<PAGE> 1
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, 1998
Commission file number 0-28092
Medical Information Technology, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Massachusetts
(State or Other Jurisdiction of Incorporation or Organization)
04-2455639
(I.R.S. Employer Identification No.)
Meditech Circle, Westwood, MA
(Address of Principal Executive Offices)
02090
(Zip Code)
781-821-3000
(Registrant's Telephone Number)
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 [ ]
The number of shares of Common Stock, $.25 par value, outstanding at September
30,1998 was 16,225,711
<PAGE> 2
Index to Form 10-Q
Part I - Financial Information
Item 1 - Financial Statements
Balance Sheet - December 31, 1997 and September 30, 1998 Page 3
Statement of Income for the Third Quarter and Nine Months
ended September 30, 1997 and 1998 Page 4
Statement of Shareholders' Equity for the Nine Months
ended September 30, 1997 and 1998 Page 4
Statement of Cash Flow for the Nine Months ended September 30,
1997 and 1998 Page 5
Notes to Financial Statements (Unaudited) Page 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Operating Results Page 7
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K Page 9
Signatures Page 9
<PAGE> 3
Part I - Financial Information
Item 1 Financial Statements
<TABLE>
Balance Sheet (000 omitted)
<CAPTION>
Dec 31, 1997 Sep 30, 1998
<S> <C> <C>
Cash and equivalents 8,379 3,595
Marketable securities 62,349 68,608
Accounts receivable less reserve 26,360 26,336
------- -------
Current assets 97,088 98,539
Furniture and fixtures 18,506 18,372
Computer equipment 11,887 9,240
Buildings 143,126 143,126
Land 26,604 26,604
Accumulated depreciation (36,155) (37,915)
------- -------
Net property, plant and equipment 163,968 159,427
Investments 2,052 1,773
------- -------
Total assets 263,108 259,739
Accounts payable 695 2,222
Accrued taxes 1,749 367
Accrued expenses 15,598 14,804
Customer deposits 16,135 13,162
Note payable to a bank 18,000 18,000
------- -------
Current liabilities 52,177 48,555
Note payable to a bank 19,500 1,500
Deferred income taxes 1,900 2,350
------- -------
Total liabilities 73,577 52,405
Common stock, $.25 par value,
Authorized 17,000,000 shares,
Issued and outstanding 16,047,212
in 1997 and 16,225,711 in 1998 4,022 4,056
Additional paid-in capital 11,335 15,040
Retained earnings 174,174 188,238
------- -------
Shareholders' equity 189,531 207,334
------- -------
Total liabilities and
shareholders' equity 263,108 259,739
</TABLE>
<PAGE> 4
<TABLE>
Statement Of Income (000 omitted)
<CAPTION>
3 Months Ended Sep 30 9 Months Ended Sep 30
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Software products 34,331 27,780 98,355 87,187
Software services 15,771 17,749 45,692 51,878
Other revenue 1,082 4,393 3,304 8,283
------- ------- ------- -------
Total revenues 51,184 49,922 147,351 147,348
Operating, development 18,989 19,989 55,115 60,136
Selling, G & A 11,197 11,078 31,480 30,882
------- ------- ------- -------
Total expenses 30,186 31,067 86,595 91,018
------- ------- ------- -------
Operating income 20,998 18,855 60,756 56,330
Other income 3,020 4,132 7,917 12,001
Other expense 1,476 2,086 3,663 6,280
------- ------- ------- -------
Income before taxes 22,542 20,901 65,010 62,051
State taxes 1,289 2,022 5,011 5,709
Federal taxes 7,746 6,492 21,453 19,465
------- ------- ------- -------
Net income 13,507 12,387 38,546 36,877
Earnings/share $0.84 $0.76 $2.41 $2.28
</TABLE>
<TABLE>
Statement Of Shareholders' Equity (000 omitted)
<CAPTION>
9 Months Ended 9 Months Ended
Sep 30, 1997 Sep 30, 1998
<S> <C> <C>
Shareholders' equity at beginning 162,468 189,531
Net income 38,546 36,877
Sale of common stock 2,612 3,739
Dividends paid (20,174) (22,813)
------- -------
Shareholders' equity at end 183,452 207,334
</TABLE>
<PAGE> 5
<TABLE>
Statement Of Cash Flow (000 omitted)
<CAPTION>
9 Months Ended 9 Months Ended
Sep 30, 1997 Sep 30, 1998
<S> <C> <C>
Net income 38,546 36,877
Depreciation 6,871 7,577
(Gain) Loss on marketable securities 51 (452)
Change in accounts receivable (3,960) 24
Change in accounts payable 1,278 1,527
Change in accrued expenses 1,056 (2,176)
Change in customer deposits 1,577 (2,973)
Change in deferred taxes 566 450
------- -------
Net cash from operations 45,985 40,854
Purchase of property, plant
and equipment (56,819) (3,036)
Purchase of marketable securities (13,441) (31,928)
Proceeds from investment liquidation 12,064 26,400
------- -------
Net cash used in investing (58,196) (8,564)
Proceeds from bank note 43,000 0
Payment of bank note (22,500) (18,000)
Proceeds from sale of common stock 2,612 3,739
Dividends paid (20,174) (22,813)
------- -------
Net cash (used in) from financing 2,938 (37,074)
------- -------
Net (decrease) increase in cash
and equivalents (9,273) (4,784)
Cash and equivalents at beginning 18,063 8,379
------- -------
Cash and equivalents at end 8,790 3,595
</TABLE>
<PAGE> 6
Notes To Financial Statements (Unaudited)
1. The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1997 included in
the Company's Form 10K filed in March 1998. The accompanying financial
statements have not been examined by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of management such
financial statements include all adjustments necessary to summarize fairly the
Company's financial position and results of operation.
2. The earnings per share calculation for the Three Months and Nine Months
ended September 30, 1997 and 1998 is as follows:
<TABLE>
Earnings per Share Calculations (in thousands where applicable)
<CAPTION>
3 Months Ended Sep 30 9 Months Ended Sep 30
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Net income 13,507 12,387 38,546 36,877
Average number of
common shares 16,047 16,226 16,023 16,195
Earnings per share $0.84 $0.76 $2.41 $2.28
</TABLE>
The average number of common shares outstanding during the period reflects the
new issuance of 108,847 shares in February 1997 and 138,499 shares in February
1998.
3. The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS No. 130"), Reporting Comprehensive Income, effective Jan 1, 1998. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components in financial statements. Comprehensive income is the total
of net income and all other nonowner changes in equity including items such as
unrealized holding gains/losses on securities classified as available for sale,
foreign currency translation adjustments and minimum pension liability
adjustments. The Company had no such items for the third quarter and nine
months ended September 30, 1997 and 1998 and therefore comprehensive income and
net income are the same.
<PAGE> 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Operating Results
<TABLE>
Comparison of 3rd Quarter 1998 to 3rd Quarter 1997
(in thousands where applicable)
<CAPTION>
1997 1998 Change
<S> <C> <C> <C>
Revenues 51,184 49,922 (2%)
Operating income 20,998 18,855 (10%)
Net income 13,507 12,387 (8%)
Earnings per common share $0.84 $0.76 (10%)
Cash dividends per common share $0.42 $0.47 12%
</TABLE>
Revenues decreased by $1.3 million or 2% due to the slowdown of scheduled
deliveries to our largest customer, Columbia/HCA.
Expenses increased by $0.9 million or 3% due primarily to 4% higher staff level
and associated costs. The increase in expenses, coupled by the decrease in
revenues, resulted in a $2.1 million or 10% decrease in operating income.
Other income, net of other expenses, increased by $0.8 million. The primary
factor is the additional rental revenues received from property purchased
during the third quarter of 1997. Net income decreased by $1.1 million or 8%.
<TABLE>
Comparison of 1st Nine Months 1998 to 1st Nine Months 1997
(in thousands where applicable)
<CAPTION>
1997 1998 Change
<S> <C> <C> <C>
Revenues 147,351 147,348 --%
Operating income 60,756 56,330 (7%)
Net income 38,546 36,877 (4%)
Earnings per average common share $2.41 $2.28 (5%)
Cash dividends per common share $1.26 $1.41 12%
</TABLE>
Revenues were flat as a result of increased orders received from both existing
and new customers that were offset by the slowdown of scheduled deliveries to
our largest customer, Columbia/HCA.
Expenses increased by $4.4 million or 5% due primarily to 4% higher staffing
levels and associated costs. The higher growth rate of expenses over revenues
resulted in a $4.4 million or 7% decrease in operating income.
Other income, net of other expenses, increased by $1.5 million. The primary
factor is the additional rental revenues received from property purchased
during the third quarter of 1997. Net Income decreased by $1.7 million or 4%.
<PAGE> 8
<TABLE>
Liquidity And Capital Resources (in thousands where applicable)
<CAPTION>
Dec 31, 1997 Sep 30, 1998
<S> <C> <C>
Cash and cash equivalents 8,379 3,595
Total assets 263,108 259,739
Total liabilities 73,577 52,405
Shareholders' equity 189,531 207,334
Common shares outstanding 16,087 16,226
Book value per share $11.78 $12.78
</TABLE>
As presented in the Statement of Cash Flow, net cash from operations was $40.9
million during the first nine months of fiscal 1998. $8.6 million was used in
investing to increase our holdings in marketable securities and for the
purchase of additional equipment. The payment of $22.8 million in dividends
to shareholders and repayment of $18 million of debt to a bank constituted the
most significant use of cash during the first nine months of fiscal 1998. The
resultant net decrease in cash and equivalents was $4.8 million for the nine
months ended September 30, 1998.
At September 30, 1998 the Company's total debt was $19.5 million as compared to
$37.5 million at December 31, 1997.
Working capital requirements for the remainder of fiscal 1998 are expected to
be provided by cash generated from operations.
<PAGE> 9
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
A Financial Data Schedule is appended as an exhibit to this document. There
were no reports filed on Form 8-K during the quarter ended September 30, 1998.
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.
Medical Information Technology, Inc.
(Registrant)
November 2, 1998
(Date)
Barbara A. Manzolillo, Chief Financial Officer and Treasurer
(Signature)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,595
<SECURITIES> 68,608
<RECEIVABLES> 24,740
<ALLOWANCES> 270
<INVENTORY> 0
<CURRENT-ASSETS> 98,539
<PP&E> 197,342
<DEPRECIATION> 37,915
<TOTAL-ASSETS> 259,739
<CURRENT-LIABILITIES> 48,555
<BONDS> 1,500
0
0
<COMMON> 4,056
<OTHER-SE> 203,278
<TOTAL-LIABILITY-AND-EQUITY> 259,739
<SALES> 87,187
<TOTAL-REVENUES> 147,348
<CGS> 0
<TOTAL-COSTS> 91,018
<OTHER-EXPENSES> 4,520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,760
<INCOME-PRETAX> 62,051
<INCOME-TAX> 25,174
<INCOME-CONTINUING> 36,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,877
<EPS-PRIMARY> 2.28
<EPS-DILUTED> 2.28
</TABLE>
