 1998 compared to $702,000 in the same period in 1997. This change was generally attributable to a higher level of average outstanding short-term borrowings during the current period. The increase in average outstanding short-term borrowings was partially attributable to funds used for businesses and investments acquired in the first quarter of 1998 and fourth quarter of 1997. 7 SHARED MEDICAL SYSTEMS CORPORATION ---------------------------------- Provision for Income Taxes -------------------------- Income taxes increased $2,373,000 in the quarter ended March 31, 1998 when compared to the same period in 1997. This change was primarily due to an increase of $6,249,000 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 1998 and 1997. Net Income ---------- Net income was $17,821,000 in the quarter ended March 31, 1998 compared to $13,945,000 in the quarter ended March 31, 1997 for the reasons discussed above. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Following the Company's initiation of legal action against PeopleSoft, Inc., as described in the Company's report on Form 10-K for the year ended December 31, 1997, the parties agreed to submit their issues to an expedited arbitration. The Company remains confident in its position and expects the arbitration to be concluded within the next two calendar quarters. Item 2. Changes In Securities On January 28, 1998 the Company issued 1,119,428 shares of its Common Stock to acquire Data-Plan Software GmbH (Data-Plan), in a transaction not subject to the Securities Act of 1933, as amended (the Act), or exempt from registration under Section 4(2) of the Act. On February 27, 1998 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 Data-Plan. An amendment to the registration statement was filed on April 27, 1998. The registration statement, as amended, was declared effective on April 29, 1998. 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, 1998 Restated for the Year Ended December 31, 1997 Restated for the Nine Months Ended September 30, 1997 Restated for the Six Months Ended June 30, 1997 Restated 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 (b) No reports on Form 8-K were filed during the three-month period ended March 31, 1998. 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, 1998 /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, 1998 Restated for the Year Ended December 31, 1997 Restated for the Nine Months Ended September 30, 1997 Restated for the Six Months Ended June 30, 1997 Restated 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 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 25,032 0 292,853 10,931 0 340,504 272,599 164,349 669,508 272,752 15,531 0 0 304 356,052 669,508 41,735 255,466 35,413 170,383 19,515 0 1,412 28,743 10,922 17,821 0 0 0 17,821 .68 .66

EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 30,692 0 265,629 10,828 0 319,260 264,737 158,432 613,976 229,584 16,291 0 0 303 329,554 613,976 118,813 921,341 97,872 648,231 72,700 0 3,987 98,551 37,449 61,102 0 0 0 61,102 2.34 2.30

EX-27.2 4 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 26,326 0 253,008 9,411 0 307,177 258,436 155,590 564,533 196,697 16,550 0 0 302 311,557 564,533 84,716 664,558 71,859 468,012 52,475 0 2,817 69,395 26,371 43,024 0 0 0 43,024 1.65 1.62

EX-27.3 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 30,042 0 240,897 9,611 0 290,308 258,503 155,594 535,671 174,243 17,579 0 0 301 303,821 535,671 57,505 434,711 48,633 304,194 34,716 0 1,810 45,358 17,236 28,122 0 0 0 28,122 1.08 1.06

EX-27.4 6 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 13,974 0 241,973 9,463 0 281,571 258,312 159,379 506,048 160,946 14,342 0 0 300 293,531 506,048 29,055 217,344 24,192 151,651 18,305 0 702 22,494 8,549 13,945 0 0 0 13,945 .54 .53

EX-27.5 7 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 42,124 0 226,754 9,389 0 290,243 258,348 154,436 522,592 185,331 15,361 0 0 299 285,799 522,592 89,854 806,950 76,424 582,456 66,319 0 3,655 78,096 29,322 48,774 0 0 0 48,774 1.89 1.84

EX-27.6 8 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 23,895 0 210,669 8,222 0 257,365 251,797 149,401 484,757 155,623 15,919 0 0 298 278,196 484,757 59,989 578,388 51,228 420,023 48,997 0 2,717 55,423 21,026 34,397 0 0 0 34,397 1.33 1.30

EX-27.7 9 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 19,508 0 208,464 7,056 0 251,724 252,862 150,730 470,129 150,478 16,616 0 0 298 268,559 470,129 43,979 381,886 37,912 274,348 32,234 0 1,745 35,647 13,830 21,817 0 0 0 21,817 .85 .82

EX-27.8 10 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 20,541 0 199,141 6,826 0 243,674 245,221 145,919 456,083 141,736 17,664 0 0 297 262,268 456,083 15,976 182,130 13,886 134,771 15,871 0 823 16,779 6,734 10,045 0 0 0 10,045 .39 .38

EX-27.9 11 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 25,512 0 188,726 6,767 0 239,894 246,054 143,493 459,075 150,554 17,939 0 0 296 253,792 459,075 69,829 689,978 54,734 505,391 59,325 0 3,256 67,272 25,437 41,835 0 0 0 41,835 1.64 1.61

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