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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 June 30, 2000
COMMISSION FILE NUMBER: 000-24539
ECLIPSYS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 65-0632092
(State of Incorporation) (IRS Employer Identification Number)
777 East Atlantic Avenue
Suite 200
Delray Beach, Florida
33483
(Address of principal executive offices)
(561)-243-1440
(Telephone number of registrant)
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 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.
CLASS SHARES OUTSTANDING AS OF JULY 15, 2000
----- --------------------------------------
Common Stock, $.01 par value 36,735,297.
-----------
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<PAGE> 2
ECLIPSYS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I. Financial Information
Item 1. Condensed Consolidated Balance Sheets - As of June 30, 2000 (unaudited) and December 31, 1999
Condensed Consolidated Statements of Operations (unaudited) - For the Three and Six Months ended
June 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows (unaudited) - For the Six Months ended
June 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements (unaudited) - For the Three and Six Months ended
June 30, 2000 and 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
2
<PAGE> 3
PART I.
ITEM 1.
ECLISPSYS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
----------------------------- -----------------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 23,084 $ 33,956
Accounts receivable, net 76,941 77,254
Inventory 526 660
Other current assets 11,914 11,800
------------- -------------
TOTAL CURRENT ASSETS 112,465 123,670
Fixed assets, net 15,536 14,522
Capitalized software development costs, net 10,005 7,944
Acquired technology, net 28,273 33,161
Intangible assets, net 12,354 16,858
Other assets 5,493 6,780
------------- -------------
TOTAL ASSETS $ 184,126 $ 202,935
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue $ 43,759 $ 49,279
Current portion of long-term debt 790 -
Other current liabilities 36,078 41,288
------------- -------------
TOTAL CURRENT LIABILITIES 80,627 90,567
Deferred revenue 6,265 8,803
Long-term debt 1,090 -
Other long-term liabilities 2,264 2,264
STOCKHOLDERS' EQUITY
Common stock 367 363
Unearned stock compensation (248) (320)
Additional paid-in capital 256,709 254,085
Accumulated other comprehensive loss (206) (327)
Accumulated deficit (162,742) (152,500)
-------------- --------------
Total stockholders' equity 93,880 101,301
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 184,126 $ 202,935
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------- ------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Systems and services $ 45,174 $ 57,856 $105,814 $109,736
Hardware 1,955 3,970 6,005 9,468
------------------ ------------------ -------------- ---------------
TOTAL REVENUES 47,129 61,826 111,819 119,204
COSTS AND EXPENSES
Cost of systems and services revenues 35,818 32,380 68,095 61,142
Cost of hardware revenues 1,525 3,343 4,801 8,013
Marketing and sales 9,920 8,798 19,195 16,563
Research and development 9,119 14,205 18,893 24,094
General and administrative 2,593 3,040 4,919 6,105
Depreciation and amortization 3,668 3,887 7,322 7,731
Stock compensation charge - 1,005 - 1,005
Restructuring charge - 3,359 - 3,359
Pooling and transaction costs - 1,034 3,100 1,648
------------------ ------------------ -------------- ---------------
TOTAL COSTS AND EXPENSES 62,643 71,051 126,325 129,660
------------------ ------------------ -------------- ---------------
LOSS FROM OPERATIONS (15,514) (9,225) (14,506) (10,456)
Interest income, net 283 165 668 608
Other income, net - - 3,596 -
------------------ ------------------ -------------- ---------------
NET LOSS $(15,231) $ (9,060) $(10,242) $ (9,848)
------------------ ------------------ -------------- ---------------
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.42) $ (0.26) $ (0.28) $ (0.29)
------------------ ------------------ -------------- ---------------
BASIC AND DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 36,715 34,984 36,608 34,337
------------------ ------------------ -------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
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ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------------------------
2000 1999
---------------------- ----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss $(10,242) $ (9,848)
Adjustments to reconcile net loss to net cash
Provided by (used in) operating activities:
Depreciation and amortization 17,772 20,984
Provision for bad debts 1,720 1,576
Gain on sale of investment (4,462) -
Write down of investments 836 -
Write off of capitalized software development costs - 2,790
Stock compensation expense 72 1,232
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (2,555) (7,124)
Inventory (16) 11
Other current assets 1,414 (1,218)
Other assets 350 116
Deferred revenue (9,115) (5,934)
Other current liabilities (8,465) (7,365)
Other liabilities - (4)
---------------------- ----------------------
Total adjustments to reconcile net loss to net
cash provided by (used in) operating activities (2,449) 5,064
---------------------- ----------------------
NET CASH USED IN OPERATING ACTIVITIES (12,691) (4,784)
---------------------- ----------------------
INVESTING ACTIVITIES
Purchase of fixed assets (3,935) (4,339)
Purchase of investments (7,905) -
Sale of investments 12,432 -
Capitalized software development costs (3,402) (3,047)
Acquisitions, net of cash acquired - (25,000)
---------------------- ----------------------
NET CASH USED IN INVESTING ACTIVITIES (2,810) (32,386)
---------------------- ----------------------
FINANCING ACTIVITIES
Borrowings 2,012 20,000
Payments on borrowings (132) (20,000)
Exercise of stock options 1,132 4,344
Employee stock purchase plan 1,492 1,192
Distributions - (377)
Exercise of warrants 4 -
---------------------- ----------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,508 5,159
---------------------- ----------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 121 136
---------------------- ----------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,872) (31,875)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 33,956 54,986
---------------------- ----------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 23,084 $ 23,111
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
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ECLIPSYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include all adjustments
that, in the opinion of management, are necessary for a fair presentation of the
results for the periods presented. All such adjustments are considered of a
normal recurring nature. Quarterly results of operations are not necessarily
indicative of annual results.
Certain financial information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K dated March 29, 2000 and as amended April
28, 2000.
2. ACQUISITIONS
Effective March 31, 1999, the Company acquired the common stock of Intelus
Corporation ("Intelus") and Med Data Systems, Inc. ("Med Data"), both wholly
owned subsidiaries of Sungard Data Systems, Inc. for total consideration of
$25.0 million in cash. The acquired entities both provide document imaging
technology and workflow solutions to entities throughout the healthcare
industry. The acquisition was accounted for as a purchase and, accordingly, the
purchase price was allocated based on the fair value of the net assets acquired.
The purchase price is composed of and allocated as follows (in thousands):
<TABLE>
<S> <C>
Cash $25,000
Liabilities assumed 4,306
------------
29,306
Current assets 9,830
Fixed assets 778
------------
10,608
------------
Identifiable intangible assets
(acquired technology) $18,698
</TABLE>
As of March 31, 1999 the Company intended to dispose of Med Data.
Effective July 1, 1999, the Company sold Med Data for total a sales price of
$5.0 million in cash. The Company reduced the acquired technology originally
recorded above in the purchase by $4.4 million, which represented the difference
between the sales price and the net assets sold. No gain or loss was recorded.
During the quarter ended March 31, 2000, the Company finalized the
purchase price of Intelus. An increase of $3.3 million was recorded to acquired
technology.
Unaudited pro forma results of operations as if the aforementioned
acquisitions had occurred on January 1, 1999 is as follows (in thousands except
per share data):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1999
--------------------
<S> <C>
Revenues $122,695
Net loss $(10,287)
Basic and diluted net loss per share $(0.30)
</TABLE>
3. UNBILLED ACCOUNTS RECEIVABLE
The current portion of unbilled accounts receivable were $19.1 million and
$18.2 million as of June 30, 2000 and 1999, respectively, and are included in
accounts receivable in the accompanying condensed consolidated balance sheet.
The non-current portion of unbilled accounts receivable were $1.7 and $1.1
million as of June 30, 2000 and 1999, respectively, and are included in other
assets in the accompanying condensed consolidated balance sheet.
6
<PAGE> 7
4. INVESTMENTS
During the six months ended June 30, 2000, the Company recorded a gain on
its investment in Shared Medical Systems Corp (SMS) of approximately $4.5
million. The investment was made in connection with a proposed merger with SMS.
The Company recorded transaction costs of approximately $50,000 related to the
proposed merger with SMS, which was not consummated.
Additionally, during first quarter 2000, the Company recorded a charge of
approximately $802,000 to write down an equity investment to its net realizable
value, unrelated to the SMS investment.
5. TERMINATION OF MERGER
On March 30, 2000, the Company signed a merger agreement to be acquired by
Neoforma.com Inc., (Neoforma) a California based, business-to-business
e-commerce services provider in the medical products, supplies and equipment
industry. The merger was subject to the approval of stockholders of both the
Company and Neoforma and certain other transactions. In connection with the
proposed merger, the Company recorded transaction costs of approximately
$3.1million during the quarter ended March 31, 2000. During the second quarter
of 2000, the Company and Neoforma agreed to terminate the Merger Agreement
without the payment of a termination fee.
6. NEW ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25" (FIN No.44). The
interpretation provides guidance for certain issues relating to stock
compensation, involving employees that arose in applying APB Opinion No. 25. The
provisions of FIN No. 44 are effective July 1, 2000. Adoption of FIN 44 will
have no effect on the Company's financial statements.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements"
(SAB No. 101). SAB No. 101 summarizes certain of the SEC staff's view in
applying generally accepted accounting principles to revenue recognition in
financial statements. On June 26, 2000, the SEC staff issues SAB No. 101-B to
provide registrants with additional time to implement guidance contained in SAB
No. 101. SAB 101-B delays the implementation date of SAB No. 101 until no later
than the fourth fiscal quarter of fiscal years beginning after December 15,
1999. The Company believes its revenue recognition policies are compliant with
the Staff Accounting Bulletin.
7
<PAGE> 8
PART I.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. The important
factors discussed under the caption "Certain Factors that May Affect Future
Operating Results/Risk Factors," presented from time to time in the Company's
filings with the Securities and Exchange Commission, among others, could cause
actual results to differ materially from those indicated by forward-looking
statements made herein. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
OVERVIEW
Eclipsys Corporation ("Eclipsys" or "the Company") is a healthcare
information technology company delivering solutions that enable healthcare
providers to achieve improved clinical, financial and administrative outcomes.
The Company offers an integrated suite of core products in seven functional
areas - clinical management, access management, patient financial management,
health information management, strategic decision support, resource planning
management and enterprise application integration. These products can be
purchased in combination to provide an enterprise-wide solution or individually
to address specific needs. Eclipsys' products have been designed specifically to
deliver a measurable impact on outcomes, enabling Eclipsys' customers to
quantify clinical benefits and return on investment in a precise and timely
manner. Eclipsys' products can be integrated with a customer's existing
information systems, which Eclipsys believes reduces overall cost of ownership
and increases the attractiveness of its products. Eclipsys also provides
outsourcing, remote hosting and networking services to assist customers in
meeting their healthcare information technology requirements. Eclipsys markets
its products primarily to large hospitals, academic medical centers and
integrated health networks. To provide direct and sustained customer contact,
Eclipsys maintains decentralized sales, implementation and customer support
teams in each of its eight North American regions.
The Company was formed in December 1995 and has grown primarily through a
series of strategic acquisitions as follows:
<TABLE>
<CAPTION>
METHOD OF
TRANSACTION DATE ACCOUNTING
----------- ------- ----------
<S> <C> <C>
ALLTEL Healthcare Information Services, Inc. 1/24/97 Purchase
("Alltel")
SDK Medical Computer Services Corporation 6/26/97 Purchase
("SDK")
Emtek Healthcare Systems 1/30/98 Purchase
("Emtek") a division of Motorola, Inc.
HealthVISION, Inc. (acquired by Transition) 12/1/98 Purchase
("HealthVISION")
Transition Systems, Inc. 12/31/98 Pooling
("Transition")
PowerCenter Systems, Inc. 2/17/99 Pooling
("PCS")
Intelus Corporation and Med Data Systems, Inc. 3/31/99 Purchase
("Intelus" and "Med Data") wholly owned
subsidiaries of Sungard Data Systems, Inc.
MSI Solutions, Inc. and MSI Integrated 6/17/99 Pooling
Services, Inc.
(collectively, "MSI")
</TABLE>
The condensed consolidated financial statements of the Company reflect the
financial results of the purchased entities from the respective dates of the
purchase. For all transactions accounted for using the pooling of interests
method, the Company's condensed consolidated financial statements have been
retroactively restated as if the transactions had occurred as of the beginning
of the earliest period presented.
8
<PAGE> 9
RESULTS OF OPERATIONS
SUMMARY
Total revenues for the quarter ended June 30, 2000 decreased 23.8% to
$47.1 million compared with $61.8 million for the second quarter 1999. For the
six months ended June 30, 2000, total revenues decreased 6.2% to $111.8 million
compared to $119.2 million for the same period in 1999.
Total costs and expenses for the quarter ended June 30, 2000 decreased
11.8% compared to the same period in 1999. For the six months ended June 30,
2000, total costs and expenses decreased 2.6% compared to the same period in
1999.
These changes in revenues and expenses combined to increase net loss for
the quarter ended June 30, 2000 by 68.1% to $(15.2) million compared to the same
period in 1999. Included in the reported quarterly results were acquisition
related amortization of intangible assets and certain non-recurring charges of
$6.5 million and $16.9 million for the quarter ended June 30, 2000 and 1999,
respectively.
Year to date changes in revenues and expenses combined to increase net
loss for the six months ended June 30, 2000 by 4.0% to $(10.2) million compared
to the same period in 1999. Included in the reported six month net losses were
acquisition related amortization of intangible assets and certain non-recurring
charges recorded in connection with the acquisitions of $12.1 million and $25.0
million for the six months ended June 30, 2000 and 1999, respectively.
REVENUES
System and services revenues decreased 21.9% to $45.2 million for the
second quarter of 2000 compared to the same period in 1999 and 3.6% to $105.8
million for the six months ended June 30, 2000 compared to the same period in
1999. The decrease was primarily due to the completion of certain projects that
were in process during 1999 and recognized using the percentage of completion
method over the implementation period. Implementation periods generally range
from 12 to 24 months.
Hardware revenues decreased 50.8% to $2.0 million for the second quarter
of 2000 compared to the same period in 1999 and 36.6% to $6.0 million for the
six months ended June 30, 2000 compared to the same period in 1999. The decrease
was primarily due to decreased volume as a result of less hardware-intensive
transactions.
EXPENSES
Total cost of revenues increased 4.5% for the second quarter of 2000
compared to the same period in 1999 and 5.4% for the six months ended June 30,
2000 compared to the same period in 1999. Increased costs of system and services
were partially offset by a decrease in hardware costs associated with the
decrease in hardware sales. System and services costs increased primarily due to
increased third party royalties associated with revenue recognized during the
period.
Marketing and sales expenses increased 12.8% for the second quarter of
2000 compared to the same period in 1999 and 15.9% for the six months ended June
30, 2000 compared to the same period in 1999. The increase was primarily due to
an increase in commissions as the result of new contracted business for the
quarter and the six months ended June 30, 2000.
Total expenditures for research and development, including both
capitalized and non-capitalized expenses decreased 33.1% to $10.7 million for
the second quarter 2000 compared to the same period in 1999 and 17.9% to $22.3
million for the six months ended June 30, 2000 compared to the same period in
1999. The decrease was due primarily to a write-off of $2.8 million of
capitalized software development costs related to duplicate products with no
alternative future use due to the acquisition of MSI in 1999 and the realization
of integration synergies. Research and development expenses capitalized for the
second quarter of 2000 decreased $212,000 compared to the same period in 1999
and increased $355,000 for the six months ended June 30, 2000 compared to the
same period in 1999. The changes in capitalization were primarily the result of
the completion of certain projects related to the development of an
enterprise-wide, web enabled, client server platform solution at the end of the
first quarter of 2000.
General and administrative expenses decreased 14.7% for the second quarter
of 2000 compared to the same period in 1999 and 19.4% for the six months ended
June 30, 2000 compared to the same period in 1999. The decrease was primarily
due to the reduction of administrative and finance personnel following the
Company's restructuring that commenced in the second quarter of 1999.
9
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Depreciation and amortization decreased 5.6% for the second quarter of
2000 compared to the same period in 1999 and 5.3% for the six months ended June
30, 2000 compared to the same period in 1999. The decrease is primarily the
result of the full depreciation of fixed assets and a decrease in the purchase
of fixed assets during the quarter and six months ended June 30, 2000.
Stock compensation and restructuring charges incurred during the second
quarter of 1999 were non-recurring in nature.
Pooling and transaction costs decreased 100% for the second quarter of
2000 compared to the same period in 1999 and increased 88.0% for the six months
ended June 30, 2000 compared to the same period in 1999. Pooling and transaction
costs incurred during the quarter and six months ended June 30, 1999 were
related to the poolings of PowerCenter and MSI. The increase during the six
months ended June 30, 2000, is primarily the result of costs associated with
proposed transactions with Shared Medical Systems Corp (SMS) and Neoforma.com,
Inc. (Neoforma).
Other income recorded during the six months ended June 30, 2000 related to
a gain on the Company's investment in SMS during the first quarter of 2000. See
notes to the unaudited condensed consolidated financial statements.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
In connection with the Alltel, SDK and HealthVISION acquisitions, the
Company wrote off acquired in-process research and development totaling $92.2
million and $7.0 million in 1997 and $2.4 million in 1998, respectively. These
amounts were expensed as non-recurring charges on the respective acquisition
dates. The Company continues to believe that the acquired in-process research
and development will be successfully developed, but there can be no assurance
that commercial viability of these products will be achieved.
The value of the acquired in-process research and development was
determined by estimating the projected net cash flows related to such products,
including costs to complete the development of the technology and the future
revenues to be earned upon commercialization of the products. These cash flows
were discounted back to their net present value. The resulting projected net
cash flows from such projects were based on management's estimates of revenues
and operating profits related to such projects.
Through June 30, 2000, revenues and operating profit attributable to the
acquired in-process technology have not materially differed from the projections
used in determining its value. Throughout 1999 and during the first six months
of 2000, the Company has continued the development of the in-process technology
that was acquired in the transactions. To date, the Company is installing
modules derived from the acquired in-process technology in various field trial
sites and activated certain sites by the end of 1999. Additionally, the Company
has begun to successfully market certain aspects of the technology to new and
existing customers. The Company expects to continue releasing products derived
from the technology through 2001. Management continues to believe the
projections used reasonably estimate the future benefits attributable to the
in-process technology. However, no assurance can be given that deviations from
these projections will not occur.
If these projects to develop commercial products based on the acquired
in-process technology are not successfully completed, the sales and
profitability of the Company may be adversely affected in future periods.
Additionally, the value of other intangible assets may become impaired.
BALANCE SHEET
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Capitalized software development costs increased during the six months
ended June 30, 2000 primarily due to the continued development of an
enterprise-wide, web enabled, client server platform solution that had reached
technological feasibility.
ACQUIRED TECHNOLOGY
Acquired technology decreased during the six months ended June 30, 2000
primarily due to amortization partially offset by the final purchase price
adjustment for Intelus.
INTANGIBLE ASSETS
Intangible assets decreased during the six months ended June 30, 2000 due
to amortization.
10
<PAGE> 11
OTHER ASSETS
Other assets decreased during the six months ended June 30, 2000 primarily
due to a write-down of an equity investment to its net realizable value.
DEFERRED REVENUE
Deferred revenue decreased during the six months ended June 30, 2000
primarily due to the completion of certain implementations and milestones of
various software license fee contracts and the timing of software maintenance
billings.
OTHER CURRENT LIABILITIES
Other current liabilities decreased during the six months ended June 30,
2000 primarily due to the timing of certain employee compensation related
expenses.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2000, the Company used $12.7 million
in operations. Included in operations is approximately $10.5 million of annual
employee compensation related liabilities paid during the first quarter and $3.1
million related to transaction costs paid during the second quarter. Investing
activities used $2.8 million for the purchase of fixed assets and the funding of
development costs partially offset by the sale of investments. Financing
activities provided $4.5 million, due to the assumption of a note payable,
exercise of stock options and the employee stock purchase plan.
As of June 30, 2000, the Company had no amounts outstanding under its
$50.0 million revolving credit facility.
As of June 30, 2000, the Company had $23.1 million in cash and cash
equivalents.
Management believes that its available cash and cash equivalents,
anticipated cash generated from its future operations and amounts available
under the existing revolving credit facility will be sufficient to meet the
Company's operating requirements for at least the next twelve months.
11
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PART II.
ITEM 1. LEGAL PROCEEDINGS
In April 2000, the Company and the members of its Board of Directors were
named as defendants in three shareholder lawsuits filed in the Court of Chancery
of the state of Delaware, Ilene Silberman v. Eclipsys Corporation, et al; Paul
Minch v. Eclipsys Corporation, et al; and William York v. Eclipsys Corporation,
et al. Each of the lawsuits seeks to enjoin or rescind the proposed merger with
Neoforma.com, Inc. or to collect an unspecified amount of damages. Each of the
lawsuits in general alleged that the members of the Company's Board of Directors
had breached their fiduciary duties by approving the transaction with
Neoforma.com, Inc. and that the consideration received by the Company's
shareholders in connection with the transaction would be inadequate. The Company
believes that the members of its Board of Directors properly exercised their
fiduciary duties. During the second quarter of 2000, the Company and Neoforma
agreed to terminate the merger agreement without the payment of a termination
fee. In July 2000, the plaintiffs in each of these cases voluntarily dismissed
these stockholder lawsuits.
ITEM 2. CHANGES IN SECURITIES
On July 26, 2000, the Board of Directors of the Company declared a
dividend of one Right for each outstanding share of the Company's Common Stock
to stockholders of record at the close of business on August 9, 2000. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, $.01 par value per
share, at a Purchase Price of $65.00 in cash, subject to adjustment. The Rights
will initially trade together with the Eclipsys Common Stock and will not be
exercisable. If a person or group (other than an exempt person) acquires 15% or
more of the outstanding shares of Eclipsys Common Stock, the Rights generally
will become exercisable and allow the holder (other than the 15% purchaser) to
purchase shares of Eclipsys Common Stock at a 50% discount to the market price.
The effect will be to discourage acquisitions of 15% or more of Eclipsys Common
Stock without negotiations with the Board. The terms of the Rights are set forth
in a Rights Agreement dated as of July 26, 2000 (the "Rights Agreement") between
the Company and Fleet National Bank, as Rights Agent. A copy of the Rights
Agreement has been filed with the Securities and Exchange Commission as an
Exhibit to the Company's Current Report on Form 8-K dated August 8, 2000. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Index to exhibits.
(b) Reports on Form 8-K: Filed with the Securities and Exchange Commission on
April 3, 2000
12
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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.
ECLIPSYS CORPORATION
Date: August 14, 2000 /s/ Gregory L.Wilson
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Gregory L. Wilson
Senior Vice President, Chief Financial Officer and
Treasurer
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ECLIPSYS CORPORATION
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
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10 2000 Stock Incentive Plan
27 Financial Data Schedule (for SEC use only)
14
