<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period from _______________ to _______________
COMMISSION FILE NUMBER 0-28182
TRANSITION SYSTEMS, INC.
-----------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2887598
------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
ONE BOSTON PLACE, BOSTON, MASSACHUSETTS 02108
---------------------------------------------
(Address of principal executive offices)
(Zip Code)
(617) 723-4222
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
CLASS AUGUST 5, 1997
----- --------------
<S> <C>
COMMON STOCK, 17,315,392
$.01 PAR VALUE SHARES
NON-VOTING COMMON STOCK, 356,262
$.01 PAR VALUE SHARES
</TABLE>
<PAGE> 2
TRANSITION SYSTEMS, INC.
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page No.
--------
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of
June 30, 1997 (unaudited) and September 30, 1996.................. 3
Consolidated Statements of Operations for the Three Months
and Nine Months Ended June 30, 1997 and 1996 (unaudited) ......... 4
Consolidated Statements of Cash Flows for the Nine Months
Ended June 30, 1997 and 1996 (unaudited).......................... 5
Notes to Interim Consolidated Financial Statements................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................... 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................. 12
SIGNATURES................................................................. 13
2
<PAGE> 3
TRANSITION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
----------- -----------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $54,386,000 $51,505,000
Short term investments 251,000 --
Accounts receivable, net 17,559,000 13,419,000
Other current assets 1,992,000 1,831,000
Deferred income taxes 653,000 2,062,000
----------- -----------
Total current assets 74,841,000 68,817,000
----------- -----------
Property and equipment, net 1,340,000 1,108,000
Capitalized software costs, net 1,411,000 1,399,000
Purchased technology, net 1,435,000 1,612,000
Intangible assets, net 307,000 120,000
Long-term deferred income taxes 1,228,000 1,228,000
Equity investment 6,000,000 --
----------- -----------
Total assets $86,562,000 $74,284,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 306,000 $ 595,000
Accrued expenses 5,708,000 4,280,000
Income taxes payable 2,483,000 2,015,000
Deferred revenue 6,578,000 6,255,000
----------- -----------
Total current liabilities 15,075,000 13,145,000
----------- -----------
Notes payable 15,000 21,000
Deferred income taxes 485,000 485,000
----------- -----------
Total liabilities 15,575,000 13,651,000
----------- -----------
Commitments
Stockholders' equity:
Common stock 173,000 166,000
Non-voting common stock 4,000 4,000
Non-voting common stock warrant 395,000 395,000
Additional paid-in capital 41,980,000 39,161,000
Retained earnings 28,435,000 20,907,000
----------- -----------
Total stockholders' equity 70,987,000 60,633,000
----------- -----------
Total liabilities
and stockholders' equity $86,562,000 $74,284,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
TRANSITION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Software and implementation $ 9,651,000 $ 7,718,000 $22,537,000 $17,348,000
Maintenance 2,919,000 2,384,000 8,338,000 6,830,000
----------- ----------- ----------- -----------
Total revenues 12,570,000 10,102,000 30,875,000 24,178,000
----------- ----------- ----------- -----------
Cost of Revenues:
Software and implementation 2,623,000 1,827,000 7,293,000 5,335,000
Maintenance 726,000 800,000 2,062,000 2,322,000
Research and development 948,000 816,000 2,709,000 2,444,000
Sales and marketing 2,023,000 1,156,000 5,067,000 3,177,000
General and administrative 965,000 770,000 2,996,000 1,996,000
Compensation charge -- -- -- 3,024,000
----------- ----------- ----------- -----------
Total operating expenses 7,285,000 5,369,000 20,127,000 18,298,000
----------- ----------- ----------- -----------
Income from operations 5,285,000 4,733,000 10,748,000 5,880,000
Interest income 651,000 468,000 1,798,000 677,000
Interest expense -- (337,000) -- (1,236,000)
----------- ----------- ----------- -----------
Income before income taxes and extraordinary item 5,936,000 4,864,000 12,546,000 5,321,000
Provision for income taxes 2,374,000 1,994,000 5,018,000 2,182,000
----------- ----------- ----------- -----------
Net income before extraordinary item 3,562,000 2,870,000 7,528,000 3,139,000
Extraordinary item:
Loss on early extinguishment of debt,
net of taxes -- (2,149,000) -- (2,149,000)
----------- ----------- ----------- -----------
Net income $ 3,562,000 $ 721,000 $ 7,528,000 $ 990,000
=========== =========== =========== ===========
Series A non-voting preferred stock dividends -- 593,000 -- 593,000
----------- ----------- ----------- -----------
Net income allocable to common stockholders $ 3,562,000 $ 128,000 $ 7,528,000 $ 397,000
=========== =========== =========== ===========
Income per share:
Net income before extraordinary item $ 0.17 $ 0.15 $ 0.37 $ 0.20
Extraordinary item $ -- $ (0.11) $ -- $ (0.13)
Net income allocable to common stockholders $ 0.17 $ 0.01 $ 0.37 $ 0.02
Weighted average common shares outstanding (1) 20,462,000 19,629,000 20,474,000 15,931,000
</TABLE>
(1) See note 2 of notes to interim consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
TRANSITION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------
June 30, June 30,
1997 1996
----------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,528,000 $ 990,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary item, gross -- 3,642,000
Deferred income taxes -- (55,000)
Depreciation and amortization 1,195,000 1,033,000
Compensation charge in connection with the recapitalization -- 3,024,000
Other (92,000) 43,000
Tax benefit from stock option exercises 2,162,000 --
Changes in operating assets and liabilities:
Increase in accounts receivable (4,140,000) (1,717,000)
Increase in other current assets (161,000) (1,379,000)
Decrease in deferred tax asset 1,409,000 --
(Decrease) increase in accounts payable (289,000) 531,000
Increase in accrued expenses 1,428,000 342,000
Increase (decrease) in taxes payable 468,000 (1,132,000)
Increase in deferred revenue 323,000 569,000
----------- -------------
Net cash provided by operating activities 9,831,000 5,891,000
Cash flows (used by) provided by investing activities:
Purchases of investments (250,000) --
Sales and maturities of investments -- 7,324,000
Purchases of property and equipment (699,000) (414,000)
Additions to capitalized software costs (537,000) (525,000)
Additions to intangible assets (212,000) (9,000)
Equity investment (6,000,000) --
----------- -------------
Net cash (used by) provided by investing activities (7,698,000) 6,376,000
Cash flows provided by financing activities:
Proceeds from initial public offering -- 114,468,000
Redemption of Series A preferred stock -- (20,000,000)
Payment of Series A preferred stock dividends -- (593,000)
Proceeds of issuance of debt -- 49,605,000
Early extinguishment of debt -- (50,000,000)
Net proceeds from issuance of Preferred Stock -- 53,585,000
Purchase of Common Stock -- (111,410,000)
Payment of fees related to Recapitalization (3,336,000)
Exercise of options 760,000 767,000
Proceeds from warrants issued -- 395,000
Other (12,000) (121,000)
----------- -------------
Net cash provided by financing activities 748,000 33,360,000
Net increase in cash and cash equivalents 2,881,000 45,627,000
Cash and cash equivalents - beginning of period 51,505,000 3,844,000
----------- -------------
Cash and cash equivalents - end of period $54,386,000 $ 49,471,000
=========== =============
Supplemental information:
Income taxes paid $ 956,000 $ 2,488,000
Interest paid -- 1,119,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
TRANSITION SYSTEMS, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, and have been prepared by the Company
without audit. In the opinion of management, the accompanying consolidated
financial statements contain all adjustments, consisting only of those of a
normal recurring nature, except for the effects of the Recapitalization effected
by the Company in January 1996 and the Company's initial public offering in
April 1996, necessary for a fair presentation of the Company's financial
position, results of operations and cash flows at the dates and for the periods
indicated. While the Company believes that the disclosures presented are
adequate to make the information not misleading, these financial statements
should be read in conjunction with the audited consolidated financial statements
for the fiscal year ended September 30, 1996 which are contained in the
Company's Annual Report on Form 10-K for such fiscal year. The results of
operations for the three and nine months ended June 30, 1997 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
September 30, 1997.
2. COMPUTATION OF PRO FORMA EARNINGS PER SHARE
Net income per common share is computed based upon the weighted average number
of common shares and common equivalent shares outstanding during each period.
Common equivalent shares are included in the per share calculations where the
effect of their inclusion would be dilutive. Net income per share for the three
and nine month periods ended June 30, 1996, on a pro forma basis, gives effect
to the Company's Recapitalization and the issuance of common stock in the
initial public offering. In accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin No. 83 ("SAB 83") all common and common
equivalent shares and other potentially dilutive instruments, including stock
options, warrants and preferred stock issued during the twelve-month period
prior to the effective date (April 18, 1996) of the Company's registration
statement for its initial public offering have been included in the calculation
as if they were outstanding for all periods presented.
3. EQUITY INVESTMENT
On January 31, 1997, the Company acquired a 19.5% equity interest in
HealthVISION, Inc. for $6 million in cash. HealthVISION is a provider of
electronic medical record software based in Santa Rosa, California. This
investment is being accounted for on the cost basis.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board ("FASB") released the
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share". SFAS 128 simplifies the standards for computing earnings per share
("EPS") and makes them comparable to international EPS standards. It replaces
the presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. SFAS 128 requires restatement of all
prior-period EPS data presented. Management has not yet determined the impact of
SFAS 128 on the Company's financial statements.
6
<PAGE> 7
5. EXTRAORDINARY ITEM
In the three months ended June 30, 1996, the Company incurred an extraordinary
loss of $2,149,000 representing the after tax effect of the write-off of
$3,642,000 of unamortized capitalized financing costs. These costs were
attributable to indebtedness incurred in the Recapitalization that was repaid
out of the proceeds of the Company's initial public offering.
6. PREFERRED STOCK DIVIDEND
The holders of the Series A Preferred Stock (issued in connection with the
Recapitalization on January 24, 1996) were entitled to receive, when and as
declared by the Board of Directors, out of funds legally available therefor,
preferential cumulative dividends at the rate of 12% per annum. The Company was
not obligated to pay dividends prior to the redemption of the Series A Preferred
Stock, and no dividends were declared by the Board. The Series A Preferred Stock
was subject to mandatory redemption, provided funds were legally available
therefor, upon the closing of an initial public offering or the sale of the
Company, but in no event later than January 2006. Upon the closing of the
Company's initial public offering, on April 23, 1996, at which time funds became
legally available for the redemption of the Series A Preferred Stock and payment
of dividends, the Company redeemed in full the Series A Preferred Stock and
accrued and paid dividends thereon from the date of the Recapitalization.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
- ----------
This document contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that may contribute
to such differences include those listed under "Risk Factors" in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1996, File
No. 0-28182.
The following information should be read in conjunction with the consolidated
financial statements included herein and the notes thereto as well as the
consolidated financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996.
OVERVIEW
- --------
The Company provides integrated clinical and financial decision support systems
to hospitals, integrated delivery systems and other health care institutions.
The Company was founded in 1985 to apply management control techniques to the
health care delivery process, with the objective of improving quality and
lowering costs.
The Company has experienced a seasonal pattern in its operating results, in
which the first quarter of each fiscal year typically has the lowest revenue and
net income, frequently lower than the last quarter of the previous fiscal year,
and the fourth quarter typically has the highest revenue and net income. While
the Company has taken steps to moderate this seasonal pattern, there can be no
assurance that it will be able to eliminate the seasonality of its operating
results.
RESULTS OF OPERATIONS
- ---------------------
REVENUES
The Company's total revenues increased 24% to $12.6 million for the three months
ended June 30, 1997 from $10.1 million for the same period in the prior year.
For the nine months ended June 30, 1997, total revenues increased 28% to $30.9
million from $24.2 million for the same nine month period in the prior year.
Software and implementation revenue increased 25% to $9.7 million for the three
months ended June 30, 1997 from $7.7 million for the same period in the prior
year and increased 30% to $22.5 million for the nine months ended June 30, 1997
from $17.3 million for the same period in the prior year. The increase in
software and implementation revenue was due primarily to increased market
penetration of the Company's mid-range and mainframe products and continued
increases in add-on software sales to its existing customer base. Maintenance
revenue increased 22% to $2.9 million for the three months ended June 30, 1997
from $2.4 million for the same period in the prior year, and increased 22% to
$8.3 million for the nine months ended June 30, 1997 from $6.8 million for the
same period in the prior year. The growth in maintenance revenue is attributable
to the growth in the Company's installed base.
8
<PAGE> 9
COST OF REVENUE
Cost of software and implementation revenue consists primarily of the cost of
third-party software that is resold by the Company or included in the Company's
products, personnel costs, the cost of related benefits, travel and living
expenses, costs of materials and other costs related to the installation and
implementation of the Company's products, and amortization of capitalized
software development costs. Cost of maintenance revenue consists primarily of
maintenance costs associated with the third-party software included in the
Company's products and personnel costs incurred in providing maintenance and
technical support services to the Company's customers.
Cost of software and implementation revenue increased 43% to $2.6 million for
the three months ended June 30, 1997 from $1.8 million for the same period in
the prior year. For the nine months ended June 30, 1997, cost of software and
implementation revenue increased 37% to $7.3 million from $5.3 million for the
same period last year. As a percentage of software and implementation revenue,
cost of software and implementation revenue increased to 27% for the three
months ended June 30, 1997 from 24% for the same period in the prior year, and
increased to 32% for the nine months ended June 30, 1997 from 31% for the same
period in the prior year. The increase in spending was primarily due to a net
increase of twenty-one persons in the Company's implementation staff, as well as
higher third-party software costs.
Cost of maintenance revenue decreased 9% to $0.7 million for the three months
ended June 30, 1997 from $0.8 million for the same period in the prior year, and
decreased 11% to $2.1 million for the nine months ended June 30, 1997 from $2.3
million for the same period in the prior year. As a percentage of maintenance
revenue, cost of maintenance revenue decreased to 25% from 34% for the three
months ended June 30, 1997 and June 30, 1996, respectively, and decreased to 25%
from 34% for the nine months ended June 30, 1997 and June 30, 1996,
respectively. The decrease was primarily due to the reorganization of the
Company's technical support department. Several employees in the technical
support department were reassigned to research and development due to the
maturation of the Company's midrange product, reducing support needs.
RESEARCH AND DEVELOPMENT
Research and development expense increased 16% to $0.9 million for the three
months ended June 30, 1997 from $0.8 million for the same period in the prior
year. For the nine months ended June 30, 1997, research and development expenses
increased 11% to $2.7 million from $2.4 million for the same period in the prior
year. As a percentage of total revenues, research and development expense
remained constant at 8% for the three months ended June 30, 1997 and 1996, and
decreased to 9% from 10% for the nine months ended June 30, 1997 and 1996,
respectively. The increase in spending was mainly due to the reorganization of
the Company's technical support department. This increase was partly offset by
an increased investment in research and development resources for the continued
development of additional products to compliment the Company's existing product
line. The decrease as a percentage of revenues from the nine month period ended
June 30, 1996 was mainly due to the Company's investment in technology and
development tools in prior years, resulting in increased productivity and less
rapid growth in research and development expenditures. The Company expects that
research and development expenses will increase as a percentage of revenue in
future periods as new development projects are undertaken.
9
<PAGE> 10
SALES AND MARKETING
Sales and marketing expense increased 75% to $2.0 million for the three months
ended June 30, 1997 from $1.2 million for the same period in the prior year, and
increased 60% to $5.1 million for the nine months ended June 30, 1997 from $3.2
million for the same period in the prior year. As a percentage of total
revenues, sales and marketing expense increased to 16% for the three months
ended June 30, 1997 from 11% for the three months ended June 30, 1996 and
increased to 16% from 13% for the nine months ended June 30, 1997 and 1996
respectively. The increase was primarily due to a net increase of twelve new
sales and sales support personnel. Sales commissions also increased over the
prior year due to increased sales volume.
GENERAL AND ADMINISTRATIVE
General and administrative expense increased 25% to $1.0 million for the three
months ended June 30, 1997 from $0.8 million for the same period in the prior
year, and increased 50% to $3.0 million for the nine months ended June 30, 1997
from $2.0 million for the same period in the prior year. As a percentage of
total revenues, general and administrative expense remained constant at 8% for
the three months ended June 30, 1997 and 1996, and increased to 10% from 8% for
the nine months ended June 30, 1997 and 1996, respectively. The increase was
primarily due to increased costs related to being a publicly-traded company, and
expenses related to Enterprising HealthCare, Inc., which the Company acquired in
July 1996.
OTHER OPERATING EXPENSES
Other operating expenses for the nine months ended June 30, 1996 included a
compensation charge of $3.0 million arising from the acquisition by the Company,
in connection with the January 1996 Recapitalization, of shares of Common Stock
issued to certain executive officers pursuant to the exercise of options.
INTEREST INCOME (EXPENSE)
Interest income for the three months ended June 30, 1997 was $0.7 million,
compared to $0.5 million in interest income and $0.3 million in interest expense
for the same period in the prior year. During the nine months ended June 30,
1997, the Company had $1.8 million in interest income compared to $0.7 million
in interest income and $1.2 million in interest expense for the same period in
the prior year. The increase in interest income, and the decrease in interest
expense is related to the extinguishment in April 1996 of the debt related to
the January 1996 Recapitalization, as well as the interest income earned on the
cash balances that the Company generated from operations and the proceeds of the
Company's April 1996 initial public offering.
PROVISION FOR INCOME TAXES
The Company's effective income tax rate decreased to 40% for the nine months
ended June 30, 1997 from 41% for the same period in the prior year. The decrease
was primarily attributable to the tax benefit obtained by the Company's
investing a portion of its cash in tax exempt securities during the current
year.
10
<PAGE> 11
EXTRAORDINARY ITEM
For the three and nine months ended June 30, 1996, the Company incurred an
extraordinary loss of $2.1 million representing the after tax effect of the
write-off of $3.6 million of unamortized capitalized financing costs
attributable to indebtedness incurred in the Recapitalization that was repaid
out of the proceeds of the Company's initial public offering.
PREFERRED STOCK DIVIDEND
The holders of the Series A Preferred Stock (issued in connection with the
Recapitalization on January 24, 1996) were entitled to receive, when and as
declared by the Board of Directors, out of funds legally available therefor,
preferential cumulative dividends at the rate of 12% per annum. The Company was
not obligated to pay dividends prior to the redemption of the Series A Preferred
Stock, and no dividends were declared by the Board. The Series A Preferred Stock
was subject to mandatory redemption, provided funds were legally available
therefor, upon the closing of an initial public offering or the sale of the
Company, but in no event later than January 2006. Upon the closing of the
Company's initial public offering, on April 23, 1996, at which time funds became
legally available for the redemption of the Series A Preferred Stock and payment
of dividends, the Company redeemed in full the Series A Preferred Stock and
accrued and paid dividends thereon from the date of the Recapitalization.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $54.4 million at June 30, 1997 from $51.5
million at September 30, 1996. The increase is primarily attributable to cash
provided by operations, which was partially offset by the Company's January 1997
acquisition of a 19.5% equity interest in HealthVISION for $6 million in cash.
The Company believes that available funds, cash generated from operations and
its unused line of credit of $15 million, will be sufficient to finance the
Company's operations and planned capital expenditures for at least the next
twelve months. There can be no assurance, however, that the Company will not
require additional financing during that time or thereafter.
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
*3.2 Amended and Restated Articles of Organization
*3.4 Amended and Restated By-Laws
*3.5 Articles of Amendment to the Articles of Organization, as filed
with the Secretary of State of the Commonwealth of Massachusetts
on April 3, 1996.
*4.1 Specimen Certificate for Common Stock
11.1 Computation of Per Share Earnings
27 Financial Data Schedule
* Incorporated herein by reference to the similarly-numbered exhibit included
in the Company's registration statement on Form S-1, File No. 333-01758.
(b) REPORTS ON FORM 8-K
None.
12
<PAGE> 13
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.
Transition Systems, Inc.
(Registrant)
Dated: August 13, 1997 /s/ Robert F. Raco
---------------------------------------
Robert F. Raco
President, Chief Executive Officer and
Director (principal executive officer)
Dated: August 13, 1997 /s/ Paula J. Malzone
---------------------------------------
Paula J. Malzone
Chief Financial Officer and Treasurer
(principal financial and accounting
officer)
13
<PAGE> 1
Exhibit 11.1
TRANSITION SYSTEMS, INC
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three month period ended: June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Weighted averages shares outstanding:
Common stock outstanding ........................... 17,433,000 15,638,000
Common stock equivalent ............................ 3,029,000 3,991,000
Weighted average number of common shares
and common equivalent shares outstanding (1) ..... 20,462,000 19,629,000
=========== ============
Net income:
Net income before extraordinary item ............... $ 3,562,000 $ 2,870,000
Extraordinary item ................................. -- (2,149,000)
Net income allocable to common
stockholders ...................................... $ 3,562,000 $ 128,000
Earnings per share:
Net income before extraordinary item ............... $ 0.17 $ 0.15
Extraordinary item ................................. -- (0.11)
Net income allocable to common
stockholders ...................................... $ 0.17 $ 0.01
For the nine months ended:
Weighted averages shares outstanding:
Common stock outstanding ........................... 17,306,000 11,951,000
Common stock equivalent ............................ 3,168,000 3,980,000
Weighted average number of common shares
and common equivalent shares outstanding (1) ..... 20,474,000 15,931,000
=========== ============
Net income:
Net income before extraordinary item ............... $ 7,528,000 $ 3,139,000
Extraordinary item ................................. -- (2,149,000)
Net income allocable to common
stockholders ...................................... $ 7,528,000 $ 397,000
Earnings per share:
Net income before extraordinary item ............... $ 0.37 $ 0.20
Extraordinary item ................................. -- (0.13)
Net income allocable to common
stockholders ...................................... $ 0.37 $ 0.02
</TABLE>
(1) Gives effect to the Recapitalization. See Note 9 of Notes to Consolidated
Financial Statements for the fiscal year ended September 30, 1996 which are
contained in the Company's Annual Report on Form 10-K for such fiscal year,
File No. 0-28182.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 54,386
<SECURITIES> 251
<RECEIVABLES> 18,863
<ALLOWANCES> 1,304
<INVENTORY> 0
<CURRENT-ASSETS> 74,841
<PP&E> 4,761
<DEPRECIATION> 3,421
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0
0
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</TABLE>
