<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 JUNE 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 June 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 June 30, 1998 Page 3
Statement of Income for the Second Quarter and Six Months
ended June 30, 1997 and 1998 Page 4
Statement of Shareholders' Equity for the Six Months
ended June 30, 1997 and 1998 Page 4
Statement of Cash Flow for the Six Months ended June 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 4 - Submission of Matters to a Vote of Shareholders Page 9
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 Jun 30, 1998
<S> <C> <C>
Cash and equivalents 8,379 13,373
Marketable securities 62,349 55,761
Accounts receivable less reserve 26,360 26,374
------- -------
Current assets 97,088 95,508
Furniture and fixtures 18,506 18,016
Computer equipment 11,887 8,871
Buildings 143,126 143,126
Land 26,604 26,604
Accumulated depreciation (36,155) (35,384)
------- -------
Net property, plant and equipment 163,968 161,233
Investments 2,052 1,865
------- -------
Total assets 263,108 258,606
Accounts payable 695 2,193
Accrued taxes 1,749 (100)
Accrued expenses 15,598 10,664
Customer deposits 16,135 12,576
Note payable to a bank 18,000 18,000
------- -------
Current liabilities 52,177 43,333
Note payable to a bank 19,500 10,500
Deferred income taxes 1,900 2,200
------- -------
Total liabilities 73,577 56,033
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 174,174 183,477
------- -------
Shareholders' equity 189,531 202,573
------- -------
Total liabilities and
shareholders' equity 263,108 258,606
</TABLE>
<PAGE> 4
<TABLE>
Statement Of Income (000 omitted)
<CAPTION>
3 Months Ended June 30 6 Months Ended June 30
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Software products 32,929 29,362 64,024 59,407
Software services 15,229 17,280 29,922 34,129
Other revenue 1,304 2,291 2,221 3,890
------- ------- ------- -------
Total revenues 49,462 48,933 96,167 97,426
Operating, development 18,669 20,184 36,126 40,147
Selling, G & A 10,345 10,030 20,283 19,804
------- ------- ------- -------
Total expenses 29,014 30,214 56,409 59,951
------- ------- ------- -------
Operating income 20,448 18,719 39,758 37,475
Other income 2,459 3,849 4,897 7,869
Other expense 1,139 2,000 2,187 4,194
------- ------- ------- -------
Income before taxes 21,768 20,568 42,468 41,150
State taxes 1,907 1,827 3,722 3,687
Federal taxes 7,023 6,388 13,707 12,973
------- ------- ------- -------
Net income 12,838 12,353 25,039 24,490
Earnings/share $0.80 $0.76 $1.56 $1.51
</TABLE>
<TABLE>
Statement Of Shareholders' Equity (000 omitted)
<CAPTION>
6 Months Ended 6 Months Ended
June 30, 1997 June 30, 1998
<S> <C> <C>
Shareholders' equity at beginning 162,468 189,531
Net income 25,039 24,490
Sale of common stock 2,612 3,739
Dividends paid (13,434) (15,187)
------- -------
Shareholders' equity at end 176,685 202,573
</TABLE>
<PAGE> 5
<TABLE>
Statement Of Cash Flow (000 omitted)
<CAPTION>
6 Months Ended 6 Months Ended
June 30, 1997 June 30, 1998
<S> <C> <C>
Net income 25,039 24,490
Depreciation 4,476 5,046
(Gain) on marketable securities (40) (117)
Change in accounts receivable (7,936) (14)
Change in accounts payable 1,203 1,498
Change in accrued expenses (5,298) (6,783)
Change in customer deposits (1,248) (3,559)
Change in deferred taxes 377 300
------- -------
Net cash from operations 16,573 20,861
Purchase of property, plant
and equipment (3,112) (2,311)
Purchase of marketable securities (7,149) (1,676)
Proceeds from investment liquidation 2,919 8,568
------- -------
Net cash (used by) from investing (7,342) 4,581
Payment of bank note (14,000) (9,000)
Proceeds from sale of common stock 2,612 3,739
Dividends paid (13,434) (15,187)
------- -------
Net cash used in financing (24,822) (20,448)
------- -------
Net (decrease) increase in cash
and equivalents (15,591) 4,994
Cash and equivalents at beginning 18,063 8,379
------- -------
Cash and equivalents at end 2,472 13,373
</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 Six Months ended
June 30, 1997 and 1998 is as follows:
<TABLE>
Earnings per Share Calculations (in thousands where applicable)
<CAPTION>
3 Months Ended June 30 6 Months Ended June 30
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Net income 12,838 12,353 25,039 24,490
Average number of
common shares 16,047 16,226 16,011 16,180
Earnings per share $0.80 $0.76 $1.56 $1.51
</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 second quarter and six
months ended June 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 2nd Quarter 1998 to 2nd Quarter 1997
(in thousands where applicable)
<CAPTION>
1997 1998 Change
<S> <C> <C> <C>
Revenues 49,462 48,933 (1%)
Operating income 20,448 18,719 (8%)
Net income 12,838 12,353 (4%)
Earnings per common share $0.80 $0.76 (5%)
Cash dividends per common share $0.42 $0.47 12%
</TABLE>
Revenues decreased by $0.5 million or 1% due to the slowdown of scheduled
deliveries to our largest customer, Columbia/HCA.
Expenses increased by $1.2 million or 4% due primarily to higher staffing
costs. The increase in expenses, coupled by the decrease in revenues resulted
in a $1.7 million or 8% decrease in operating income.
Other income, net of other expenses, increased by $0.5 million. The primary
factor is the additional rental revenues received from property purchased
during the third quarter of 1997. Net income decreased by $0.5 million or 4%.
<TABLE>
Comparison of 1st Six Months 1998 to 1st Six Months 1997
(in thousands where applicable)
<CAPTION>
1997 1998 Change
<S> <C> <C> <C>
Revenues 96,167 97,426 1%
Operating income 39,758 37,475 (6%)
Net income 25,039 24,490 (2%)
Earnings per average common share $1.56 $1.51 (3%)
Cash dividends per common share $0.84 $0.94 12%
</TABLE>
Revenues increased by $1.3 million or 1% due to increased orders received from
both existing and new customers, after offset by the slowdown of scheduled
deliveries to our largest customer, Columbia/HCA.
Expenses increased by $3.5 million or 6% due primarily to higher staffing costs.
The higher growth rate of expenses over revenues resulted in a $2.3 million or
6% decrease in operating income.
Other income, net of other expenses, increased by $1.0 million. The primary
factor is the additional rental revenues received from property purchased
during the third quarter of 1997. Net Income decreased by $0.5 million or 2%.
<PAGE> 8
<TABLE>
Liquidity And Capital Resources (in thousands where applicable)
<CAPTION>
Dec 31, 1997 Jun 30, 1998
<S> <C> <C>
Cash and cash equivalents 8,379 13,373
Total assets 263,108 258,606
Total liabilities 73,577 56,033
Shareholders' equity 189,531 202,573
Book value per share $11.78 $12.48
Common shares outstanding 16,087 16,226
</TABLE>
As presented in the Statement of Cash Flow, net cash from operations was $20.9
million during the first six months of fiscal 1998. Net cash from investing
was not significant. The payment of $15.2 million in dividends to shareholders
and repayment of $9 million of debt to a bank constituted the most significant
use of cash during the first half of fiscal 1998. The resultant net increase
in cash and equivalents was $5 million for the six months ended June 30, 1998.
At June 30, 1998 the Company's total debt was $28.5 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 4 - Submission of Matters to a Vote of Shareholders
At the Company's Annual Meeting of Shareholders held on April 27, 1998, the
shareholders voted as follows, in each case by a total of 13,268,153 shares
in favor and none opposed.
i) To fix the number of directors of the corporation at eight.
ii) To elect as directors A. Neil Pappalardo, Roland L. Driscoll, Jerome H.
Grossman, Lawrence A. Polimeno, Edward B. Roberts, Morton E. Ruderman and
Louis P. Valente until the 1999 Annual Meeting of Shareholders and thereafter
until their successors are chosen and qualified.
iii) To select Messrs. Arthur Andersen, LLP as auditors of the Corporation
for the current fiscal year.
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 June 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)
August 11, 1998
(Date)
Barbara A. Manzolillo, Chief Financial Officer and Treasurer
(Signature)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,373
<SECURITIES> 55,761
<RECEIVABLES> 24,564
<ALLOWANCES> 270
<INVENTORY> 0
<CURRENT-ASSETS> 95,508
<PP&E> 196,617
<DEPRECIATION> 35,384
<TOTAL-ASSETS> 258,606
<CURRENT-LIABILITIES> 43,333
<BONDS> 10,500
0
0
<COMMON> 4,056
<OTHER-SE> 198,517
<TOTAL-LIABILITY-AND-EQUITY> 258,606
<SALES> 59,407
<TOTAL-REVENUES> 97,426
<CGS> 0
<TOTAL-COSTS> 59,951
<OTHER-EXPENSES> 2,923
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,271
<INCOME-PRETAX> 41,150
<INCOME-TAX> 16,660
<INCOME-CONTINUING> 24,490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,490
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.51
</TABLE>
