================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
-------------------------------
Commission File Number 0-26816
IDX SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Vermont 03-0222230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Shelburne Road
South Burlington, VT 05403
(Address of principal executive offices)
Registrant's telephone number, including area code: (802-862-1022)
Indicate by check mark whether the registrant 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).
Yes X No
----- -----
Indicate by check mark whether the registrant has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the registrant's common
stock as of November 11, 1999 was 27,779,914.
================================================================================
[Exhibit index begins on Page 24]
<PAGE>
IDX SYSTEMS CORPORATION
FORM 10-Q
For the Quarterly Period Ended September 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
ITEM 1. INTERIM FINANCIAL STATEMENTS..................................3
Condensed Consolidated Balance Sheets.........................3
Consolidated Statements of Operations.........................4
Condensed Consolidated Statements of Cash Flows...............5
Notes to Condensed Consolidated Financial Statements..........6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.....................................10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................................22
ITEM 2. CHANGES IN SECURITIES.........................................22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...............................22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........22
ITEM 5. OTHER INFORMATION.............................................22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..............................22
SIGNATURES................................................................23
EXHIBIT INDEX.............................................................24
</TABLE>
Page 2 of 24
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements
IDX Systems Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- ----------------
<S> <C> <C>
ASSETS
Cash and marketable securities $ 73,896 $ 125,132
Accounts receivable, net 111,374 102,179
Income taxes receivable 4,720 -
Other current assets 6,644 5,403
Deferred tax asset 4,720 4,720
----------------- ----------------
Total current assets 201,354 237,434
Property and equipment, net 54,545 35,949
Capitalized software costs, net 470 665
Other assets 16,938 12,868
Deferred tax asset 2,307 2,307
----------------- ----------------
Total assets $ 275,614 $ 289,223
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses
and other liabilities $ 44,322 $ 38,484
Short-term debt - 5,611
Income taxes - 5,429
Deferred revenue 17,801 18,239
----------------- ----------------
Total current liabilities 62,123 67,763
Long-term debt - 2,261
Minority interest 9,100 8,988
Stockholders' equity 204,391 210,211
----------------- ----------------
Total liabilities and stockholders'
equity $ 275,614 $ 289,223
================= ================
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
Restated for Comparison Purposes - See Note 1
Page 3 of 24
<PAGE>
IDX Systems Corporation
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES
Systems sales $ 34,365 $ 46,678 $ 94,944 $129,363
Maintenance and service fees 57,853 44,259 158,179 126,545
-------- -------- -------- --------
TOTAL REVENUES 92,218 90,937 253,123 255,908
OPERATING EXPENSES
Cost of sales 56,442 50,362 161,540 142,823
Selling, general and
administrative 21,616 17,385 62,815 48,548
Research and development 12,733 12,587 39,921 35,025
Nonrecurring charge - - 4,045 3,201
-------- -------- -------- -------
TOTAL OPERATING EXPENSES 90,791 80,334 268,321 229,597
OPERATING INCOME (LOSS) 1,427 10,603 (15,198) 26,311
Other (income) expense (537) (1,246) (1,796) (3,242)
Loss on impairment of asset - - 1,642 -
-------- ------- -------- ---------
Income (loss) before taxes 1,964 11,849 (15,044) 29,553
Income tax provision (benefit) 786 5,650 (5,394) 15,990
-------- ------- -------- --------
NET INCOME (LOSS) $ 1,178 $ 6,199 $ (9,650) $ 13,563
======== ======== ======== ========
BASIC EARNINGS (LOSS) PER
SHARE $ 0.04 $ 0.23 $ (0.35) $ 0.50
======== ======== ======== ========
Basic weighted average
shares outstanding 27,767 27,427 27,701 27,292
======== ======== ======== ========
Diluted earnings (loss)
per share $ 0.04 $ 0.22 $ (0.35) $ 0.48
======== ======== ======== ========
Diluted weighted average
shares outstanding 28,271 28,279 27,701 28,156
======== ======== ======== ========
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
Restated for Comparison Purposes - See Note 1
Page 4 of 24
<PAGE>
IDX Systems Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
--------- --------
<S> <C> <C>
Operating Activities
Net income (loss) $ (9,650) $13,564
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 11,222 9,398
Deferred tax benefit, net of business
acquisitions - (517)
Increase in allowance for doubtful
accounts 585 118
Minority interest 112 301
Loss on investment 1,642 -
Write-off of acquired in-process
research and development costs - 3,201
Changes in operating assets and liabilities,
net of business acquisitions:
Accounts receivable (9,780) (15,168)
Prepaid expenses and other assets 1,179 2,644
Accounts payable and accrued expenses 5,839 (3,102)
Federal and state taxes payable (10,149) 6,339
Deferred revenue (438) (3,654)
------------- ------------
Net cash (used in) provided by
operating activities (9,438) 13,124
Investing Activities
Purchase of property and equipment, net (28,177) (11,545)
Purchase of securities available-for-sale (178,246) (83,216)
Sale of securities available-for-sale 246,753 75,133
Business acquisitions (6,500) -
Other assets (3,077) (7,545)
-------------- ------------
Net cash provided by (used in)
investing activities 30,753 (27,173)
Financing Activities
Proceeds from sale of common stock 4,063 11,728
Proceeds from debt issuances 3,501 8,935
Contributions to affiliates, net - 6,500
Principal repayments of debt (11,373) (9,324)
-------------- -------------
Net cash (used in) provided by
financing activities (3,809) 17,839
-------------- -------------
Increase in cash and cash equivalents 17,506 3,790
Cash and cash equivalents at beginning
of period 11,558 14,741
-------------- -------------
Cash and cash equivalents at end of period $ 29,064 $ 18,531
============== =============
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
Restated for Comparison Purposes - See Note 1
Page 5 of 24
<PAGE>
Notes to Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation
All financial information for previously reported periods included in the
accompanying interim unaudited condensed consolidated financial statements of
IDX Systems Corporation ("Company" or "IDX") has been restated to reflect the
combined operations of IDX and EDiX Corporation ("EDiX") as a result of the
merger, more fully described in Note 3, which was accounted for as a pooling of
interests during the quarter ended June 30, 1999. No adjustments were required
to conform the financial reporting policies of IDX and EDiX for periods
presented.
The interim unaudited consolidated financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission and in accordance with generally accepted accounting principles.
Accordingly, certain information and footnote disclosures normally included in
annual financial statements have been omitted or condensed. In the opinion of
management, all necessary adjustments have been made to provide a fair
presentation. The operating results for the nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes included in the Company's latest annual
report on Form 10-K.
Note 2 - New Accounting Standards
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use", which the Company adopted as
of December 31, 1998. SOP 98-1 requires capitalization of certain costs incurred
in connection with developing or obtaining internal use software. In the prior
year, the Company expensed such costs as incurred. This accounting change had no
effect on net income (loss) for the three month period ended September 30, 1999
and increased net income per diluted share by $0.01 for the same period in 1998.
For the nine month period ended September 30, 1999 this accounting change
decreased the net loss per share by $0.01, and increased earnings per diluted
share by $0.01 for the comparable period in 1998.
Note 3 - Business Acquisitions
On February 23, 1998, the Company recorded charges of $3.2 million related to
the acquisition of contract management system technology from Trego Systems,
Inc. for cash of $4.0 million. The acquisition was accounted for under the
purchase method. The charges were expensed as in-process research and
development costs in connection with the Company's development of a healthcare
contract management system.
On April 23, 1999, the Company acquired EDiX, a provider of medical
transcription outsourcing services to hospitals and large physician group
practices. The terms of the agreement provided for the shareholders and
optionholders of EDiX to receive approximately 1,000,000 shares of IDX common
stock. Based on the closing price of the IDX common stock on April 23, 1999, the
transaction is valued at approximately $16.7 million, plus the assumption of
EDiX debt of approximately $14.0 million. This transaction has not had a
dilutive effect on dilute earnings per share in 1999 compared to 1998. The EDiX
organization will operate as EDiX, a division of IDX Systems Corporation.
The acquisition was accounted for as a pooling of interests during the quarter
ended June 30, 1999 and all historical information of the Company for all
periods presented has been restated to include EDiX's operating results. During
the second quarter ended June 30, 1999, the Company recorded charges of $4.0
million related to the acquisition of EDiX. The charges were comprised of
transaction costs of $2.4 million, write-offs and adjustments for long-lived
assets, principally computer equipment, of $1.4 million and other merger related
costs of $200,000, principally noncompatible related to integration costs
incurred during the period and the termination of leases and other contractual
obligations.
On April 1, 1999, the Company acquired an 80% interest in Channelhealth, Inc.
for $6.5 million and may pay an additional $3.0 million, contingent upon certain
performance goals. The acquisition will be accounted for under the purchase
method.
Page 6 of 24
<PAGE>
On June 23, 1999, the Company acquired all of the assets of DietSite.com, Inc.
for $1.5 million. DietSite.com is a website which includes disease-oriented
dietary information with extensive proprietary content on diets, vitamins,
herbals and nutritionals. Channelhealth, Inc. and DietSite.com will be managed
and operated with the Company's other web technology initiatives in a separate,
majority-owned subsidiary. Channelhealth will offer three Internet channels that
integrate the core practice management systems with extensive Internet-based
services and clinically valid content.
Note 4 - Income Taxes
The tax benefit in 1999 is lower than that expected based on the statutory rate
principally due to the non-deductible nature of certain transaction costs
related to business acquisitions. The 1998 tax provision is higher than that
expected based on the statutory rate principally due to losses of EDiX for which
no tax benefit has been recognized.
Note 5 - Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 130, "Reporting Comprehensive Income". SFAS 130 establishes
new rules for the reporting and display of comprehensive income and its
components; however, the adoption of this statement had no impact on the
Company's net income or stockholders' equity. SFAS 130 requires unrealized gains
or losses on the Company's available-for-sale securities which prior to adoption
were reported separately in stockholders' equity, to be included in other
comprehensive income. Total comprehensive income (loss) for the quarter ended
September 30, 1999 amounted to $1.2 million compared to $6.2 million in the same
period in 1998. Total comprehensive income (loss) for the nine months ended
September 30, 1999 amounted to ($9.8) million compared to $13.6 million in the
same period in 1998.
Note 6- Segment Information
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." The
Company adopted SFAS No. 131 effective with the fiscal year ended December 31,
1998. SFAS No. 131 establishes standards for reporting information regarding
operating segments in annual financial statements and requires selected
information for those segments to be presented in interim financial reports
issued to stockholders. SFAS No. 131 also establishes standards for related
disclosures about major customers, products and services, and geographic areas.
Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision making group, in making decisions
regarding resource allocation and performance assessment. Up to and including
the first quarter of 1999, the Company has viewed its operations and managed its
business as principally one segment, healthcare information solutions that
include software, hardware and related services. During the second quarter of
1999, the Company acquired two companies which have separate and distinct
financial and operating characteristics. When applicable, the information for
the reportable segments has been restated for the prior year in order to conform
to the 1999 presentation.
The Company's three business units have separate management teams and
infrastructures that offer different products and services, and as such, have
been classified as three reportable segments (information systems and services,
internet initiatives, and medical transcription services).
Information Systems and Services: This reportable segment consists of IDX
Systems Corporation's healthcare information solutions that include software,
hardware and related services. IDX solutions enable healthcare organizations to
redesign patient care and other workflow processes in order to improve
efficiency and quality. The principal markets for this segment include physician
groups, management service organizations, hospitals, and integrated delivery
networks primarily located in the United States.
Channelhealth, Inc. - Internet Initiatives: This reportable segment consists of
an 80% interest in Channelhealth, an internet web-portal for physicians combined
with a marketing site for pharmaceutical products, including the website
DietSite.com which provides nutritional analysis and information, and various
other web enabled products.
Page 7 of 24
<PAGE>
Channelhealth will offer three Internet channels that integrate the core
practice management systems with extensive Internet-based services and
clinically valid content. Channelhealth services are available to physicians
through group practices, hospitals, integrated delivery networks and managed
care organizations.
The Physician Channel(TM)
The Physician Channel includes a workflow-driven portal called the Physician
Homebase with rich medical content and continuing medical education material,
and web-based electronic medical record modules. The Homebase(TM) will
incorporate the physician's schedule and other practice-specific data that helps
improve office management and patient care processes. The Physician Channel will
provide online medication orders, results review and interactive transcription
management, which will ultimately create secure, Internet-based electronic
medical records.
The Patient Channel(TM)
The Patient Channel is being designed to create a meaningful, personally
relevant online connection between the patient and his/her personal physician.
Using the Patient Channel, a patient will be able to access a "Virtual
Office(TM)" --to schedule and confirm appointments, renew medications, refill
prescriptions and review test results after they have been acknowledged and
released by the physician. The Patient Channel will also provide the ability for
individuals to review their personal medical records starting with data that may
be automatically transferred from the physician's record.
The E-commerce Channel(TM)
The E-commerce Channel will feature an integrated single-source solution for
processing claims, referrals, eligibility and clinical transactions by providing
connectivity to payers, pharmacies, laboratories and pharmacy benefit managers.
For example, when performing online eligibility verification, the patient
registration and health plan information is extracted automatically from the
practice management system, eliminating redundant data entry and improving the
efficiency of payer communication. In addition, the E-commerce Channel will
allow physicians and provider organizations group purchasing for medical/ office
equipment and supplies.
Medical Transcription Services: This reportable segment represents EDiX, a
provider of medical transcription outsourcing services. The principal markets
for this segment include hospitals and large physician group practices primarily
located in the United States.
The accounting policies of the reportable segments are the same as those
described in Note 1 of the Notes to Consolidated Financial Statements filed in
the 1998 Form 10-K. The Company evaluates the performance of its operating
segments based on revenue and operating income. Intersegment revenues are
immaterial. No one customer accounts for greater than 10% of revenue for any
reportable segment, with the exception of EDiX. During the quarter ended
September 30, 1999 and September 30, 1998, EDiX's sales to one major customer
amounted to 12.9% and 0.0% of total revenue respectively. During the nine months
ended September 30, 1999 and September 30, 1998, EDiX's sales to the same
customers amounted to 10.3% and 0.0% of total revenue respectively.
Page 8 of 24
<PAGE>
Summarized financial information concerning the Company's reportable segments is
shown in the following table (in millions):
<TABLE>
<CAPTION>
IDX Healthcare
Information Channelhealth-
Systems and Internet
Services Initiatives EDiX Total
-------------- -------------- -------- -------
<S> <C> <C> <C> <C>
FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1999
Net operating revenues $ 78,894 $ 1,127 $ 12,197 $ 92,218
Operating income (loss) 6,198 (4,882) 111 1,427
Identifiable operating
assets 254,774 8,042 12,798 275,614
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999
Net operating revenues $ 216,589 $ 3,688 $ 32,846 $ 253,123
Operating loss (2,612) (7,621) (4,965) (15,198)
Identifiable operating
assets 254,774 8,042 12,798 275,614
FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1998
Net operating revenues $ 83,358 - $ 7,579 $ 90,937
Operating income (loss) 12,496 - (1,893) 10,603
Identifiable operating
assets 266,357 - 8,420 274,777
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998
Net operating revenues $ 235,459 - $ 20,449 $ 255,908
Operating income (loss) 32,963 - (6,652) 26,311
Identifiable operating
assets 266,357 - 8,420 274,777
</TABLE>
Substantially all of the Company's operations are in the United States. As a
result, the financial information disclosed herein represents all of the
material financial information related to the Company's principal operating
segments.
Note 6 - Earnings Per Share Information
The following sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------- --------------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ 1,178 $ 6,199 $(9,650) $13,563
------------------- --------------------
Numerator for basic and diluted
earnings (loss) per share $ 1,178 $ 6,199 $(9,650) $13,563
Denominator:
Denominator for basic earnings
(loss) per share
Weighted-average shares 27,767 27,427 27,701 27,292
Effect of employee stock
options 504 852 864
------------------- --------------------
Denominator for diluted earnings
(loss) per share 28,271 28,279 27,701 28,156
------------------- --------------------
Basic earnings (loss) per
share $ 0.04 $ 0.23 $ (0.35) $ 0.50
=================== ====================
Diluted earnings (loss) per
share $ 0.04 $ 0.22 $ (0.35) $ 0.48
=================== ====================
</TABLE>
Page 9 of 24
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
This Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties
including those discussed below that could cause actual results to differ
materially from historical results or those anticipated. Words such as
"believes," "may," "plans," "anticipates," "expects," "intends," and similar
expressions are intended to identify forward-looking statements, but are not the
exclusive means of identifying such statements. In addition, the disclosures in
the section on page 16 under the caption "Factors Affecting Future Results"
consists principally of a discussion of risks which may affect future results
and are thus, in their entirety, forward-looking in nature. Readers are urged to
carefully review and consider the various disclosures made by the Company in
this report and in the Company's other reports filed with the Securities and
Exchange Commission that attempt to advise interested parties of the risks and
factors that may affect the Company's business.
The Company reported net income of $1.2 million, or $0.04 per diluted share, for
the third quarter of 1999 as compared to net income of $6.2 million or $0.22 per
diluted share, for the third quarter of 1998. The Company reported a net loss of
($9.6) million, or ($0.35) per diluted share, for the first nine months of 1999
as compared to net income of $13.6 million or $0.48 per diluted share, for the
first nine months of 1998.
Excluding the effect of nonrecurring charges for the acquisition of EDiX
Corporation of $4.0 million and the write-off of an investment of $1.6 million,
the net loss for the nine months ended September 30, 1999 was ($5.6) million or
($0.20) per diluted share. Excluding nonrecurring expenses in the prior year for
costs associated with the acquisition of Trego Systems, Inc., the Company
reported net income of $15.1 million, or $0.54 per share, for the first nine
months of 1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS
ENDED SEPTEMBER 30, 1998
REVENUES
The Company's total revenues increased to $92.2 million during the three months
ended September 30, 1999 from $90.9 million in the corresponding period in 1998,
an increase of $1.3 million or 1.4%. Revenues from systems sales decreased to
$34.4 million during the three months ended September 30, 1999 (37.3% of total
revenues) compared to $46.7 million (51.3% of total revenues) in the
corresponding period in 1998, a decrease of $12.3 million or (26.4%). The
decrease was primarily due to a reduction in hardware sales of $9.7 million.
Revenues from maintenance and service fees increased to $57.9 million during the
three months ended September 30, 1999 (62.7% of total revenues) from $44.3
million (48.7% of total revenues) in the corresponding period in 1998, an
increase of $13.6 million or 30.7%. The increase in revenues from maintenance
and service fees was due to additional maintenance revenues resulting from the
continued growth in the Company's installed client base and increased
transcription service fee revenue from EDiX.
During 1999, certain of the Company's large customers delayed making purchasing
decisions with respect to certain large software systems comprised of multiple
products, resulting in longer sales cycles for such systems. Management believes
such delays are due to a number of factors, including customer organizational
changes, governmental approvals, product complexity, competition and customer
preoccupation with internal Year 2000 issues. The Company is unable to determine
whether such factors constitute a trend and will continue into future periods.
Page 10 of 24
<PAGE>
COST OF SALES
The cost of sales and services increased to $56.4 million during the three
months ended September 30, 1999 from $50.4 million in the corresponding period
in 1998, an increase of $6.1 million or 12.1%. The gross profit margin on
systems sales and services decreased to 38.8% during the three months ended
September 30, 1999 from 44.6% in the corresponding period in 1998. The decrease
in gross profit was primarily due to fixed costs and overhead expenses in
relation to decreased revenue from installations of the Company's systems which
typically include a greater percentage of software than services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $21.6 million during
the three months ended September 30, 1999 from $17.4 million in the
corresponding period in 1998, an increase of $4.2 million or 24.3%. As a
percentage of total revenues, selling, general and administrative expenses
increased to 23.4% during the three months ended September 30, 1999 from 19.1%
in 1998. The increase in total selling, general and administrative expenses
during the three months ended September 30, 1999 was primarily due to an
increase in the Company's sales, marketing and administrative staff
infrastructure which management believes is necessary to support the long-term
growth of the Company.
RESEARCH AND DEVELOPMENT
Research and development expenses increased to $12.7 million during the three
months ended September 30, 1999 from $12.6 million in the corresponding period
in 1998, an increase of $100,000 or 1.2%. The slight increase is due to the
hiring of additional staff and outside consultants to support the development of
additional products including IDXsite and web technology applications, and for
the costs of efforts to address Year 2000 issues. As a percentage of total
revenues, research and development expenses remained comparable at 13.8% of
revenue for the third quarters of 1999 and 1998.
Interest and OTHER INCOME
Interest income decreased to approximately $768,000 during the third quarter of
1999 compared to $1.9 million for the comparable period in 1998. Interest
expense decreased approximately $375,000 during the third quarter of 1999 as
compared to the same period in the prior year.
INCOME TAXES
Income taxes for the quarter ended September 30, 1999 were provided at 40.0 %
which approximates the Company's historical statutory rate. The provision for
income taxes for the three months ended September 30, 1998 was provided for at
approximately 47.7 %. The higher rate in the prior year is due to the effect of
the restatement of the Company's financial statements, for the pooling of
interests accounting for the acquisition of EDiX which includes a net loss for
EDiX for which no tax benefit was recognized. The Company anticipates an
effective tax rate of approximately 40.0% for the remainder of the year ending
December 31, 1999.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1998
REVENUES
The Company's total revenues decreased to $253.1 million during the nine months
ended September 30, 1999 compared to $255.9 million in the corresponding period
in 1998, a decrease of $2.8 million or (1.1%). Revenues from systems sales
decreased to $94.9 million during the nine months ended September 30, 1999
(37.5% of total revenues) compared to $129.4 million (50.6% of total revenues)
in the corresponding period in 1998, a decrease of $34.4 million or (26.6%). The
decrease was primarily due to a delay in current and potential customers'
purchasing decisions combined with a decrease in hardware sales. Revenues from
maintenance and service fees increased to $158.2 million during the nine months
ended September 30, 1999 (62.5% of total revenues) from $126.5 million (49.4% of
total revenues) in the corresponding period in 1998, an increase of $31.6
million or 25.0%. The increase in revenues from maintenance and service fees was
due to additional maintenance revenues resulting from the continued growth in
the Company's installed client base and increased transcription service fee
revenue from EDiX.
Page 11 of 24
<PAGE>
During 1999, certain of the Company's large customers delayed making purchasing
decisions with respect to certain large software systems comprised of multiple
products, resulting in longer sales cycles for such systems. Management believes
such delays are due to a number of factors, including customer organizational
changes, governmental approvals, product complexity, competition and customer
preoccupation with internal Year 2000 issues. The Company is unable to determine
whether such factors constitute a trend and will continue into future periods.
COST OF SALES
The cost of sales and services increased to $161.5 million during the nine
months ended September 30, 1999 from $142.8 million in the corresponding period
in 1998, an increase of $18.7 million or 13.1%. The gross profit margin on
systems sales and services decreased to 36.2% during the nine months ended
September 30, 1999 from 44.2% in the corresponding period in 1998.
The decrease in gross profit was primarily due to fixed costs and overhead
expenses in relation to decreased revenue from installations of the Company's
LastWord and IDXtend systems which typically include a greater percentage of
software than of services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $62.8 million during
the nine months ended September 30, 1999 from $48.5 million in the corresponding
period in 1998, an increase of $14.3 million or 29.4%. As a percentage of total
revenues, selling, general and administrative expenses increased to 24.8% during
the nine months ended September 30, 1999 from 19.0% in 1998. The increase in
total selling, general and administrative expenses during the nine months ended
September 30, 1999 was principally due to an increase in the Company's sales,
marketing and administrative staff infrastructure which management believes is
necessary to support the long-term growth of the Company.
RESEARCH AND DEVELOPMENT
Research and development expenses increased to $39.9 million during the nine
months ended September 30, 1999 from $35.0 million in the corresponding period
in 1998, an increase of $4.9 million or 14.0%. The increase is primarily due to
the hiring of additional staff and outside consultants to support the
development of additional products including IDXsite and web technology
applications, and for the costs of efforts to address Year 2000 issues. As a
percentage of total revenues, research and development expenses increased to
15.8% during the nine months ended September 30, 1999 from 13.7% for the nine
months ended September 30, 1998. The increase as a percentage of sales for the
nine months ended September 30, 1999 as compared to the prior year, is due to
the additional personnel and consulting expenses.
NONRECURRING CHARGE - MERGER AND RELATED COSTS
During the nine months ended September 30, 1999, the Company recorded charges of
$4.0 million related to the acquisition of EDiX. The charges were comprised of
transaction costs of $2.4 million, write-offs and adjustments for long-lived
assets, principally noncompatible computer equipment, of $1.4 million and other
merger related costs of $200,000, principally related to integration costs
incurred during the period and the termination of leases and other contractual
obligations.
NONRECURRING CHARGE - WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
On February 23, 1998, the Company recorded nonrecurring charges of $3.2 million
related to the acquisition of contract management technology from Trego Systems,
Inc. for cash of $4.0 million. The acquisition was accounted for under the
purchase method. The charges were expensed as in-process research and
development costs in connection with the Company's development of a healthcare
contract management system.
INTEREST AND OTHER INCOME (EXPENSE)
Interest income decreased to approximately $3.4 million during the first nine
months of 1999 compared to $4.9 million for the same period in 1998. Interest
expense increased to $900,000 during the first three quarters of 1999 compared
to $800,000 for the same period in the prior year. The increase in interest
expense is primarily due to interest expense incurred by EDiX Corporation.
Page 12 of 24
<PAGE>
LOSS ON IMPAIRMENT OF ASSET
Other expense included the write-off of an investment of $1.6 million in the
quarter ended March 31, 1999.
INCOME TAXES
Income taxes for the nine months ended September 30, 1999 were benefited at
35.9% which is lower than the Company's historical statutory rate of 40.0%
primarily due to certain charges related to the acquisition of EDiX which are
non-deductible for income tax purposes. Income taxes for the nine months ended
September 30, 1998 were provided for at approximately 54.1%. The higher rate in
the prior year is due to the effect of the restatement of the Company's
financial statements for the pooling of interests accounting for the acquisition
of EDiX, which includes the net loss for EDiX for which no tax benefit was
recognized. In addition, a portion of the charges incurred in the first quarter
ended March 31, 1998 related to the acquisition of Trego Systems, Inc. were
non-deductible for income tax purposes. The Company anticipates an effective tax
rate of approximately 40% for the remainder of the year ending December 31,
1999.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in 1969, the Company has funded its operations, working
capital needs and capital expenditures primarily from operations. The proceeds
from its initial public offering in 1995 have been used for general corporate
purposes.
Cash flows from operations are principally comprised of net income (loss),
depreciation and amortization, and are primarily affected by the net effect of
the change in accounts receivable, accounts payable and accrued expenses. Due to
the nature of the Company's business, accounts receivable, deferred revenue and
accounts payable fluctuate considerably due to, among other things, the length
of the installation efforts which are dependent upon, among other things, the
size of the transaction, the changing business plans of the customer, the
effectiveness of customers' management and general economic conditions. In
general, accounts receivable from customers have been collected within the range
of 111 to 128 days.
Cash flows related to investing activities have principally been related to the
purchase of computer and office equipment, leasehold improvements, the
acquisition of complementary products, businesses, technology and the purchase
and sale of investment grade marketable securities. The Company expects these
activities to continue. During the nine months ended September 30, 1999, the
Company acquired two buildings in South Burlington, Vermont for approximately
$7.5 million with approximately 66,000 square feet that will be used for
additional office space.
On April 23, 1999 the Company acquired EDiX. The terms of the agreement provided
for the shareholders and optionholders of EDiX to receive approximately
1,000,000 shares of IDX common stock. Based on the closing price of the IDX
common stock on April 23, 1999, the transaction is valued at approximately $16.7
million, plus the assumption of EDiX debt of approximately $14.0 million that
was paid off during the nine months ended September 30, 1999. Additionally, the
Company acquired an 80% interest in Channelhealth, Inc. on April 1, 1999 for
$6.5 million. On June 23, 1999, the Company acquired all of the assets of
DietSite.com, Inc. for $1.5 million. Channelhealth, Inc. and DietSite.com will
be managed and operated with the Company's other web technology initiatives in a
separate, majority-owned subsidiary. It is anticipated that this company will
lose approximately $13.0 million pretax during 1999. There can be no assurance
that the Company will be able to successfully complete other purchases or
acquisitions in the future.
Cash flows from financing activities historically relate to the sale of common
stock through the exercise of employee stock options and in connection with the
employee stock purchase plan. During 1998 other financing activities related to
the recapitalization of the real estate affiliate, which is included in the
consolidated financial statements, from debt to equity.
Cash, cash equivalents and marketable securities at September 30, 1999 were
$73.9 million, a decrease from the December 31, 1998 balance of $125.1 million.
This decrease is primarily due to the investing activities referred to above
combined with a use of cash for operations due to the operating loss of $9.6
million for the nine months ended September 30, 1999. The Company has a
revolving line of credit with a bank allowing the Company to borrow up to $5.0
million bearing interest at the prime rate. There were no borrowings as of
September 30, 1999 or 1998.
Page 13 of 24
<PAGE>
The Company expects that its requirements for office facilities will grow as
staffing requirements dictate. The Company's operating lease commitments consist
primarily of office leasing for the Company's operating facilities. The Company
plans to continue increasing the number of its professional staff during the
remainder of 1999 and throughout 2000 to meet anticipated sales volume and to
support research and development efforts. To the extent necessary to support
increases in staffing, the Company intends to obtain additional office space.
The Company is currently evaluating a plan to acquire the Company's headquarters
in South Burlington, Vermont from BDP Realty, a related entity which is included
in the Company's consolidated financial statements. As a result of this
potential acquisition, the Company may choose to obtain financing in the form of
a mortgage backed financing instrument. The Company started construction on an
expansion of its Corporate Headquarters facility in South Burlington, Vermont,
in November 1999, and is considering various options for financing including a
construction loan, sale lease-back arrangement or funding from operations. From
time to time, based on the Company's requirements, the Company may consider
other purchases of additional land or the construction of additional office
space. Currently, the Company has made no material lease or purchase commitments
other than the two building purchases mentioned above.
The Company believes that current operating funds will be sufficient to finance
its operating requirements at least through the next twelve months. To date,
inflation has not had a material impact on the Company's revenues or income.
YEAR 2000
INTRODUCTION
Software applications that use only two digits to identify a year in the date
field may fail or create errors in the year 2000 ("Year 2000 Issues"). The
Company has taken significant steps to address Year 2000 Issues.
The Company's internally used computer equipment, software and devices with
embedded technology--including both information systems and non-information
systems (together, "Internal Use Systems")--may fail to operate properly or as
expected due to Year 2000 Issues. This could result in a system failure or
miscalculations causing disruption of the Company's operations, including among
other things, a temporary inability to process transactions, send invoices,
conduct communications, or engage in similar normal business activities. In
addition, computer software products sold, marketed, and supported by the
Company ("Company Software Products") and the products of third parties that are
distributed by the Company or others or may be necessary for operation of
Company Software Products ("Third Party Products"), may fail to operate properly
or as expected due to Year 2000 Issues. Such failures could result in system
failures or miscalculations causing disruption of customers' operations,
including among other things, a temporary inability to process transactions,
send invoices, conduct communications, treat patients, or engage in similar
normal business activities. Further, products and services used by the Company's
customers, but not supplied by the Company, could fail to operate properly or as
expected due to Year 2000 Issues. Customers' efforts to plan for such events
could result in the deferral, delay or cancellation by customers of current
installations of and plans to purchase Company Software Products.
STATE OF READINESS
The Company has undertaken various initiatives intended to address Year 2000
Issues with respect to Internal Use Systems, Company Software Products, and
Third Party Products. The Company has established working groups whose primary
functions are to: (i) develop and implement the Company's definition of Year
2000 readiness; (ii) assess Internal Use Systems, Third Party Products and
Company Software Products for Year 2000 Issues; (iii) monitor development,
testing and remediation efforts with respect to Company Software Products; (iv)
monitor testing of Company Software Products and Third Party Products, (v)
review customer preparations to implement Year 2000 releases of Company Software
Products; (vi) monitor and coordinate the Company's deployment plans and results
with respect to Year 2000 releases of Company Software Products; (vii) monitor
and coordinate contingency plans with respect to Internal Use Systems, Company
Software Products and Third Party Products; and (viii) provide centralization,
accuracy and consistency of the Company's communications regarding Year 2000
Issues.
Page 14 of 24
<PAGE>
The Company has engaged independent experts to assist in its efforts with
respect to Year 2000 Issues. The Company has employed such experts to
independently evaluate and verify its methodologies and state of readiness. In
addition, the Company has employed experts to independently evaluate certain
critical Internal Use Systems. Although the Company's efforts to address Year
2000 issues do not fall precisely into sequential phases, generally these
efforts are comprised of an assessment phase, a development phase (only with
respect to Company Software Products), a deployment or remediation phase, a
preliminary contingency planning phase, and a final stage contingency planning
phase.
INTERNAL USE SYSTEMS. Certain Internal Use Systems require replacement or
modification, and to date the Company has replaced or modified most Internal Use
Systems. In addition, in the ordinary course of replacing and upgrading Internal
Use Systems, the Company attempts to obtain replacements that it believes will
not fail as a result of Year 2000 Issues. The Company has completed its
assessment efforts with respect to Internal Use Systems and expects that its
remediation efforts will be completed by the fourth quarter of 1999. The Company
is currently engaged in ongoing contingency planning to address personnel,
resource and technical Year 2000 Issues relating to foreseeable scenarios that
may develop despite its remediation efforts. The Company estimates that as of
September 30, 1999 it had completed approximately 97% of its efforts in
connection with Year 2000 Issues relating to its Internal Use Systems. The
projects comprising the remaining 3% of such efforts are in process and are
expected to be substantially completed on or about the fourth quarter of 1999.
The majority of the remaining work is associated with finalizing the Company's
contingency plan, analyzing landlord's responses for facilities leased by IDX,
completing evaluation of the possible need for upgrades on non-IDX desktop
applications and plan validation.
The Company has mailed letters or otherwise communicated with many of its
significant vendors of Internal Use Systems and related service providers to
determine the extent to which Year 2000 Issues affect products and services of
such vendors and providers. As of Sepember 30, 1999, the Company had received
responses from approximately 97% of such third parties, and 97% of these
companies have provided written assurances that they expect to successfully
address their significant Year 2000 Issues on a timely basis. The Company is
engaged in but has not completed efforts to communicate with other vendors and
service providers involved in its Internal Use Systems to request more responses
to its communications and to verify the responses received. Due to uncertainties
associated with vendors and service providers, the Company is unable to predict
whether Year 2000 Issues involved in its Internal Use Systems will have a
material adverse effect on the Company's business, results of operations, or
financial condition, despite the Company's current assessment to the contrary.
THIRD PARTY PRODUCTS. The Company works closely with vendors of significant
Third Party Products and has communicated with them to determine the extent to
which their products and services are or will be Year 2000 compliant. In
addition, the Company is testing or plans to test Year 2000 releases of certain
Third Party Products. Based upon its current assessment, the Company believes it
has received adequate assurances that significant Third Party Product vendors
expect to successfully address their significant Year 2000 Issues on a timely
basis. Due to uncertainties associated with Third Party Product vendors, the
Company is unable to predict whether a material adverse effect on business,
results of operations, or financial condition may result from Year 2000 Issues
related to Third Party Products, despite the Company's current assessment to the
contrary.
COMPANY SOFTWARE PRODUCTS. The Company began development of Year 2000 versions
of some Company Software Products in 1997 and continues to progress through
development and maintenance cycles with respect to some Company Software
Products. The Company began deploying Year 2000 releases of Company Software
Products in 1998 and expects to complete deployment of such releases during the
fourth quarter of 1999. The Company continues to test and monitor performance of
Year 2000 releases of Company Software Products in customer environments. The
Company expects to deliver and deploy maintenance releases of Company Software
Products in the ordinary course of business to remediate any Year 2000 Issues
identified during and after deployment of Year 2000 releases of Company Software
Products. Based on the Company's assessment, the Company believes continuing
efforts will be required to assist customers in deploying and testing Year 2000
releases of Company Software Products in their unique environments. The Company
expects an increase in service and support effort levels as the year 2000
approaches and into the early months of the year 2000.
Page 15 of 24
<PAGE>
The Company develops, markets and supports many different products, and the
amount of effort applied with respect to individual products varies from product
to product. The Company estimates that as of September 30, 1999 it had completed
more than 99% of the development efforts relating to Year 2000 versions of all
of the Company Software Products, including 100% of such efforts related to
EDiX. The projects comprising the remaining less than 1% of these efforts are in
process and expected to be substantially completed in the fourth quarter of
1999. The Company estimates that as of September 30, 1999, it had completed
approximately 94% of the deployment efforts relating to Year 2000 versions of
all Company Software Products, including 81% of deployment efforts related to
EDiX's products. The projects comprising the remaining 6% of these efforts are
in process and are expected to be substantially completed in the fourth quarter
of 1999, but the Company expects to continue efforts to remediate and maintain
Year 2000 versions of Company Software Products in customer environments and to
support customers' efforts relating to Year 2000 Issues through the early part
of 2000.
The Company is currently engaged in ongoing contingency planning to address
company-wide personnel, resource, technical and communication issues relating to
its service and remediation efforts. The Company expects that its development,
remediation, testing, deployment and contingency planning efforts with respect
to Company Software Products will continue up to and beyond December 31, 1999,
but expects the level of development and deployment will decrease in the fourth
quarter of 1999.
CONTINGENCY PLANS AND RISKS. The Company will continue its ongoing efforts
to comprehensively analyze company-wide operational, business and financial
problems (including possible loss of revenue), if any, that would be reasonably
likely to result from the impact of unresolved Year 2000 Issues, including
possible: (i) failure by the Company and vendors of Third Party Products to
complete efforts to avoid or minimize Year 2000 Issues on a timely basis,
including failure of Internal Use Systems, Company Software Products and Third
Party Products to be Year 2000 ready; (ii) failure of Customers to be ready to
or cooperate in the deployment of Year 2000 ready versions of Company Software
Products and Third Party Products on a timely basis; (iii) delay, deferral or
cancellation by customers of current installations and prospective purchase
decisions with respect to Company Software Products; and (iv) failure of
communicating infrastructures, including communications and transportation. The
Company's contingency plans relating to Year 2000 scenarios encompass "worst
case" scenarios that assume the failure of some but not all significant
communications and computing infrastructures of the Company, its customers and
suppliers, together with failures of governmental and utility infrastructures,
including those related to transportation and energy.
COSTS
The Company estimates that the cost of its efforts to successfully address Year
2000 Issues will be approximately $17.7 million, of which approximately $5.4
million relates to Internal Use Systems, $0.6 million relates to EDiX, and $12.3
million relates to Company Software Products. Because the Company develops,
markets, and supports many different products, the amount of effort applied with
respect to individual products varies from product to product. All expenditures
to fund Year 2000 Issue efforts have been and will continue to be recognized as
operating expenses for fiscal years 1997 through early 2000, except for $0.7
million, which is expected to be incurred and capitalized in 1999. As of
September 30, 1999, the Company had incurred approximately $15.3 million related
to its Year 2000 Issue assessment, remediation, testing, and contingency
planning efforts identification, which is approximately 86% of the total
projected costs of such efforts. Of the amount of costs incurred as of September
30, 1999, approximately $4.3 million relates to Internal Use Systems, which is
approximately 81% of the total of estimated costs for such efforts, and $10.0
million relates to Company Software Products, which is approximately 89% of the
total of estimated costs for such efforts.
Unless all material Year 2000 Issues are timely and properly identified,
assessed, and remediated, and unless adequate contingency plans are properly
formulated and executed, Year 2000 Issues may materially adversely impact the
Company's business, financial condition and results of operations, or adversely
affect the Company's relationships with customers, suppliers or others. The
Company believes that Year 2000 Issues could cause failures in important
elements of the computing and communications infrastructures of the Company, its
customers and suppliers and also Company Software Products and Third Party
Products. Further, the Company expects that it and its customers and suppliers
may experience failures of such systems the causes of which will be difficult to
determine, requiring the application of resources for diagnostic purposes. If
the Company has not developed adequate contingency plans and means to address
such contingencies, Year 2000 Issues could materially adversely impact the
Company's business, financial condition and results of operations, or adversely
affect the Company's relationships with customers, suppliers or others.
Page 16 of 24
<PAGE>
The costs, timing and scheduling of deployment and installation of Year 2000
versions of Company Software Products and Third Party Products, as well as the
ability of the Company to assist customers in the installation of Company
Software Products, will depend in part on the readiness, ability and cooperation
of customers and their suppliers. Due to uncertainties associated with
customers' readiness, cooperation and sources of products and services, there
can be no assurance that Year 2000 Issues will not materially adversely affect
the Company's business, results of operations, or financial condition, or
adversely affect the Company's relationships with customers, vendors or others.
Some customers and prospects of the Company operate in complex computing
environments that include products and services not supplied by the Company. The
costs, timing and scheduling by customers of work related to Year 2000 Issues
involving such products and services may cause some customers and prospects to
defer current projects or prospective purchase decisions regarding Company
Software Products. If Year 2000 Issues cause customers and prospects to defer
current projects or prospective purchase decisions, the Company's financial,
business and operational goals may be deferred or may not be realized at all,
with the result that the Company's business, results of operations, or financial
condition could be materially adversely affected. Due to uncertainties
associated with customers and prospects, there can be no assurance that Year
2000 Issues will not materially adversely affect the Company's business, results
of operations, or financial condition or adversely affect the Company's
relationships with customers, vendors or others.
The costs of the Company's Year 2000 identification, assessment, remediation,
testing, deployment and contingency planning efforts, and the dates on which the
Company believes it will complete such efforts, are based upon management's
current best estimates, which were derived using numerous assumptions regarding
future events, including the continued availability of certain resources,
third-party remediation plans, and other factors. There can be no assurance that
these estimates will prove to be accurate, and actual results could differ
materially from those currently anticipated. Specific factors that could cause
such material differences include, but are not limited to, the availability of
and cost of personnel trained in Year 2000 Issues, the ability to correctly and
effectively identify, assess, remediate, and test all relevant computer codes,
equipment, and embedded technology, and similar uncertainties, the ability of
the Company to timely install and deploy Year 2000 releases of Company Software
Products, a failure of the Company to provide, obtain or make available adequate
resources to assist customers in installing Year 2000 releases of Company
Software Products and Third Party Products. As a result of any of such factors
alone or in combination, the Company may experience an increase in warranty and
other claims. In addition, since there is no uniform definition of "compliance
with Year 2000," and since the Company sells a myriad of different combinations
of products and services under varying contractual terms, the Company is not
able to assess or estimate the possible impact of such possible claims. No
assurance can be given that the aggregate cost of defending and resolving such
claims, if any, will not materially adversely affect the Company's results of
operations. Although some of the Company's agreements with manufacturers and
others from whom it purchases products for resale contain provisions requiring
such parties to indemnify the Company under some circumstances, there can be no
assurance that such indemnification arrangements will cover all of the Company's
liabilities and costs related to claims by third parties related to Year 2000
Issues.
FACTORS AFFECTING FUTURE RESULTS
IDX Stock Prices May Continue to be Volatile. IDX has experienced, and expects
to continue to experience fluctuations in its stock price due to a variety of
factors including:
. delay in customers purchasing decisions due to a variety of factors
such as consolidation, management changes and year 2000 problems;
. market prices of competitors such as McKesson HBOC, Inc.;
. announcements of technological innovations, including Internet
delivery of information and use of relational database technology;
. new product introductions by IDX or its competitors;
. market conditions particularly in the computer software and hardware
industries; and
. healthcare reform measures, such as those contemplated by the
Balanced Budget Act of 1997.
Page 17 of 24
<PAGE>
These fluctuations could have a significant impact on future market prices of
IDX's common stock. On March 5, 1999 IDX announced that it expected a loss of
($0.22) - ($0.28) per share in the quarter ending March 31, 1999. Following this
announcement, the IDX share price declined. On April 30, 1999, the last reported
sale price of IDX common stock on the Nasdaq National Market was $16.25 per
share and on June 30, 1999, such price was $22.5625. On December 31, 1998, the
last reported sale price of IDX common stock on the Nasdaq National Market was
$44.00. These prices represent declines of 63% and 49%, respectively, in the
value of IDX stock since December 31, 1998.
Variation in Financial Trends in Net Income and Cash from Operations May
Continue. Year over year net income and cash from operations have fluctuated
since 1995. IDX's net income was $20.6 million in 1995. Net income fell to $16.7
million in 1996 and $8.0 million in 1997. Net income increased to $30.2 million
in 1998. Cash from operations was $21.7 million in 1995, $10.4 million in 1996,
$9.8 million in 1997, and $23.4 million in 1998. On March 5, 1999 IDX announced
that based on currently available information, the after tax loss for the first
quarter ending March 31, 1999 was expected to be ($5.0) to ($7.0) million. If
these negative trends were to continue, IDX may have difficulty in financing
future growth and funding its operating initiatives including future
acquisitions.
IDX Expects its Quarterly Operating Results to Fluctuate and its Customer Sales
and Installation Requirements to Change.
IDX expects its quarterly results of operations to continue to fluctuate.
Because a significant percentage of IDX's expenses are relatively fixed, the
following factors could cause these fluctuations:
. delay in customers purchasing decisions due to a variety of factors
such as consolidation, management changes and year 2000 problems;
. the volume and timing of systems sales and installations;
. recognizing revenue at various points during the installation
process;
. the sales and implementation cycles of IDX's customers; and
. general reductions in spending by IDX's customers and healthcare
reform measures.
In addition, the timing of new product and service introductions and product
upgrade releases and general economic conditions can impact IDX's quarterly
operating results.
In light of the above, IDX believes that its results of operations for any
particular quarter or fiscal year are not necessarily meaningful or reliable
indicators of future performance. Future period-to-period fluctuations may have
a material adverse effect on IDX's results of operations, financial condition or
business.
IDX May Experience Challenges and Incur Substantial Costs in Integrating the
Operations of EDiX.
EDiX may present IDX operational challenges, and IDX expects to incur
significant pre-tax charges in association with the merger. If IDX fails to
successfully integrate the operations or management of the two companies, it
could have a material adverse effect on the combined entity's results of
operations, financial condition or business.
IDX May Not be Successful in Implementing its Acquisition Strategy. IDX intends
to continue to grow in part through either acquisitions of complementary
products, technologies and businesses or alliances with complementary
businesses. IDX may not be successful in these acquisitions or alliances, or in
integrating any such acquired or aligned products, technologies or businesses
into its current business and operations. Factors which may affect IDX's ability
to expand successfully include:
. the successful identification and acquisition of products,
technologies or businesses;
Page 18 of 24
<PAGE>
. effective integration and operation of the acquired or aligned
products, technologies or businesses despite technical
difficulties, geographic limitations and personnel issues; and
. overcoming significant competition for acquisition and alliance
opportunities from companies that have significantly
greater financial and management resources, such as McKesson HBOC,
Inc. and Shared Medical Systems Corporation.
The failure to successfully integrate any significant products, technologies or
businesses could have a material adverse effect on IDX's results of operations,
financial condition or business.
IDX's Success Depends on New Product Development and Its Ability to Respond to
Rapidly Changing Technology. To be successful, IDX must enhance its existing
products, respond effectively to technology changes and help its clients adopt
new technologies. In addition, IDX must sell additional products to its existing
client base and introduce new products and technologies to meet the evolving
needs of its clients in the healthcare information systems market. IDX may have
difficulty in accomplishing this because of factors including:
. evolving industry standards, for example, Health Level Seven;
. new technological developments, for example, the web technology.
IDX is currently devoting significant resources toward the development of
enhancements to its existing products, particularly in the announced area of
web-based functionality and the migration of existing products to new hardware
and software platforms including relational database technology and
object-oriented programming. However, IDX may not successfully complete these
product developments or the adaptation in a timely fashion, and IDX's current or
future products may not satisfy the needs of the healthcare information systems
market. Any of these developments may adversely affect IDX's competitive
position or render its products or technologies noncompetitive or obsolete.
IDX May Be Adversely Affected by Year 2000 Problems. In the year 2000 software
applications that use only two digits to identify a year in the date field may
fail or create errors. IDX uses computer equipment, software and devices with
embedded technology, including both information systems and non-information
systems, that may not be year 2000 compliant despite IDX's continuing efforts to
assess, remediate, and test such equipment, software and devices. This could
result in a system failure or miscalculations causing disruption of IDX's
operations, including among other things, a temporary inability to:
. process transactions;
. send invoices;
. conduct communications; or
. engage in similar normal business activities.
In addition, IDX sells computer software products and distributes the products
of third parties that may not be year 2000 compliant despite IDX's continuing
efforts to assess and test these products. This could result in system failures
or miscalculations causing disruption of customers' operations, including, in
addition to the types of disruptions described above, a temporary disruption in
their ability to treat patients. Further, products and services used by IDX's
customers, but not supplied by IDX, may not be year 2000 compliant. Customers
may defer current installations of and plans to purchase IDX products until they
have completed their own year 2000 assessment. Any of these problems could have
a material adverse effect on IDX's results of operations, financial condition or
business.
IDX does not believe that the year 2000 issues will pose significant operational
problems for IDX. However, if year 2000 issues are not properly identified,
assessed and resolved, it could have a material adverse effect on the results of
operations, financial condition or business of IDX. In addition if actual year
2000 remediation costs are higher than IDX estimated costs, it could materially
adversely affect IDX's results of operations, financial condition or business.
Page 19 of 24
<PAGE>
The nature of IDX's business and its relationships with its customers make it
difficult to assess the magnitude of IDX's potential exposure as a result of
year 2000 issues. IDX is engaged in the business of developing, marketing and
supporting computer software. IDX's software is often used by its customers in
conjunction with other vendors' products and services. The ability of IDX to
assist its customers in the development and installation of year 2000 compliant
versions of IDX software products will depend in part on the readiness, ability
and cooperation of its customers and their suppliers. In addition, the
purchasing patterns of IDX customers and potential customers may be affected by
year 2000 issues. The cost, timing and scheduling by customers of work related
to year 2000 issues involving IDX's products and services may cause some
customers to defer or forego projects or purchase decisions. IDX sells a number
of different combinations of products and services under varying contractual
terms. There is no widely accepted definition of year 2000 compliance. Certain
of IDX's customers may assert breach of warranty or other claims against IDX
relating to year 2000 compliance. Any of these factors may adversely affect the
results of operations.
Product Sales Within the Healthcare Industry May Decline Causing IDX to Suffer
Financially. IDX currently derives substantially all of its revenues from sales
of financial, administrative and clinical healthcare information systems and
related services within the healthcare industry. As a result, any factor
adversely affecting this industry and these sales could have a material adverse
effect on IDX. In addition, even though IDX's annual sales have increased,
future revenues associated with existing products may decline as a result of
factors like price competition. IDX may not be able to continue its success in
marketing its current, new or enhanced products. Moreover, IDX may be unable to
maintain its current pricing for existing products.
IDX May Be Faced With Product Liability Claims Exceeding Its Insurance Coverage.
Any failure by IDX's products that provide applications relating to patient
medical histories and treatment plans could expose IDX to product liability
claims. These potential claims may exceed IDX's current insurance coverage. A
successful claim brought against IDX in excess of its insurance coverage could
have a material adverse effect on IDX's results of operations. Even unsuccessful
claims could be costly to defend and divert management time and resources. In
addition, IDX cannot assure you that it will continue to have appropriate
insurance available to it in the future at commercially reasonable rates.
IDX's Success is Significantly Dependent on Key Personnel. The success of IDX is
dependent to a significant degree on its key management, sales, marketing, and
technical personnel. To be successful IDX must attract, motivate and retain
highly skilled managerial, sales, marketing, consulting and technical personnel,
including programmers, consultants, and systems architects skilled in the
technical environments in which IDX's products operate. Competition for such
personnel in the software and information services industries is intense. The
loss of key personnel, or the inability to hire or retain qualified personnel,
could have a material adverse effect on IDX's results of operations. IDX does
not maintain "key man" life insurance policies on its executives.
Not all IDX personnel have executed noncompetition agreements.
IDX May Be Adversely Affected By Changes in the Healthcare Industry and by
Government Healthcare Reform Proposals. IDX's products are designed to function
within the structure of the healthcare financing and reimbursement system
currently being used in the United States. During the past several years, the
healthcare industry has been subject to increasing levels of governmental
regulation of, among other things, reimbursement rates and capital expenditures.
From time to time, Congress has considered and adopted proposals to reform the
healthcare system. These proposals may increase government involvement in
healthcare, lower reimbursement rates and otherwise change the operating
environment for IDX's clients. Legislation such as the Balanced Budget Act of
1997 will lower reimbursement rates and may result in reduced spending by
certain healthcare organizations. Healthcare organizations may react to these
proposals and the uncertainty surrounding these proposals by curtailing or
deferring investments, including those for IDX's products and services. IDX
cannot predict with any certainty what impact these proposals or healthcare
reforms, such as the Balanced Budget Act of 1997 might have on its results of
operations, financial condition or business.
Governmental Regulation May Impose New Burdens and Costs on IDX's Operations.
The United States Food and Drug Administration has promulgated a draft policy
for the regulation of computer software products as medical devices under the
1976 Medical Device Amendments to the Federal Food, Drug and Cosmetic Act. To
the extent that computer software is a medical device under the policy, IDX, as
a manufacturer of such products, could be required, depending on the product,
to:
Page 20 of 24
<PAGE>
. register and list its products with the FDA;
. notify the FDA and demonstrate substantial equivalence to other
products on the market before marketing such products; or
. obtain FDA approval by demonstrating safety and effectiveness
before marketing a product.
Depending on the intended use of a device, the FDA could require IDX to obtain
extensive data from clinical studies to demonstrate safety or effectiveness, or
substantial equivalence. If the FDA requires this data, IDX would be required to
obtain approval of an investigational device exemption before undertaking
clinical trials. Clinical trials can take extended periods of time to complete.
IDX cannot provide assurances that the FDA will approve or clear a device after
the completion of such trials. In addition, these products would be subject to
the FDC Act's general controls, including those relating to good manufacturing
practices and adverse experience reporting. Although it is not possible to
anticipate the final form of the FDA's policy with regard to computer software,
IDX expects that the FDA is likely to become increasingly active in regulating
computer software intended for use in healthcare settings regardless of whether
the draft is finalized or changed. The FDA can impose extensive requirements
governing pre-and post-market conditions like service investigation, approval,
labeling and manufacturing. In addition, the FDA can impose extensive
requirements governing development controls and quality assurance processes.
In order to ensure continued compliance with changing government standards and
regulations, IDX monitors regulations affecting its business including those
mandated by the Health Insurance Portability and Accountability Act of 1996.
IDX May Have Conflicts of Interests With Some of its Executives Which May
Adversely Affect IDX. Richard E. Tarrant, Chief Executive Officer and Director,
and Robert H. Hoehl, Chairman of the Board of Directors, indirectly own, through
various entities, real estate which IDX leases in connection with its
operations. During 1998, IDX paid an aggregate of approximately $4.2 million in
connection with these leases. In November 1998, IDX announced tentative plans to
expand one of its facilities located on land owned by these executives. The
Company is in the final stages of such plans but has not yet made any
commitments to execute such plans.
In connection with these arrangements, the economic interests of these
executives and directors and IDX may diverge. In response, IDX has created the
Committee on Independent Director Transactions to review and approve
transactions of this nature. IDX believes that these arrangements were entered
into on an arm's length basis on terms that were no less favorable to IDX than
could have been obtained from unaffiliated third parties.
Because of these and other factors, past financial performance should not be
considered an indicator of future performance. Investors should not use
historical trends to anticipate future results.
Page 21 of 24
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On June 11, 1999, a lawsuit was served on the Company. Eleven other
companies engaged in various aspects of the healthcare information
systems business have also been sued in the same lawsuit. The lawsuit
was brought in the United States District Court for the Northern
District of Texas Fort Worth Division and is entitled Allcare Health
Management System, Inc. v. Cerner Corporation, et al., and claims
damages for patent infringement. The Company is investigating the
claims made in the lawsuit and has responded accordingly. Based upon
investigation to date, the Company believes the lawsuit is without
merit and intends to vigorously defend against it.
The Company is from time to time involved in routine litigation
incidental to the conduct of its business. The Company believes that no
such currently pending routine litigation to which it is party will
have a material adverse effect on its financial condition or results of
operations.
Item 2. Changes In Securities
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits And Reports On Form 8-K.
(a) The exhibits filed as part of this Form 10-Q are listed on the Exhibit Index
immediately preceding such exhibits, which Exhibit Index is incorporated herein
by reference.
Page 22 of 24
<PAGE>
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.
IDX SYSTEMS CORPORATION
Date: November 12, 1999 By: /s/ John A. Kane
----------------------------------
John A. Kane,
Vice President, Finance and
Administration, Chief Financial
Officer and Treasurer
(Principal Financial and
Accounting Officer)
Page 23 of 24
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report on
Form 10-Q:
Exhibit No. Description Page
- ----------- ----------- ----
99A Sample Indemnification Agreement signed 25
by all Directors and Officers as of
September 13, 1999
99B Amendment to Amended and Restated Consulting/ 34
Employment Agreement dated as of
February 16, 1999
99C Third Amendment to Amended and Restated Consulting/ 39
Employment Agreement dated as of August 1, 1999
27 Financial Data Schedule 41
Page 24 of 24
<PAGE>
EXHIBIT 99A
INDEMNIFICATION AGREEMENT
This Agreement is made as of the 13th day of September 1999, by and
between IDX Systems Corporation, a Vermont corporation (the "Corporation), and
the individual who executes this Agreement as "Indemnitee" below (the
"Indemnitee"), a director or officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
directors and officers the most capable persons available, and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify its directors and officers so as to provide them with
the maximum possible protection permitted by law; and
WHEREAS, Indemnitee does not regard the protection available under the
Corporation's Articles of Incorporation and insurance as adequate in the present
circumstances, and may not be willing to serve as a director or officer without
adequate protection; and
WHEREAS, the Corporation desires Indemnitee to serve as a director or
officer of the Corporation.
NOW THEREFORE, the Corporation and Indemnitee do hereby agree as
follows:
1. Agreement to Serve.
Indemnitee agrees to serve or continue to serve as a director or
officer of the Corporation so long as he or she is duly elected or appointed or
until such time as he or she tenders his or her resignation in writing or the
Corporation terminates its relationship with him or her.
2. Definitions.
As used in this Agreement:
(a) The term "Proceeding" means any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative, and whether formal or informal, and shall include suits
brought by or on behalf of the Corporation, derivatively or otherwise, and all
appeals in connection with any action, suit or proceeding.
(b) "Official Capacity" means: (i) with respect to a director
of the Corporation, the office of director of the Corporation; (ii) with respect
to an officer of the Corporation, the office held by the officer.
(c) "Expenses" means the reasonable costs incurred in
connection with a Proceeding, and shall include (without limitation) reasonable
attorneys' fees, retainers, court costs, transcript costs, fees of experts, fees
of investigators, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees and other disbursements
or expenses of the types customarily incurred in connection with a Proceeding,
but shall not include the amount of judgment or Fines incurred by Indemnitee or
amounts paid to settle a proceeding.
<PAGE>
(d) "Other Capacity" means all employment of the director by
(or agency relationship of the director with) the Corporation, and all actions
taken or omitted and all services provided by the director to, for the benefit
of, or on behalf of, the Corporation, including any directorship, office,
employment, or agency relationship undertaken, or services provided, by
Indemnitee in connection with a Nominee Entity, provided, however, that an Other
Capacity shall not include an Official Capacity.
(e) "Nominee Entity" means any entity other than the
Corporation, including any foreign or domestic corporation, partnership, joint
venture, trust, or employee benefit plan, for which the Indemnitee is or was
serving at the Corporation's request. The Indemnitee is serving an employee
benefit plan at the Corporation's request if the Indemnitee's duties to the
Corporation also impose duties on, or otherwise involve services by, the
Indemnitee to the plan or its participants or beneficiaries.
(f) "Fines" means fines and penalties, and shall include any
excise tax assessed with respect to any employee benefit plan.
(g) "Special Legal Counsel" means counsel that has never been
an employee of the Corporation and who has not, and whose firm has not,
performed legal services for the Corporation pertaining to the matter for which
indemnification is sought for a period of at least two years before retention as
special counsel.
3. Indemnification in Third-Party Proceedings.
(a) The Corporation shall indemnify and hold harmless
Indemnitee in connection with any Proceeding (other than a Proceeding by or in
the right of the Corporation to procure a judgment in its favor) because of his
or her Official Capacity or because of any action alleged to have been taken or
omitted in connection therewith, against all Expenses, judgments, or Fines
actually incurred by Indemnitee or on his or her behalf in connection with such
Proceeding, if: (i) the Indemnitee acted in good faith; (ii) the Indemnitee
reasonably believed his or her conduct was in the Corporation's best interest;
and (iii) in the case of any Proceeding brought by a governmental entity, the
Indemnitee had no reasonable cause to believe that his or her conduct was
unlawful, and the Indemnitee is not finally found to have engaged in a reckless
or intentional unlawful act. The Corporation shall not indemnify Indemnitee for
Expenses, judgments, or Fines under this Paragraph 3(a) in connection with a
Proceeding as to which Indemnitee is adjudged liable on the basis that a
personal benefit was improperly received by the Indemnitee.
(b) The Corporation shall indemnify and hold harmless the
Indemnitee in connection with any Proceeding (other than a Proceeding by or in
the right of the Corporation to procure a judgment in its favor) because of his
or her Other Capacity or any action or omission alleged to have been taken or
omitted in connection therewith, against all Expenses, judgments or Fines
incurred by or on behalf of Indemnitee, if: (i) the Indemnitee acted in good
faith; (ii) the Indemnitee reasonably believed that his or her conduct was not
opposed to the Corporation's best interest (Indemnitee's conduct with respect to
an employee benefit plan for a purpose Indemnitee reasonably believed to be in
the interests of the participants in and beneficiaries of the plan satisfies
this requirement); and (iii) in the case of any Proceeding brought by a
governmental entity, the Indemnitee had no reasonable cause to believe that his
or her conduct was unlawful, and Indemnitee is not found to have engaged in a
reckless or intentional unlawful act. The Corporation shall not indemnify
Indemnitee for Expenses, judgments, or Fines under this Paragraph 3(b) in
connection with a Proceeding as to which Indemnitee is adjudged liable on the
basis that a personal benefit was improperly received by the Indemnitee.
(c) The termination of any Proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere (or similar plea) shall
not, of itself, create a presumption that Indemnitee did not act in
<PAGE>
good faith and in a manner which he or she reasonably believed to be in the best
interests of the Corporation, or not opposed to the best interests of the
Corporation, or that Indemnitee had reasonable cause to believe that his or her
conduct was unlawful.
(d) If Indemnitee is not otherwise entitled under this
Paragraph 3 to indemnification of some or all Expenses incurred by or on behalf
of Indemnitee in connection with a Proceeding (other than a Proceeding by or in
the right of the Corporation for a judgment in its favor), the Corporation shall
in any event indemnify and hold harmless Indemnitee for such Expenses if a court
of competent jurisdiction determines that Indemnitee is, in view of all of the
circumstances, fairly and reasonably entitled to indemnification.
4. Indemnification in Proceedings by or in the Right of the
Corporation.
(a) The Corporation shall indemnify and hold harmless
Indemnitee in connection with any Proceeding by or in the right of the
Corporation to procure a judgment in its favor because of his or her Official
Capacity or because of any action alleged to have been taken or omitted in
connection therewith, against all Expenses incurred by Indemnitee or on his or
her behalf in connection with such Proceeding, if he or she acted in good faith
and in a manner which he or she reasonably believed to be in the best interests
of the Corporation, and if he or she is not adjudged in connection with such
Proceeding to have improperly received a personal benefit.
(b) The Corporation shall indemnify and hold harmless
Indemnitee in connection with any Proceeding by or in the right of the
Corporation to procure a judgment in its favor because of his or her Other
Capacity or because of any action alleged to have been taken or omitted in
connection therewith, against all Expenses incurred by Indemnitee or on his or
her behalf in connection with such Proceeding, if he or she acted in good faith
and in a manner in which he or she reasonably believed was not opposed to the
best interests of the Corporation, and if he or she is not adjudged in
connection with such Proceeding to have improperly received a personal benefit.
(c) The Corporation shall not indemnify Indemnitee for any
judgment against Indemnitee in a Proceeding by or in the right of the
Corporation for a judgment in its favor.
(d) If Indemnitee is not otherwise entitled under this
Paragraph 4 to indemnification of some or all Expenses incurred by or on behalf
of Indemnitee in connection with a Proceeding by or in the right of the
Corporation for a judgment in its favor, the Corporation shall in any event
indemnify and hold harmless Indemnitee for such Expenses if a court of competent
jurisdiction determines that Indemnitee is, in view of all of the circumstances,
fairly and reasonably entitled to indemnification.
5. Exceptions to Right of Indemnification.
Notwithstanding anything to the contrary in this Agreement: (a) except
as set forth in Paragraph 11, the Corporation shall not indemnify the Indemnitee
in connection with a Proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation; and (b) the Corporation shall not indemnify the Indemnitee to the
extent the Indemnitee has been reimbursed from the proceeds of insurance. In the
event the Corporation makes any indemnification payments to the Indemnitee and
the Indemnitee is subsequently reimbursed from the proceeds of insurance, the
Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
<PAGE>
6. Indemnification of Expenses of Successful Party.
Notwithstanding anything to the contrary in this Agreement, to the
extent that Indemnitee has been successful, on the merits or otherwise, in
defense of any Proceeding or in defense of any claim, issue or matter therein,
made because of Indemnitee's Official Capacity or Other Capacity or any action
or omission in connection herewith, Indemnitee shall be indemnified against all
Expenses incurred by him or her on his or her behalf in connection therewith.
Without limiting the foregoing, if any Proceeding or any claim, issue or matter
therein is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to the Indemnitee,
(ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a
plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that
the Indemnitee did not act in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his or her conduct was unlawful, the Indemnitee
shall be considered for the purposes hereof to have been wholly successful with
respect thereto.
7. Notification and Defense of Claim.
(a) As a condition precedent to his or her right to be
indemnified, the Indemnitee must notify the Corporation in writing as soon as
reasonably practicable of any Proceeding for which indemnity will or could be
sought by him or her and provide the Corporation with a copy of any summons,
request for information, notice of formal or informal investigation or inquiry,
citation, subpoena, complaint, indictment, information or other document
relating to such Proceeding with which he or she is served.
(b) With respect to any Proceeding (other than a Proceeding by
or in the right of the Corporation to procure a judgment in its favor) of which
the Corporation is so notified, the Corporation shall be entitled to participate
therein at its own expense and/or to assume the defense thereof at its own
expense. After notice from the Corporation to the Indemnitee of its election so
to assume such defense, the Corporation shall not be liable to the Indemnitee
for any legal or other expenses subsequently incurred by the Indemnitee in
connection with such claim, other than as provided below in this Paragraph 7.
(c) The Indemnitee shall have the right to employ his or her
own counsel in connection with a Proceeding as to which the Corporation has
assumed the defense of Indemnitee, but the Expenses in connection with such
counsel incurred after notice from the Corporation of its assumption of the
defense shall not be at the expense of the Corporation, and shall be at the
expense of the Indemnitee, unless (i) the employment of counsel by the
Indemnitee has been authorized by the Corporation, (ii) there is a material
conflict of interest between the Corporation and the Indemnitee in the conduct
of the defense of such action or (iii) the Corporation does not in fact employ
counsel to assume the defense of such action.
8. Advancement of Expenses.
Subject to Paragraph 10, in the event that the Corporation does not
assume the defense of a Proceeding pursuant to Paragraph 7 it shall advance all
Expenses incurred by or on behalf of the Indemnitee in connection with a
Proceeding as to which indemnification may be due pursuant to Paragraphs 3 or 4,
prior to the final disposition of such matter, upon: (i) receipt of (a) a
written affirmation of the Indemnitee's good faith belief that he or she met the
standard of conduct required by Paragraph 3 or 4 hereof, and (b) an undertaking
by or on
<PAGE>
behalf of Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Corporation; and (ii) a determination pursuant to Paragraph 9 that the
facts then known to those making the determination would not preclude
indemnification under applicable law. The undertaking required by this paragraph
shall be an unlimited general obligation of the Indemnitee, but need not be
secured and shall be accepted without reference to Indemnitee's financial
ability to make repayment. The Corporation shall in good faith seek to settle or
otherwise compromise, on behalf of Indemnitee and at the Corporation's expense,
all claims (other than claims by or in the right of the Corporation for a
judgment in its favor) as to which advancement of Expenses is required under
this Agreement.
9. Procedure for Indemnification.
(a) In order to obtain indemnification or advancement of
Expenses pursuant to Paragraphs 3, 4, 6 or 8 of this Agreement, Indemnitee shall
submit to the Corporation a written request, including in such request such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification or advancement of Expenses. The Corporation shall
make payment within 30 days after receipt by the Corporation of a written
request for indemnification to which Indemnitee is entitled under Paragraph 6 of
this Agreement.
(b) The Corporation shall use its best efforts to make any
determination referred to in Paragraphs 3, 4 or 8 within fifteen (15) days of
receipt of any request for advancement of Expenses or indemnification pursuant
to such Paragraphs. Any such indemnification or advancement shall be made
promptly, and in any event within 30 days after receipt by the Corporation of
the written request of the Indemnitee, unless with respect to such a request the
Corporation determines within such 30 day period that it is unable to make a
determination required by such Paragraphs as a condition to indemnification or
advancement. Such determination shall be made in each instance by (a) a majority
vote of a quorum of the directors of the Corporation consisting of persons who
are not at that time parties to the Proceeding ("disinterested directors"), (b)
if a quorum cannot be obtained under clause (a), a majority vote of a quorum of
a committee duly designated by the board of directors (in which designation
directors who are parties may participate), consisting solely of two or more
directors who are not parties to the Proceeding, (c) by written opinion of
Special Legal Counsel selected by the board of directors or its committee in the
manner prescribed in clauses (a) or (b), or if a quorum of the board of
directors cannot be obtained as set forth in clause (a) and a committee cannot
be designated as set forth in clause (b), selected by a majority vote of the
full board of directors (in which selection directors who are parties may
participate), or (d) by the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the Proceeding may not be
voted on the determination.
10. Remedies.
(a) The rights to indemnification or advancement provided by
this Agreement shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies a request for indemnification or
advancement, in whole or in part, or if no disposition of a request for
indemnification or advancement is made within the 30-day period referred to
above in Paragraph 9(b).
(b) Unless otherwise required by law, the burden of proving
that Indemnitee is not entitled to indemnification, advancement, or to be held
harmless shall be on the Corporation. In the event that any action to enforce
rights to advancement of Expenses is filed in a court, the parties shall
stipulate: (i) that the question of Indemnitee's right to advancement of
Expenses during the pendency of the action to enforce such rights to advancement
is appropriate for resolution by preliminary injunction; (ii) that the question
whether such a
<PAGE>
preliminary injunction should issue shall be made on the basis of Indemnitee's
affirmation, and the facts then known to the parties without discovery except as
to the basis for factual assertions of the Corporation; (iii) that Indemnitee
shall be irreparably harmed if advancement is not promptly made; and (iv) that
Indemnitee shall not be required to post any bond or other security in
connection with such preliminary injunction. Neither the failure of the
Corporation to have made a determination (nor an actual determination by the
Corporation) pursuant to Paragraph 9 shall create a presumption or be admissible
as evidence that Indemnitee is not entitled to advancement or indemnification.
Indemnitee's Expenses in connection with successfully establishing his right to
indemnification, advancement, or to be held harmless, in whole or in part, shall
be paid by the Corporation.
11. Partial Indemnification and Contributions.
(a) If Indemnitee is entitled under any provision of this
Agreement to be indemnified or held harmless by the Corporation for some portion
of Expenses, judgments, or Fines incurred by or on behalf of Indemnitee in
connection with any Proceeding, but not for the total amount thereof, the
Corporation shall nevertheless indemnify and hold harmless Indemnitee for the
portion of such Expenses, judgments, or Fines to which Indemnitee is entitled.
In making any allocation of Expenses, judgments or Fines between matters that
are covered or not covered under any provision of this Agreement, the
Corporation shall indemnify, advance or hold harmless Indemnitee for all
Expenses, judgments, or Fines incurred by or on behalf of Indemnitee in
connection with matters covered by this Agreement, and shall not indemnify,
advance or hold harmless Indemnitee for Expenses, Judgments or Fines that would
not have been incurred absent the pendency of uncovered matters.
(b) In the event that Indemnitee and the Corporation are
jointly liable for any judgment or Fines in connection with a Proceeding (or
would be jointly liable if joined in the Proceeding), and Indemnitee is not
entitled to be indemnified or held harmless pursuant to Paragraphs 3, 4 or 8,
then the Corporation shall pay or contribute to, to the extent it is permitted
by law to do so, all Expenses, judgments, Fines otherwise due from the
Indemnitee in such proportion as is appropriate to reflect the greater of (i)
the relative benefits received by the Corporation (on the one hand) and the
Indemnitee (on the other hand) from the matters from which the Proceeding arose,
or (ii) the relative fault of the Corporation in connection with matters from
which the Proceeding arose. The relative fault of the Corporation on the (on the
one hand) and of the Indemnitee (on the other hand) shall be determined by
reference to, among other things, the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent the matters from
with the Proceeding arose. The parties acknowledge and agree that it would not
be just and equitable if contribution pursuant to this Paragraph 11 were
determined by pro rata allocation or any other method of allocation that does
not take account of the foregoing equitable considerations.
12. Subrogation.
In the event of any payment under this Agreement, the Corporation shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Corporation to bring suit to enforce such rights.
13. Term of Agreement.
This Agreement shall apply with respect to all Proceedings covered
hereby regardless of whether the acts or omissions complained of in such a
Proceeding occurred or allegedly occurred before or after the date of
<PAGE>
this Agreement. All agreements and obligations of the Corporation contained
herein shall continue during the period the Indemnitee is a director, officer,
employee, or agent of the Corporation (or is serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise) and shall continue
thereafter for so long as the Indemnitee may be subject to any possible,
contemplated, or actual Proceeding.
14. Indemnification Hereunder Not Exclusive.
The indemnification and advancement of Expenses provided by this
Agreement shall not be deemed exclusive or any other rights to which Indemnitee
may be entitled under the Second Amended and Restated Articles of Incorporation,
as may be amended from time to time, Articles of the Bylaws, any agreement, any
vote of stockholders of disinterested directors, the Vermont Business
Corporation Law, any other law (common or statutory), or otherwise, both as to
action in his or her Official Capacity or Other Capacity. Nothing contained in
this Agreement shall be deemed to prohibit the Corporation from purchasing and
maintaining insurance, at its expense, to protect itself or the Indemnitee
against any expense, liability or loss incurred by it or the Indemnitee in any
such capacity, or arising out of his or her status as such, whether or not the
Indemnitee would be indemnified against such expense, liability or loss under
this Agreement; provided the Corporation shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
under any insurance policy, contract, agreement or otherwise.
15. No Special Rights.
Nothing herein shall confer upon Indemnitee any right to continue to
serve as an officer or director of the Corporation for any period of time or at
any particular rate of compensation.
16. Savings Clause.
If this Agreement or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify Indemnitee as to Expenses, judgments, and Fines paid in
settlement with respect to any Proceeding to the full extent permitted by any
applicable portion of this Agreement that shall not have bee invalidated and to
the fullest extent permitted by applicable law.
17. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall constitute the original.
18. Successors and Assigns.
This Agreement shall be binding upon the Corporation and its successors
and assigns and shall inure to the benefits of the estate, heirs, executors,
administrators and personal representatives of Indemnitee.
19. Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
<PAGE>
20. Modification and Waiver.
This Agreement may be amended from time to time to reflect changes in
Vermont law or for other reasons. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof nor shall any
such waiver constitute a continuing waiver.
21. Notices.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been given (i) when delivered by hand
or (ii) if mailed by certified or registered mail with postage prepaid, on the
third day after the date on which it is so mailed:
To the Indemnitee addressed as follows:
====================================
====================================
====================================
====================================
To the Corporation addressed as follows:
IDX Systems Corporation
1400 Shelburne Road
South Burlington, Vermont 05402-1022
Attention: President
With a copy to:
General Counsel
IDX Systems Corporation
1400 Shelburne Road
South Burlington, Vermont 05402-1022
or to such other address as may have been furnished in writing to Indemnitee by
the Corporation or to the Corporation by Indemnitee.
<PAGE>
22. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Vermont.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
IDX SYSTEMS CORPORATION Indemnitee:
By:____________________________________ ____________________________________
[Signature of IDX authorized officer] [Signature of Indemnitee]
Print Name: Print Name:
Title:
-------------------------
<PAGE>
EXHIBIT 99B
AMENDMENT TO AMENDED AND RESTATED
CONSULTING/EMPLOYMENT AGREEMENT
This amendment is entered into as of the 16th of February, 1999 (the
"Effective Date"), by and between IDX Systems Corporation, a Vermont corporation
with its principal place of business at 1400 Shelburne Road, Burlington, Vermont
05402-1070 (the "Corporation"), and Henry M. Tufo, M.D. of Hinesburg, Vermont
(the "Employee).
This amendment amends the Consulting/Employment Agreement originally
entered into by and between the Corporation, the Employee, and the Majority
Shareholders on February 1, 1995, and amended and restated on March 7, 1995 (the
"Agreement").
In consideration of the covenants set forth herein, the parties,
intending to be bound, agree as follows:
1. Paragraph 1 shall cease to be effective as of the Effective
Date and from and after the Effective Date, the following shall apply:
The Corporation agrees to employ the Employee as Executive Vice
President from the Effective Date until June 30, 1999, and Employee
agrees to serve as such, subject to the terms and conditions of the
Agreement and this Amendment. As Executive Vice President, Employee
will continue to work from his current office with his current staff to
enable him to perform his duties. Thereafter, Employee agrees to serve
as a consultant to the Corporation until June 30, 2000, subject to the
terms and conditions of the Agreement and this Amendment. The
Corporation will provide Employee with reasonable facilities and staff
to enable him to provide consulting services to the Corporation,
including reasonable office space, a computer, a secretary and
electronic mail.
2. Paragraph 2 shall cease to be effective as of the Effective Date and
from and after the Effective Date, the following shall apply:
Employee's duties and responsibilities as an Executive Vice President
shall be as described in Attachment A, and his duties as a consultant
shall be in the areas of Internet activities related to medical and
clinical practice, key customer issues, organizational design and
measures, key strategies or other areas consistent with his fields of
expertise and background, as assigned by the Chief Executive Officer of
the Corporation. Employee shall be available for approximately one
hundred twenty (120) hours of service per month. If the Corporation
does not assign tasks sufficient to require one hundred twenty (120)
hours of service per month, the Employee shall nevertheless be entitled
to receive the compensation set forth in Paragraph 3 as if he had
performed such services.
<PAGE>
3. Paragraph 3 shall cease to be effective as of the Effective Date and
from and after the Effective Date, the following shall apply:
The Corporation shall compensate the Employee as set forth
in Attachment A to this Amendment.
4. Paragraph 4 shall cease to be effective as of the Effective Date and
from and after the Effective Date, the following shall apply:
Employer shall furnish to Employee the benefits described in
Attachment A from and after the Effective Date.
5. Paragraphs 5 and 6 shall cease to be effective as of the Effective
Date and shall be replaced with the following:
Either party may terminate this Agreement for any reason and at any
time upon ten (10) days written notice. However, if the Corporation
terminates this Agreement prior to June 30, 2000 for any reason other
than (a) fraud committed by the Employee, (b) criminal conduct by the
Employee, or (c) continued gross failure of Employee to perform
adequately his duties under this Agreement when measured against
mutually agreed on written performance goals and improvement plan
(unless because of disability as defined in the IDX employee guide),
the Employee and the Corporation agree that damages would be difficult
to calculate and therefore the Corporation shall pay to Employee, as
liquidated damages, and not as a penalty, the following: (x) the
compensation due to Employee as if Employee's services had continued
until June 30, 2000, plus (y) an amount equal to the difference
between the market price of IDX Common Stock on the date of
termination and the exercise price for all unexercised options granted
to Employee that would have become exercisable on or before June 30,
2000. Upon payment of such liquidated damages, the Corporation
shall have no further liability to Employee under this Agreement.
A summary of all unexercised options granted to Employee as of the
Effective Date that are scheduled to become exercisable before
June 30, 2000 is set forth in Attachment A.
6. Paragraph 8 shall be amended by deleting "provided, however,
that this Agreement shall thereafter be considered automatically renewed for
successive one-year periods if not terminated by either party by giving at
least twelve(12) months' advance written notice of the intent not to
renew." The last sentence of Paragraph 8 shall cease to be effective from and
after the Effective Date.
7. Paragraph 15 shall cease to be effective from and after
July 1, 1999.
8. Paragraph 16 shall be amended by inserting the following
after the first sentence:
Notwithstanding anything to the contrary, the "Noncompetition Period"
referred to in Section 5 ("Covenant Not to Compete") of Exhibit A of
the Agreement shall begin on the date the Agreement terminates and
continue for twelve (12) months thereafter.
<PAGE>
IN WITNESS WHEREOF the parties have set their hands as of the day and
year first written above.
IDX SYSTEMS CORPORATION
By:/s/ Richard E. Tarrant
-------------------------------
Its Duly Authorized Agent
/s/ Henry M. Tufo
------------------------------
Henry M. Tufo, M.D.
THE FOLLOWING PERSONS HAVE PERSONS HAVE SIGNED BELOW FOR THE SOLE PURPOSE OF
INDICATING THEIR CONSENT TO THE TERMS OF THIS AMENDMENT.
/s/ Richard E. Tarrant
- -----------------------------------
Richard E. Tarrant
/s/ Robert H. Hoehl
- -----------------------------------
Robert H. Hoehl
<PAGE>
ATTACHMENT A
EXECUTIVE VICE PRESIDENT DUTIES
(AS ASSIGNED BY THE CHIEF EXECUTIVE OFFICERS)
o Management transition issues
o Internet activities related to medical and clinical
practice
o Key customer issues
o Organizational design and measures
o Key strategies and other areas consistent with
Employee's field of expertise.
COMPENSATION
AS EXECUTIVE VICE PRESIDENT
o Salary at the rate of $300,000.00 per annum,
payable semi-monthly
o Bonus similar to that of other senior management,
payable for that portion of the year Employee serves
as Executive Vice President
o Standard company benefits. Stock options shall not
be granted to Employee.
AS CONSULTANT
o $400,000.00 for services provided between 7/1/99 and
6/30/00, payable semi-monthly
<PAGE>
Options Summary as of the Effective Date
- -------------- ------------------- -------------- ----------------- ------------
Option No. Grant Date Granted Full Vest Exercisable
- -------------- ------------------- -------------- ----------------- ------------
- -------------- ------------------- -------------- ----------------- ------------
000566 5/1/97 1808 5/1/98 1808
- -------------- ------------------- -------------- ----------------- ------------
- -------------- ------------------- -------------- ----------------- ------------
000566 5/1/97 1808 5/1/99 0
- -------------- ------------------- -------------- ----------------- ------------
- -------------- ------------------- -------------- ----------------- ------------
000566 5/1/97 1808 5/1/00 0
- -------------- ------------------- -------------- ----------------- ------------
- -------------- ------------------- -------------- ----------------- ------------
000567 5/1/97 1808 2/13/98 1808
- -------------- ------------------- -------------- ----------------- ------------
- -------------- ------------------- -------------- ----------------- ------------
000567 5/1/97 1808 5/1/05* 0
- -------------- ------------------- -------------- ----------------- ------------
- -------------- ------------------- -------------- ----------------- ------------
000567 5/1/97 1808 5/1/05* 0
- -------------- ------------------- -------------- ----------------- ------------
- -------------- ------------------- -------------- ----------------- ------------
000810 11/24/97 3050 11/24/98 3050
- -------------- ------------------- -------------- ----------------- ------------
- -------------- ------------------- -------------- ----------------- ------------
000810 11/24/97 3050 11/24/99 0
- -------------- ------------------- -------------- ----------------- ------------
- ------------------------
* While the exercise date for these options is beyond June 30, 2000, these
options are included in the summary since Employee may become entitled to
exercise these options in 1999 and 2000 if the Corporation meets certain goals
for 1998 and 1999, respectively. If the Corporation does not meet such goals for
those years, these options would not become exercisable until 5/1/05, and
Employee would not receive the amount described in paragraph 5(y) for those
options.
<PAGE>
EXHIBIT 99C
THIRD AMENDMENT TO AMENDED AND RESTATED
CONSULTING/EMPLOYMENT AGREEMENT
This amendment is entered into as of the 1st of August, 1999 (the
"Effective Date"), by and between IDX Systems Corporation, a Vermont corporation
with its principal place of business at 1400 Shelburne Road, Burlington, Vermont
05402-1070 (the "Corporation"), and Henry M. Tufo, M.D. of Hinesburg, Vermont
(the "Employee).
This amendment amends the Consulting/Employment Agreement originally
entered into by and between the Corporation, the Employee, and the Majority
Shareholders on February 1, 1995, and amended and restated on March 7, 1995, and
further amended on February 16, 1999 (the "Agreement").
In consideration of the covenants set forth herein, the parties,
intending to be bound, agree as follows:
1. Paragraph 1 shall be amended by inserting after the sentence
reading "As Executive Vice President, Employee will continue to work from his
current office with his current staff to enable him to perform his duties."
the following new language:
Beginning July 1, 1999, Employee shall serve as Executive Vice
President on a month-to-month basis. Either party may terminate
Employee's employment as Executive Vice President by providing at least
ten (10) days written notice to the other prior to the end of any
calendar month. The giving of such notice terminates employment as
Executive Vice President at the end of the month in which such proper
notice is given.
2. Attachment A to the Amendment dated February 16, 1999 shall be
amended by deleting the section "Compensation" and replacing with the following:
COMPENSATION
AS EXECUTIVE VICE PRESIDENT:
o Until June 30, 1999, salary at the rate of $300,000.00 per
annum, payable semi-monthly, and bonus similar to that of
other senior management, payable for the 6-month period of the
year Employee serves as Executive Vice President;
o Beginning July 1, 1999, salary at the rate of $33,157.09
per month, payable semi-monthly.
<PAGE>
AS CONSULTANT:
o Compensation at the rate of $400,000.00 per annum, payable
semi-monthly.
3. Paragraph 4 shall be amended by adding the following new sentence:
Effective July 1, 1999, Employer shall furnish to Employee the
following benefits as long as Employee serves as Executive Vice
President: basic life insurance/AD&D, Long Term Disability insurance,
ShortTerm Disability insurance, and reimbursement for Employee's
election to waive medical insurance. Employer shall also pay the
appropriate payroll taxes for Medicare.
IN WITNESS WHEREOF the parties have set their hands as of the day and
year first written above.
IDX SYSTEMS CORPORATION
By: /s/ Robert W. Baker, Jr.
-------------------------------
Its Duly Authorized Agent
/s/ Henry M. Tufo
------------------------------
Henry M. Tufo, M.D.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPANY'S
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME TAXES AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001001185
<NAME> IDX SYSTEMS COPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<EXCHANGE-RATE> 1 1
<CASH> 29,064 18,531
<SECURITIES> 44,832 109,954
<RECEIVABLES> 114,574 86,434
<ALLOWANCES> (3,200) (1,978)
<INVENTORY> 0 0
<CURRENT-ASSETS> 201,354 225,696
<PP&E> 101,713 72,298
<DEPRECIATION> 47,168 37,294
<TOTAL-ASSETS> 275,614 274,777
<CURRENT-LIABILITIES> 62,123 60,590
<BONDS> 0 0
0 0
0 0
<COMMON> 358 265
<OTHER-SE> 204,033 213,922
<TOTAL-LIABILITY-AND-EQUITY> 275,614 274,777
<SALES> 253,123 255,908
<TOTAL-REVENUES> 253,123 255,908
<CGS> 161,540 142,823
<TOTAL-COSTS> 106,781 86,774
<OTHER-EXPENSES> 1,642 0
<LOSS-PROVISION> 1,256 432
<INTEREST-EXPENSE> 862 822
<INCOME-PRETAX> (15,044) 29,553
<INCOME-TAX> (5,394) 15,990
<INCOME-CONTINUING> (9,650) 13,563
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,650) 13,563
<EPS-BASIC> (0.35) 0.50
<EPS-DILUTED> (0.35) 0.48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPANY'S
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME TAXES AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001001185
<NAME> IDX SYSTEMS COPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JUL-01-1999 JUL-01-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<EXCHANGE-RATE> 1 1
<CASH> 29,064 18,531
<SECURITIES> 44,832 109,954
<RECEIVABLES> 114,574 86,434
<ALLOWANCES> (3,200) (1,978)
<INVENTORY> 0 0
<CURRENT-ASSETS> 201,354 225,696
<PP&E> 101,713 72,298
<DEPRECIATION> 47,168 37,294
<TOTAL-ASSETS> 275,614 274,777
<CURRENT-LIABILITIES> 62,123 60,590
<BONDS> 0 0
0 0
0 0
<COMMON> 358 265
<OTHER-SE> 204,033 213,922
<TOTAL-LIABILITY-AND-EQUITY> 275,614 274,777
<SALES> 92,218 90,937
<TOTAL-REVENUES> 92,218 90,937
<CGS> 56,442 50,362
<TOTAL-COSTS> 34,349 29,972
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 526 131
<INTEREST-EXPENSE> 4 379
<INCOME-PRETAX> 1,964 11,849
<INCOME-TAX> 786 5,650
<INCOME-CONTINUING> 1,178 6,199
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,178 6,199
<EPS-BASIC> 0.04 0.23
<EPS-DILUTED> 0.04 0.22
</TABLE>
