SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 25, 1999
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Sunquest Information Systems, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 0-28212 86-0378223
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
4801 East Broadway Boulevard, Tucson, Arizona 85711
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (520) 570-2000
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Item 5. Other Events.
The Company issued a press release on February 25, 1999, a
copy of which is filed as Exhibit 99.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits.
99 Press Release dated February 25, 1999, from the Company.
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SIGNATURE
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 hereunto duly authorized.
SUNQUEST INFORMATION SYSTEMS, INC.
(Registrant)
Date: February 26, 1999 By: /s/Nina M. Dmetruk
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Executive Vice President and
Chief Financial Officer
(Authorized Officer of the Registrant
and Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
Pagination by
Sequential Numbering
Exhibit Description of Exhibit System
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99 Press Release dated February 25, 5
1999, from the Company.
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Exhibit 99
FOR: IMMEDIATE RELEASE
DATE: February 25, 1999
CONTACT: Nina M. Dmetruk
Chief Financial Officer
Sunquest Information Systems, Inc.
(412) 784-9030
SUNQUEST REPORTS FOURTH QUARTER AND YEAR-END 1998 RESULTS, STATUS OF
BLOOD BANK SOFTWARE REVIEW BY FDA, AND MARKETING AGREEMENT FOR
MEDIWARE'S HEMOCARE BLOOD BANK SOFTWARE
Tucson, AZ. February 25, 1999 - Sunquest Information Systems, Inc.
(NASD/SUNQ) today announced results for the fourth quarter and the
year ended December 31, 1998, reported on the review status of its
blood bank software, the FlexiLab BB and Donor System, with the
United States Food and Drug Administration (the "FDA"), and
announced a new agreement to market Mediware's Hemocare blood bank
software.
The Company delayed its earnings release and quarterly analyst
conference call from last week until today due to ongoing
developments in the premarket review process at the FDA for the
Company's blood bank software. The blood bank software module, sold
in various versions since 1982, is one optional component of the
Company's FlexiLab laboratory systems software suite. One or more
components of the FlexiLab system are installed in approximately 915
sites, and the blood bank module is in approximately 665 sites.
Blood bank related revenue accounted for approximately one percent
(1%) of Company revenue in 1998.
In March 1994, the FDA determined that blood bank software is a
medical device under the Medical Device Amendments to the Federal
Food, Drug, and Cosmetic Act ("Act"). The FDA also notified blood
bank software manufacturers that they must file either a premarket
approval ("PMA") application for the software or a premarket
notification under Section 510(k) of the Act. A Section 510(k)
premarket notification advises the FDA that in the manufacturer's
opinion the subject device is "substantially equivalent" to either
(1) a device marketed in interstate commerce prior to May 28, 1976,
the enactment date of the Medical Device Amendments, or (2) any
device previously determined by the FDA to be in a class not
requiring premarket approval. Accordingly, the Company submitted a
510(k) notification to the FDA on March 27, 1996, with respect to
its blood bank software.
Following periodic discussions between the FDA and representatives
of the Company, on December 28, 1998, the Company was advised that
the FDA believed the Company's 510(k) notification to be incomplete,
and that the blood bank module could not be deemed "substantially
equivalent" and would require a PMA unless the additional required
information could be presented as part of a new, revised 510(k)
notification.
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Since December 28, the Company has submitted a new 510(k)
notification and the Company and its representatives have continued
to discuss the regulatory status of the blood bank module with the
FDA and to provide additional information to the FDA regarding the
module, with the most recent submission having been on Tuesday,
February 23, 1999. Although clarification of the module's FDA
status has been anticipated in recent days, the Company continues to
await decisions from the FDA with respect to acceptance for review
of the Company's new, revised 510(k) notification for the Blood Bank
module, and the extent of restrictions on the marketing and
installation of the blood bank module. At this time, based on the
December 28 letter and pending completion of current discussions
with FDA and its review of all recent submissions, any sales,
promotion, and new installations of the Company's blood bank module
are and remain suspended. However, the FDA's December 28 letter
permits the Company to continue to support and service its existing
blood bank customers.
To provide an alternative to our blood bank software, we have signed
a reseller agreement, effective immediately, with Mediware
Information Systems, Inc. for their Hemocare blood bank information
systems product.
The Hemocare product is one of the country's leading "best of breed"
data management systems for the hospital blood bank. Mediware has
approximately 500 blood bank clients in six countries. The system
was designed in collaboration with Memorial Sloan-Kettering Cancer
Center in New York City. Hemocare's software programs are organized
into subsystems performing over 200 functions, some of which are the
abilities to: manage and control blood inventory; perform long-term
donor and transfusion record keeping; store and manage
characteristics of blood products to be transfused; maintain
patient and transfusion records; maintain the records of patient
test results; and automate billing and workload recording. The
Hemocare product is both Year 2000 compatible and FDA cleared.
"The Hemocare blood bank solution is highly regarded in the
laboratory industry," stated Dr. Sidney A. Goldblatt, CEO and
President of Sunquest. "We believe that our prospective customers
will respond well to this alternative. The Hemocare blood bank
product is an alternative also provided by some of the other
leading healthcare information systems vendors who might or might
not have their own proprietary blood bank product. Also, many
current Sunquest clients use the Hemocare blood bank product."
"We are very pleased to sign this agreement with Sunquest," said
John Esposito, Mediware CEO and President. "This relationship
reinforces Mediware's leadership position in the blood bank
information systems market, and our desire to integrate with the
leading laboratory system vendors in the industry."
The measurable impact of substituting the Hemocare blood bank
product for the Sunquest blood bank product in 1999 sales signings
is not expected to be material to earnings, not including any
potential, unknown impact on sales, revenues, and expenses that
might result from today's report and
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subsequent developments regarding the FDA's regulation of the Company's
blood bank product. This impact is unknown and unmeasurable at this time,
and could be material.
Sunquest today also announced results for the fourth quarter and the
year ended December 31, 1998. The Company posted fourth quarter
revenues of $32.3 million, an increase of 26.6% compared to revenues
of $25.5 million for the same period of the previous year. The
Company reported net income of $3.1 million, or $.20 per diluted
share, for the quarter compared to a net loss of $385,000, or $.03
per diluted share, for the corresponding period in 1997. Net income
for the fourth quarter of 1997 included a charge to operations of
$890,000 ($534,000 after-tax) related to the Company's
discontinuation of both the sale of the IntelliCare(R) suite of
products as an enterprise-wide computerized patient record solution
and the development of a nurse clinical documentation system.
For the year ended December 31, 1998, revenues were $120.8 million,
an increase of 18.0% compared to revenues of $102.3 million for the
year ended December 31, 1997. Net income for 1998 was $8.3 million,
or $.54 per diluted share, compared to net income of $2.8 million,
or $.18 per diluted share in 1997. Net income for 1997 included
charges to operations of $2.4 million ($1.5 million after-tax)
related to the Company's discontinuation of both the sale of the
IntelliCare(R) suite of products as an enterprise-wide computerized
patient record solution and the development of a nurse clinical
documentation system and $1.3 million ($1.1 million after-tax)
related to the purchase of the PreciseCare pharmacy software.
The following table shows the effects on net income of the gain on
the sale of the Managed Care assets in the second quarter of 1998,
the write-offs of previously capitalized software development costs
related to IntelliCare(R) in the third and fourth quarters of 1997 and
the in-process technology acquired in connection with the purchase
of the pharmacy systems in the third quarter of 1997.
Three Months Ended Twelve Months Ended
December 31, December 31,
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1998 1997 1998 1997
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(In thousands)
Net income (loss) $3,134 $(385) $8,289 $ 2,770
Adjustments:
Capitalized software
development cost
adjustment, net of tax
provision - (534) - (1,451)
Gain on sale of assets - - 238 -
Acquired, in process
technology, net of tax - - - (1,113)
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Net income without adjustments $3,134 $ 149 $8,051 $ 5,334
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At December 31, 1998, the Company's backlog of future revenues from
signed sales agreements was a record $122.0 million, an increase of
$8.7 million, or 7.7%, over the third quarter ended September 30,
1998 and an increase of $22.5 million, or 22.6%, over December 31,
1997.
The Company's days sales outstanding ("DSO") calculation was 112
days at December 31, 1998 compared to 103 days at September 30, 1998
and 129 days at December 31, 1997.
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Company President and CEO, Dr. Sidney A. Goldblatt, said, "Sunquest
reported several important announcements today.
"We are very pleased with the financial results that we reported and
believe that the results demonstrate our continued strong presence
in the marketplace as a leader in the marketplace.
"We reported our on-going regulatory discussions with the FDA. It
is a company-wide priority to respond to the FDA regarding our
510(k) notification and to obtain FDA marketing clearance on the
Sunquest blood bank product. In the meantime, as an alternative to
our blood bank product for new customers, we believe that the
Hemocare blood bank product is very strong competitively.
"Our flagship laboratory product, as well as our radiology,
pharmacy, lab data network, and CEM products, are well received in
the marketplace. Our pipeline is very strong. We believe that we
will continue to meet the challenges to succeed as a leader in the
healthcare information industry."
Sunquest Information Systems, Inc. specializes in the management of
complex clinical and administrative health care information and has
been a leader in health care automation since 1979. Sunquest
designs, develops, sells and supports a suite of comprehensive
clinical information systems, from departmental to network-wide
service providers.
Sunquest systems serve over 1,140 sites worldwide, including
hospital and commercial laboratories, radiology departments, and
pharmacies. Headquartered in Tucson, the Company operates offices in
Johnstown, Pennsylvania; Salt Lake City, Utah; Plano, Texas; and the
United Kingdom.
This press release and other reports and communications to
shareholders contains forward-looking statements, including
statements which contain words such as "will," "expects,"
"believes," "plans," "anticipates," and words of similar impact.
Certain risk factors, including but not limited to dependence on
laboratory information system products, competition in the
marketplace, Year 2000 issues, purchase and installation decisions
of customers, pricing decisions of competitors, changes in
regulatory requirements, and product status and development risks
and uncertainties could cause actual results to differ materially
from such forward-looking statements.
These and other risks are detailed in the Company's Securities and
Exchange Commission filings.
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Sunquest Information Systems, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues:
System sales $14,863 $13,410 $ 60,549 $ 52,761
Support and service 17,401 12,069 60,226 49,576
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Total revenues 32,264 25,479 120,775 102,337
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Operating expenses:
Cost of system sales 6,025 6,861 27,424 26,015
Client services 8,587 6,700 32,945 27,438
Research and development 3,857 4,219 15,309 13,244
Sales and marketing 5,138 3,897 17,556 14,007
General and administrative 3,497 3,215 14,196 12,343
Gain on sale of assets - - (404) -
Capitalized software development
cost adjustment - 890 - 2,419
Acquired, in-process technology - (54) - 1,211
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Total operating expenses 27,104 25,728 107,026 96,677
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Operating income (loss) 5,160 (249) 13,749 5,660
Other income (expense):
Interest income 351 278 1,348 1,154
Interest expense (256) (334) (1,090) (1,237)
Other (92) (326) 2 (316)
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Income before income taxes 5,163 (631) 14,009 5,261
Income tax provision 2,029 (246) 5,720 2,491
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Net income (loss) $3,134 ($385) $8,289 $2,770
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Net income (loss) per share:
Basic and diluted $.20 ($.03) $.54 $.18
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Weighted-average shares outstanding:
Basic 15,389 15,375 15,383 15,369
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Diluted 15,429 15,375 15,404 15,428
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</TABLE>
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Sunquest Information Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31,
1998 1997
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 7,057 $23,692
Short-term investments 27,283 -
Trade receivables, net 40,302 36,547
Other current assets 2,107 2,166
Deferred tax asset 1,473 1,898
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Total current assets 78,222 64,303
Property and equipment, net 10,246 11,513
Capital leases from related party, net 3,304 4,096
Software development costs, net 11,146 12,252
Other assets 1,326 2,009
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Total assets $104,244 $94,173
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 14,461 $12,881
Deferred revenue 13,266 11,519
Deferred income taxes 115 13
Obligations under capital leases,
primarily from related party 917 800
Other liabilities 1,000 1,000
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Total current liabilities 29,759 26,213
Obligations under capital leases, 4,163 5,080
primarily from related party
Deferred income taxes 2,128 1,167
Transition costs - 891
Other liabilities - 1,000
Shareholders' equity 68,194 59,822
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Total liabilities and
shareholders' equity $104,244 $94,173
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</TABLE>
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