<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
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: 0-27501
THE TRIZETTO GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0761159
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
567 SAN NICOLAS DRIVE, SUITE 360
NEWPORT BEACH, CALIFORNIA 92660
(Address of Principal Executive Offices and Zip Code)
(949) 719-2200
(Registrant's Telephone Number, Including Area Code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
------------------
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. [X] Yes [ ] No
As of July 31, 2000, 21,453,262 shares of the issuer's common stock, $0.001 par
value per share, were outstanding.
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FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets - as of
June 30, 2000 and December 31, 1999.............................. 3
Unaudited Condensed Consolidated Statements of Operations
for the three and six months ended June 30, 2000 and 1999........ 4
Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2000 and 1999.................. 5
Notes to Unaudited Condensed Consolidated Financial Statements..... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk......... 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 16
Item 2. Changes in Securities and Use of Proceeds.......................... 16
Item 4. Submission of Matters to a Vote of Security Holders................ 16
Item 5. Other Information.................................................. 17
Item 6. Exhibits and Reports on Form 8-K................................... 18
Signatures................................................................. 19
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE TRIZETTO GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................ $ 8,433 $ 18,849
Short-term investments ........................... -- 5,957
Accounts receivable, net ......................... 9,269 8,228
Prepaid expenses and other current assets ........ 2,262 1,801
Income tax receivable ............................ 454 440
Total current assets ......................... 20,418 35,275
Property and equipment, net .......................... 11,707 10,797
Long-term investments ................................ 3,434 1,230
Other assets ......................................... 1,590 265
Note receivable from related party ................... 264 525
Goodwill and other intangible assets, net ............ 21,426 20,326
-------- --------
Total assets ................................. $ 58,839 $ 68,418
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term note payable .......................... $ 2,929 $ 623
Capital lease obligations, current ............... 1,558 1,234
Accounts payable ................................. 2,289 3,102
Accrued liabilities .............................. 9,062 9,172
Income taxes payable ............................. 10 22
Deferred revenue ................................. 177 241
-------- --------
Total current liabilities .................... 16,025 14,394
Long-term notes payable .............................. 324 504
Capital lease obligations ............................ 2,535 2,224
Deferred revenue ..................................... 113 --
-------- --------
Total liabilities ............................ 18,997 17,122
-------- --------
Stockholders' equity:
Common stock ......................................... 21 20
Additional paid-in capital ........................... 70,400 66,215
Notes receivable from stockholders ................... (41) (41)
Deferred stock compensation .......................... (4,894) (5,786)
Other comprehensive loss ............................. (2) --
Accumulated deficit .................................. (25,642) (9,112)
-------- --------
Total stockholders' equity ................... 39,842 51,296
-------- --------
Total liabilities and stockholders' equity $ 58,839 $ 68,418
======== ========
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements
3
<PAGE> 4
THE TRIZETTO GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(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:
Recurring revenue ............................... $ 12,377 $ 4,780 $ 24,344 $ 6,201
Non-recurring revenue ........................... 5,382 3,676 11,132 6,508
-------- -------- -------- --------
Total revenues ...................................... 17,759 8,456 35,476 12,709
-------- -------- -------- --------
Cost of revenues:
Recurring revenue ............................... 11,394 3,720 22,656 5,038
Non-recurring revenue ........................... 3,756 2,409 7,756 4,109
-------- -------- -------- --------
Total cost of revenues .............................. 15,150 6,129 30,412 9,147
-------- -------- -------- --------
Gross profit ........................................ 2,609 2,327 5,064 3,562
-------- -------- -------- --------
OPERATING EXPENSES:
Research and development ........................ 1,566 234 3,197 440
Selling, general and administrative ............. 9,454 1,869 17,395 3,098
Amortization of deferred stock compensation ..... 428 134 892 215
Write-off of acquired in-process technology ..... -- -- 536 484
-------- -------- -------- --------
Total operating expenses ............................ 11,448 2,237 22,020 4,237
-------- -------- -------- --------
Income (loss) from operations ....................... (8,839) 90 (16,956) (675)
Interest income ..................................... 346 38 609 76
Interest expense .................................... (156) (68) (183) (100)
-------- -------- -------- --------
Income (loss) before provision for income taxes ..... (8,649) 60 (16,530) (699)
Provision for (benefit of) income taxes ............. -- (2) -- 28
-------- -------- -------- --------
Net income (loss) ................................... $ (8,649) $ 62 $(16,530) $ (727)
======== ======== ======== ========
Net income (loss) per share:
Basic ........................................... $ (0.43) $ 0.01 $ (0.85) $ (0.12)
======== ======== ======== ========
Diluted ......................................... $ (0.43) $ 0.00 $ (0.85) $ (0.12)
======== ======== ======== ========
Shares used in computing net income (loss) per share:
Basic ........................................... 20,225 7,217 19,557 6,216
======== ======== ======== ========
Diluted ......................................... 20,225 18,014 19,557 6,216
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements
4
<PAGE> 5
THE TRIZETTO GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
2000 1999
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................... $(16,530) $ (727)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Provision for doubtful accounts ....................... 351 135
Amortization of deferred stock compensation ........... 892 215
Write-off of acquired in-process technology ........... 536 484
Forgiveness of note receivable ........................ -- 32
Stock compensation .................................... -- 53
Deferred taxes ........................................ -- (709)
Loss on disposal of property and equipment ............ 151 --
Depreciation and amortization ......................... 5,496 648
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable ................................... (1,187) (1,654)
Prepaid expenses and other current assets ............. 90 72
Income tax receivable ................................. (14) 406
Note receivable ....................................... (226) --
Accounts payable ...................................... (842) 967
Accrued liabilities ................................... (303) 1,870
Deferred revenue ...................................... 38 --
Other long-term assets ................................ (162) (53)
-------- -------
Net cash provided by (used in) operating activities ........ (11,710) 1,739
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of short-term and long-term investments . 5,957 --
Purchase of short-term and long-term investments ........... (2,204) --
Purchase of MedPartners' assets ............................ -- (2,630)
Payments for Erisco merger related costs ................... (1,173) --
Purchase of property and equipment and software licenses ... (3,015) (1,334)
Acquisitions, net of cash acquired ......................... (1,497) (1,238)
-------- -------
Net cash used in investing activities ...................... (1,932) (5,202)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of mandatorily redeemable
convertible preferred stock , net ........................ -- 4,483
Payments on notes payable, net ............................. (675) (267)
Principal payments on capital leases ....................... (704) (166)
Repayment of notes receivable .............................. -- 30
Payments on line of credit ................................. -- (265)
Proceeds from line of credit ............................... 2,756 --
Employee exercise of stock options ......................... 172 --
Proceeds from issuance of common stock, net ................ 515 --
Proceeds from equipment line of credit ..................... 1,164 --
-------- -------
Net cash provided by financing activities .................. 3,228 3,815
-------- -------
Net decrease in cash and cash equivalents .................. (10,414) 352
Effect of exchange rate changes on cash and cash equivalents (2) --
Cash and cash equivalents, beginning of period ............. 18,849 3,681
-------- -------
Cash and cash equivalents, end of period ................... $ 8,433 $ 4,033
======== =======
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements
5
<PAGE> 6
THE TRIZETTO GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PREPARATION
The accompanying unaudited condensed consolidated financial statements
have been prepared by The TriZetto Group, Inc. ("the Company") in accordance
with generally accepted accounting principles for interim financial information
that are consistent in all material respects with those applied in the Company's
Annual Report on Form 10K for the fiscal year ended December 31, 1999 and
pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC"). Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six months ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000, or for any future period. The financial statements and notes should be
read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's Form 10-K as filed with the SEC on March 30,
2000.
2. COMPUTATION OF INCOME (LOSS) PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income
(loss) by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur from common
shares issuable through stock options, warrants and other convertible
securities. The following is a reconciliation of the numerator (net income
(loss)) and the denominator (number of shares) used in the basic and diluted EPS
calculations (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -----------------------
2000 1999 2000 1999
-------- ------- -------- --------
<S> <C> <C> <C> <C>
BASIC:
Net income (loss) ........................ $ (8,649) $ 62 $(16,530) $ (727)
-------- ------- -------- --------
Weighted average common shares outstanding 20,225 7,217 19,557 6,216
-------- ------- -------- --------
Net income (loss) per share .............. $ (0.43) $ 0.01 $ (0.85) $ (0.12)
======== ======= ======== ========
DILUTED:
Net income (loss) ........................ $ (8,649) $ 62 $(16,530) $ (727)
-------- ------- -------- --------
Weighted average common shares outstanding 20,225 7,217 19,557 6,216
Preferred stock .......................... -- 6,048 -- --
Options to purchase common stock ......... -- 2,000 -- --
Common stock subject to repurchase ....... -- 2,615 -- --
Warrants ................................. -- 134 -- --
-------- ------- -------- --------
Total weighted common stock and common
stock equivalents ...................... 20,225 18,014 19,557 6,216
-------- ------- -------- --------
Net income (loss) per share .............. $ (0.43) $ 0.00 $ (0.85) $ (0.12)
======== ======= ======== ========
ANTIDILUTIVE SECURITIES:
Preferred stock .......................... -- -- -- 6,276
Contingently issuable shares ............. 535 -- 535 --
Options to purchase common stock ......... 3,495 -- 3,495 2,801
Common stock subject to repurchase ....... -- -- -- 1,705
Warrants ................................. -- -- -- 163
-------- ------- -------- --------
4,030 -- 4,030 10,945
======== ======= ======== ========
</TABLE>
3. COMPREHENSIVE INCOME
The Company has adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 130, "Comprehensive Income." SFAS 130
establishes standards for reporting and display of comprehensive income and
6
<PAGE> 7
THE TRIZETTO GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
its components for general-purpose financial statements. Comprehensive income is
defined as net income plus all revenues, expenses, gains and losses from
non-owner sources that are excluded from net income in accordance with generally
accepted accounting principles. For the six months ended June 30, 2000, the only
item of comprehensive loss was $2,000 of translation loss, resulting in
comprehensive net loss of $16,532. There were no material differences between
comprehensive and net income in any other periods presented.
4. SUPPLEMENTAL CASH FLOW DISCLOSURES
SIX MONTHS
ENDED
JUNE 30,
----------------
2000 1999
----- -----
SUPPLEMENTAL DISCLOSURES FOR CASH FLOW INFORMATION
Cash paid for interest ................................... 236 99
Cash paid for income taxes ............................... 38 33
NONCASH INVESTING AND FINANCING ACTIVITIES
Assets acquired through capital lease .................. 175 1,484
Deferred stock compensation ............................ 892 5,817
Common stock issued for Creative Business Solutions .... -- 1,690
Notes payable issued for Creative Business Solutions ... -- 270
Common stock issued for acquisition of Healthcare
Media Enterprises .................................... 3,500 --
Repurchase of shares in exchange for stockholder
note receivable ...................................... -- 700
Common stock issued to purchase assets of Management and
Technology Solutions, Inc. ........................... -- 140
5. ACQUISITIONS
On January 11, 2000, the Company acquired all of the outstanding shares
of Healthcare Media Enterprises, Inc. ("HME"). HME's primary business focus is
on software development, especially relating to the Internet, web design, and
business to business portals. The acquisition was accounted for using the
purchase method of accounting and accordingly, the purchase price was allocated
to the tangible and intangible assets acquired and liabilities assumed on the
basis of their fair market values on the acquisition date. The purchase price of
approximately $5.4 million consisted of cash in the amount of approximately $1.4
million, 87,359 shares of common stock with a value of $40.06 per share, assumed
liabilities of $191,000 and acquisition costs of approximately $316,000. Of the
total purchase price, $536,000 was allocated to in-process technology and the
remainder of the purchase price was allocated to assets acquired and liabilities
assumed. Of the 87,359 shares of common stock which have been issued in
connection with this acquisition, 17,472 shares of the common stock are being
held in escrow until the resolution of certain pre-acquisition contingencies.
The acquisition of HME was accounted for using the purchase method of
accounting. The excess of the purchase price over the fair market value of the
assets purchased and liabilities assumed was $5.0 million, of which $536,000 was
allocated to acquired in-process technology, based upon an independent
appraisal, and was expensed in the six months ended June 30, 2000, and $4.5
million was allocated to goodwill and intangible assets consisting of assembled
workforce, core technology and customer lists. As of the acquisition date, HME
was developing several enhancements to its proprietary software products. The
in-process and core technology was scheduled to be released by the third quarter
of 2000.
In valuing HME's developed, in-process and core technologies, the
Company utilized the discounted cash flows method. The discounted cash flows
method includes an analysis of the completion costs, cash flows and risks
associated with achieving such cash flows. This income stream was tax effected
and discounted to its present value to estimate the value of the core and
in-process technologies. For purposes of this analysis, the Company used 20% and
25% discount rates for the core and in-process technologies, respectively. These
discount rates are consistent with the risks inherent in achieving the projected
cash flows.
7
<PAGE> 8
THE TRIZETTO GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The purchase price allocations were based on the estimated fair value of
the assets, less liabilities, on the date of purchases as follows (in
thousands):
Total current assets ................................. $ 336
Property, plant, equipment and other noncurrent assets 88
Goodwill ............................................. 3,532
Other intangible assets .............................. 922
Acquired in-process technology ....................... 536
------
Total purchase price ....................... $5,414
======
The following unaudited pro forma summary presents the consolidated
results of operations of the Company as if the acquisition of HME occurred on
January 1, 1999, giving effect to an acquisition adjustment for amortization of
goodwill and other intangibles and the write-off of acquired in-process
technology (in thousands):
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 JUNE 30, 2000
----------------- ----------------
Net revenue.................... $ 36,284 $ 35,476
Net loss....................... $ (9,588) $(16,530)
On May 16, 2000, the Company entered into an Agreement and Plan of
Reorganization with Elbejay Acquisition Corp. ("Elbejay") a wholly-owned
subsidiary of the Company, IMS Health Incorporated ("IMS HEALTH"), and ERISCO
Managed Care Technologies, Inc. ("Erisco") pursuant to which Erisco will merge
with and into Elbejay resulting in Erisco becoming a wholly-owned subsidiary of
the Company (the "Merger Agreement"). The Company will issue shares of common
stock of the Company, par value $0.001 per share (the "TriZetto Common Stock"),
having a value of $255 million to IMS HEALTH; provided, however, that the
Company will not issue less than 8.8 million shares nor more than 12.1 million
shares of TriZetto Common Stock. The final exchange ratio will be determined
based upon the average daily price of TriZetto Common Stock for the 15 trading
days ending on the third day prior to the Closing Date. By execution of the
Merger Agreement, IMS HEALTH and the Company agreed to terminate the Agreement
and Plan of Reorganization, dated as of March 28, 2000, between IMS HEALTH and
the Company that provided for the merger of IMS HEALTH with and into the
Company.
In connection with the proposed merger, the Company, its directors,
executive officers and certain other members of management solicited proxies
from certain holders of an aggregate of approximately 51% of the outstanding
common stock of the Company. Such stockholders have entered into Voting
Agreements with IMS HEALTH to vote in favor of the merger and the transactions
contemplated thereby. Consummation of the proposed merger is subject to the
approval of the Company's stockholders as well as various third parties and
federal agencies. As of the date hereof, a special stockholders meeting to
approve the proposed merger has not been held.
6. LINE OF CREDIT
In March 1999, the Company entered into a revolving line of credit with
a financial institution. In October 1999, the Company entered into a subsequent
agreement which increased the amount available under the line of credit. The
total amount available for borrowings under the line of credit is $3.0 million
and expires in November 2000. In June 2000, the Company entered into a
subsequent agreement whereby the line of credit is collateralized by $3.0
million of the Company's cash. Borrowings under the line of credit bear interest
at the bank's LIBOR rate plus 2.25%. Interest is payable monthly as it accrues.
The credit agreement contains certain covenants that the Company must adhere to
during the term of the agreement, including restrictions on the payment of
dividends. As of June 30, 2000, the Company had outstanding borrowings on the
line of credit of $2.7 million and letters of credit approximating $300,000.
In December 1999, the Company entered into a line of credit with a
financial institution. This line of credit was specifically established to
finance computer equipment purchases. The line of credit has a limit of $2.0
million and expires in December 2000. Borrowings under the lease line of credit
at June 30, 2000 totaled approximately $1.9 million, and are collateralized by
substantially all of the Company's assets.
8
<PAGE> 9
THE TRIZETTO GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," which established accounting
and reporting standards for derivative instruments and hedging activities. SFAS
133 is effective for fiscal years beginning after June 15, 2000. SFAS 133
requires an entity to recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those instruments at fair
value. To date, the Company has not engaged in derivative and hedging
activities.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB
101"), Revenue Recognition, which outlines the basic criteria that must be met
to recognize revenue and provides guidance for presentation of revenue and for
disclosure related to revenue recognition policies in financial statements filed
with the SEC. The Company believes that adopting SAB 101 will not have a
material impact on its financial position or results of operations.
In March 2000, the FASB issued Interpretation No. 44, or FIN 44,
"Accounting for Certain Transactions Involving Stock Compensation," which is an
interpretation of Accounting Principal Board No. 25. This interpretation
clarifies:
o the definition of employee for purposes of applying Opinion 25, which
deals with stock compensation issues;
o the criteria for determining whether a plan qualifies as a
noncompensatory plan;
o the accounting consequence of various modifications to the terms of a
previously fixed stock option or award; and
o the accounting for an exchange of stock compensation awards in a
business combination.
This interpretation is effective July 1, 2000, but certain conclusions
in this interpretation cover specific events that occur after either December
15, 1998 or January 12, 2000. To the extent that this interpretation covers
events occurring during the period after December 15, 1998 or January 12, 2000,
but before the effective date of July 1, 2000, the effects of applying this
interpretation are recognized on a prospective basis from July 1, 2000. The
Company believes that the adoption of FIN 44 will not have a material impact on
our financial statements.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements that have been made
pursuant to the provisions of the Private Securities Litigation Reform Act of
1995. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may", "will", "should", "forecasts", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential", or "continue"
or the negative of such terms and other comparable terminology. These statements
are only predictions. Actual events or results may differ materially. In
evaluating these statements, you should specifically consider various factors,
including the risks outlined below under the caption "risk factors." These
factors may cause our actual events to differ materially from any
forward-looking statement. We do not undertake to update any forward-looking
statement.
OVERVIEW
We are a leading provider of remotely hosted third party and proprietary
software applications and related services for use in the healthcare industry.
Through our Customer Connectivity Centers, we remotely operate and maintain
applications for our customers on most of the widely used computing, networking
and operating platforms. We have acquired rights to license and/or deploy
numerous commercially available software applications from a variety of
healthcare software vendors, including Epic Systems, Inc., ERISCO Managed Care
Technologies, Inc., Medic Computer Systems, Inc., McKesson HBOC, Inc., Raintree
Systems, Inc., InfoMedtrics, Inc., CTR Business Systems, Inc., Penchart, and
QCSI by operating and maintaining such applications at our Customer Connectivity
Centers. We also offer HealthWeb, our healthcare business to business Internet
portal and e-applications. HealthWeb is designed to facilitate the exchange of
information and to enable e-commerce among all constituents of the healthcare
industry. Through our Transformation Services Group, we offer business
operations and applications integration consulting services, including
information technology assessment and software implementation design and
development. Our customers primarily consist of provider groups, physician
practice management companies, and managed care organizations such as health
maintenance organizations, preferred provider organizations and third party
administrators.
Our revenues are classified into two categories: recurring or multi-year
contractually based revenue, and revenue generated via non-recurring agreements.
Since inception, the relative percentages of recurring revenue and non-recurring
revenue were 59% and 41%, respectively. For the six months ended June 30, 2000,
the relative percentages of recurring revenue and non-recurring revenue were 68%
and 32%, respectively. As we sign additional multi-year application services
contracts, we expect the relative percentage of recurring revenue to continue to
increase.
Recurring revenue is subscription based and billed on a monthly basis
over a contract term of typically three to five years. The amount billed monthly
is based on units of volume, such as numbers of physicians, members or desktops
covered by each contract. Recurring revenue is recognized ratably over the term
of the contract, and cash received in excess of revenue recognized is recorded
as deferred revenue. Non-recurring revenue is billed on either a time and
materials or a fixed fee basis, and is recognized as the non-recurring services
are performed.
Cost of revenues are those costs related to the products and services we
provide to our customers, and costs associated with the operation and
maintenance of our Customer Connectivity Centers. These costs include salaries
and related expenses for consulting personnel, Customer Connectivity Centers
personnel, customer support personnel, application software license fees,
telecommunications and maintenance costs.
Research and development expenses are salaries and related expenses
associated with the development of technologies, applications and services and
include compensation paid to engineering personnel and fees to outside
contractors and consultants.
Selling, general and administrative expenses consist primarily of
salaries and related expenses for sales, account management, marketing,
administrative, finance, legal, human resources and executive personnel,
commissions, expenses for marketing programs and trade shows and fees for
professional services. We anticipate that sales, general and administrative
costs will continue to increase in absolute dollars as we add sales, marketing
and administrative personnel, increase our marketing and promotional activities
and incur costs related to being a public company, such as directors' and
officers' insurance premiums and professional fees.
10
<PAGE> 11
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 2000 COMPARED TO QUARTER ENDED JUNE 30, 1999
REVENUES. Total revenues in the second quarter of 2000 increased $9.3
million, or 110%, to $17.8 million from $8.5 million for the same period in
1999. The majority of this increase was due to the overall growth in both
recurring revenue and non-recurring revenue throughout the three-month period
ended June 30, 2000. Additionally, the acquisition of Novalis Corporation in
November 1999, Finserv Health Care Systems, Inc. in December 1999, and
Healthcare Media Enterprises, Inc. ("HME") in January 2000, generated
approximately $4.6 million, $1.0 million, and $351,000, respectively, in
incremental revenue in the second quarter of 2000.
Recurring revenue in the second quarter of 2000 increased $7.6 million,
or 159%, to $12.4 million from $4.8 million for the same period in 1999. Of this
increase, $4.3 million was generated from the acquisitions of Novalis and
Finserv. The remaining $3.3 million increase was related to the overall increase
in demand for our services due to expansion of our service offerings.
Non-recurring revenue in the second quarter of 2000 increased $1.7
million, or 46%, to $5.4 million from $3.7 million for the same period in 1999.
This increase was due primarily to the acquisition of Novalis, Finserv and HME
which resulted in incremental non-recurring revenue of $1.6 million in the
second quarter 2000.
COST OF REVENUES. Cost of revenues in the second quarter 2000 increased
$9.0 million, or 147%, to $15.2 million from $6.1 million for the same period in
1999. This increase was due to the costs incurred to support the overall
expansion of our business, including our acquisition of Novalis, Finserv and
HME. As a percentage of total revenues, cost of revenues approximated 85% in the
second quarter of 2000 and 72% in the second quarter of 1999.
Cost of recurring revenue in the second quarter of 2000 increased $7.7
million, or 206%, to $11.4 million from $3.7 million for the same period in
1999. This increase represented the incremental expenses for personnel and
facilities costs incurred to support the growing application services provider
business, including the incremental costs associated with the acquisitions of
Novalis and Finserv. As a percentage of recurring revenue, cost of recurring
revenue approximated 92% in the second quarter of 2000 and 78% in the second
quarter of 1999.
Cost of non-recurring revenue in the second quarter of 2000 increased
$1.3 million, or 56%, to $3.8 million from $2.4 million for the same period in
1999. This increase was due to incremental costs required to support increasing
demand for our consulting services in the three months ended June 30, 2000,
including costs associated with the acquisitions of Novalis, Finserv and HME. As
a percentage of non-recurring revenue, cost of non-recurring revenue
approximated 70% in the second quarter of 2000 and 66% in the second quarter of
1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in
the second quarter of 2000 increased $1.3 million, or 569%, to $1.6 million from
$234,000 for the same period in 1999. The increase was primarily due to a
significant increase in the amount of resources engaged in the development of
our applications and services. Expenses relating to system enhancements from
which we derive revenue are not classified as research and development and are
included in cost of revenues. As a percentage of total revenues, research and
development expenses approximated 9% in the second quarter of 2000 and 3% in the
second quarter of 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses in the second quarter of 2000 increased $7.6 million, or
406%, to $9.5 million from $1.9 million for the same period in 1999. This
increase was due primarily to expansion of the sales force, staff growth in
management and administrative support areas, expansion of internal
infrastructure, and expansion of related office space. As a percentage of total
revenues, selling, general and administrative expenses approximated 53% in the
second quarter of 2000 and 22% in the second quarter of 1999.
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AMORTIZATION OF DEFERRED STOCK COMPENSATION. Amortization of deferred
stock compensation increased $294,000 in the second quarter of 2000 to $428,000
from $134,000 for the same period in 1999. This amount represents the allocated
portion of the difference between the deemed fair value of our common stock and
the exercise price of stock options granted by us to our employees.
INTEREST INCOME. Interest income in the second quarter of 2000 increased
$308,000, or 811%, to $346,000 from $38,000 for the same period in 1999. The
increase was due to the increase in cash available for investing due to proceeds
received from our initial public offering in October 1999.
INTEREST EXPENSE. Interest expense in the second quarter of 2000
increased $88,000, or 129%, to $156,000 from $68,000 for the same period in
1999. The increase was due to additional borrowings on our line of credit.
PROVISION FOR (BENEFIT OF) INCOME TAXES. Provision for income tax for
the three months ended June 30, 2000 was zero, a decrease of $2,000 from an
income tax provision of $2,000 for the same period in 1999. An income tax
provision was not recorded in the second quarter of 2000 due to our pre-tax
loss.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
REVENUES. Total revenues in the first six months of 2000 increased $22.8
million, or 179%, to $35.5 million from $12.7 million in the first six months of
1999. The majority of this increase was due to the overall growth in both
recurring revenue and consulting revenue throughout the six month period ended
June 30, 2000. Additionally, the acquisitions of Novalis in November 1999,
Finserv in December 1999, and HME in January 2000 generated approximately $11.9
million in incremental revenue for the first six months of 2000.
Recurring revenue in the first six months of 2000 increased $18.1
million, or 293%, to $24.3 million from $6.2 million for the same period in
1999. Of this increase, $8.2 million was generated from the acquisitions of
Novalis and Finserv. The remaining $9.9 million increase was related to the
overall increase in demand for our services due to expansion of our service
offerings.
Non-recurring revenue in the first six months of 2000 increased $4.6
million, or 71%, to $11.1 million from $6.5 million for the same period in 1999.
This increase was primarily due to the acquisition of Novalis, Finserv and HME
which resulted in incremental non-recurring revenue of $3.8 million for the six
months ended June 30, 2000.
COST OF REVENUES. Cost of revenues in the first six months of 2000
increased $21.3 million, or 233%, to $30.4 million from $9.1 million in the
first six months of 1999. This increase was due to the costs incurred to support
the overall expansion of our business, including our acquisitions of Novalis in
November 1999, Finserv in December 1999, and HME in January 2000. As a
percentage of total revenues, cost of revenues approximated 86% in the first six
months of 2000 and 72% in the first six months of 1999.
Cost of recurring revenue in the first six months of 2000 increased
$17.6 million, or 350%, to $22.7 million from $5.0 million in the first six
months of 1999. This increase represented the incremental expenses for personnel
and facilities costs incurred to support the growing application services
provider business, including the incremental costs associated with the
acquisitions of Novalis and Finserv. As a percentage of recurring revenue, cost
of recurring revenue approximated 93% in the first six months of 2000 and 81% in
the first six months of 1999.
Cost of non-recurring revenue in the first six months of 2000 increased
$3.6 million, or 89%, to $7.8 million from $4.1 million in the first six months
of 1999. This increase was due to incremental costs required to support
increasing demand for our consulting services in the first six months of 2000.
As a percentage of non-recurring revenue, cost of non-recurring revenue
approximated 70% for the first six months of 2000 and 63% for the same period in
1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in
the first six months of 2000 increased $2.8 million, or 627%, to $3.2 million
from $440,000 for the same period in 1999. The increase was primarily due to a
significant increase in the amount of resources engaged in the development of
our applications and services. Expenses relating to system enhancements from
which we derive revenue are not classified as research and development and are
included in cost of revenues. As a percentage of total revenues, research and
development expenses approximated 9% for the first six months of 2000 and 4% for
the same period in 1999.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses in the first six months of 2000 increased $14.3 million,
or 461%, to $17.4 million from $3.1 million for the same period in 1999. This
increase was due primarily to expansion of the sales force, staff growth in
management and administrative support areas, and expansion of related office
space. As a percentage of total revenues, selling, general and administrative
expenses approximated 49% for the first six months of 2000 and 24% for the same
period in 1999.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. Amortization of deferred
stock compensation increased $677,000 in the first six months of 2000 to
$892,000 from $215,000 for the same period in 1999. This amount represents the
allocated portion of the difference between the deemed fair value of our common
stock and the exercise price of stock options granted by us to our employees.
WRITE OFF OF ACQUIRED IN-PROCESS TECHNOLOGY. Write off of Acquired
In-Process Technology increased $52,000 in the first six months of 2000 to
$536,000 from $484,000 for the same period in 1999. The expense related to the
write off of acquired in-process technology in the first six months of 2000 was
the result of our acquisition of HME in January 2000, in which the excess of the
purchase price over the fair market value of the assets assumed was $5.0
million. Of this amount, $536,000 was allocated to acquired in-process
technology, based upon an independent appraisal, and was expensed in the six
months ended June 30, 2000. Our acquisition of Creative Business Solutions and
HealthWeb Systems in February 1999 resulted in an excess of purchase price over
the fair market value of the assets purchased and liabilities assumed of $2.5
million. Of this amount, $484,000 was allocated to acquired in-process
technology, based upon an independent appraisal, and was written-off in the six
months ended June 30, 1999.
INTEREST INCOME. Interest income in the first six months of 2000
increased $533,000 or 701%, to $609,000 from $76,000 in the first six months of
1999. The increase was due to the increase in cash available for investing due
to proceeds received from our initial public offering.
INTEREST EXPENSE. Interest expense in the first six months of 2000
increased $83,000, or 83%, to $183,000 from $100,000 for the same period in
1999. The increase was due to additional borrowings on our line of credit and
new capital lease obligations.
PROVISION FOR (BENEFIT OF) INCOME TAXES. Provision for income tax in the
first six months of 2000 was zero, a decrease of $28,000 from an income tax
provision of $28,000 for the same period in 1999. An income tax provision was
not recorded in the first six months of 2000 due to our pre-tax loss.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through a
combination of cash from operations, private financings and an initial public
offering of our common stock. As of June 30, 2000, we had approximately $11.9
million of cash, cash equivalents, short-term investments and long-term
investments.
Cash used in operating activities in the six months ended June 30, 2000,
was $11.7 million. Cash used during this period was primarily attributable to
net losses of $16.5 million, which was offset by $4.8 million, consisting of
depreciation and amortization, amortization of deferred stock compensation,
write off of in-process technology and other changes in operating asset and
liability accounts. These losses were principally related to increased research
and development expenses and sales, general and administrative expenses. In
addition, the losses were generated by the expansion of our infrastructure to
support growing demand of our recurring line of business.
Cash used in investing activities in the six months ended June 30, 2000
was $1.9 million. Cash used during this period was primarily the result of our
purchase of $3.0 million in property and equipment and software licenses, the
$1.5 million cash portion (net of cash acquired) of our acquisition of HME in
January 2000, the $1.2 million cash
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payment of acquisition costs related to Erisco, and our purchase of $2.2 million
of short-term and long-term investments. These expenditures were partially
offset by the sale of $6.0 million of our short-term and long-term investments.
Cash provided in financing activities in the six months ended June 30,
2000 was $3.2 million. The cash provided during this period was primarily the
result of proceeds from line of credit of $2.8 million, proceeds from new
capital lease obligations of $1.2 million, and the issuance of common stock
related to employee exercise of stock options and employee purchase of common
stock of $687,000, offset by principal payments on notes payable and capital
lease obligations of $1.4 million.
In March 1999, we entered into a revolving line of credit with a
financial institution. In October 1999, we entered into a subsequent agreement
which increased the amount available under the line of credit. The total amount
available for borrowings under the line of credit is $3.0 million and expires in
November 2000. In June 2000, we entered into a subsequent agreement whereby the
line of credit is collateralized by a secured interest of $3.0 million.
Borrowings under the line of credit bear interest at the bank's LIBOR rate plus
2.25%. Interest is payable monthly as it accrues. The credit agreement contains
certain covenants that we must adhere to during the term of the agreement,
including restrictions on the payment of dividends. As of June 30, 2000, we have
outstanding borrowings on the line of credit of $2.7 million and letters of
credit approximating $300,000.
In December 1999, we entered into a line of credit with a financial
institution. This line of credit was specifically established to finance
computer equipment purchases. The line of credit has a total capacity of $2.0
million and expires in December 2000. Individual borrowings under the line of
credit have a fixed interest rate between 9% and 11% per year. Payments
including principal and interest are made monthly. Borrowings under the line of
credit at June 30, 2000 totaled approximately $1.9 million, and are
collateralized by substantially all of our assets.
Based upon our current operating plan, we believe existing cash
balances, cash balances, cash generated from operations and future borrowings
will be sufficient to meet our working capital and capital requirements for at
least the next 12 months. However, we expect that our cash needs may increase in
future periods due to the funding of activities related to acquisitions.
Accordingly, we may seek additional financing through available means, which may
include debt and/or equity financing or funding through third party agreements.
There can be no assurance that any additional financing will be available on
acceptable terms, if at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," which established accounting
and reporting standards for derivative instruments and hedging activities. SFAS
133 is effective for fiscal years beginning after June 15, 2000. SFAS 133
requires an entity to recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those instruments at fair
value. To date, we have not engaged in derivative and hedging activities.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition, which
outlines the basic criteria that must be met to recognize revenue and provides
guidance for presentation of revenue and for disclosure related to revenue
recognition policies in financial statements filed with the SEC. We believe that
adopting SAB 101 will not have a material impact on our financial position or
results of operations.
In March 2000, the FASB issued Interpretation No. 44, or FIN 44,
"Accounting for Certain Transactions Involving Stock Compensation," which is an
interpretation of Accounting Principal Board No. 25. This interpretation
clarifies:
o the definition of employee for purposes of applying Opinion 25, which
deals with stock compensation issues;
o the criteria for determining whether a plan qualifies as a
noncompensatory plan;
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o the accounting consequence of various modifications to the terms of a
previously fixed stock option or award; and
o the accounting for an exchange of stock compensation awards in a
business combination.
This interpretation is effective July 1, 2000, but certain conclusions
in this interpretation cover specific events that occur after either December
15, 1998 or January 12, 2000. To the extent that this interpretation covers
events occurring during the period after December 15, 1998 or January 12, 2000,
but before the effective date of July 1, 2000, the effects of applying this
interpretation are recognized on a prospective basis from July 1, 2000. We
believe that the adoption of FIN 44 will not have a material impact on our
financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial
position, operating results or cash flows due to adverse changes in financial
and commodity market prices and rates. We are exposed to market risk due to
changes in United States interest rates. This exposure is directly related to
our normal operating and funding activities. Historically and as of June 30,
2000, we have not used derivative instruments or engaged in hedging activities.
The interest payable on our $3.0 million credit facility is variable,
based on the LIBOR rate, and, therefore, affected by changes in market interest
rates. As of June 30, 2000, the amount outstanding on our credit facility was
$2.7 million and letters of credit approximating $300,000 had been written
against the credit facility. The line of credit expires in November 2000.
Changes in interest rates have no impact on our other debt as all of our other
notes are at fixed interest rates between 8% and 10%. We manage interest rate
risk by investing excess funds in cash equivalents and short-term investments
bearing variable interest rates, which are tied to various market indices. As a
result, we do not believe that near-term changes in interest rates will result
in a material effect on our future earnings, fair values or cash flows.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our operations in the normal course of business. As of the date
of this report, we are not a party to any legal proceedings, the adverse outcome
of which, in management's opinion, individually or in the aggregate, would have
a material adverse effect on our results of operations or financial position.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES. On April 3, 2000, we issued
3,000 shares of our common stock to Allen Karp in connection with services
rendered. On May 10, 2000, we issued 293 shares of our common stock to Burns
McClellan, Inc. in connection with services rendered. On May 22, 2000, we issued
13,700 shares of our restricted common stock to eleven consultants in connection
with services rendered.
We did not employ any underwriters, brokers or finders in connection
with any of the transactions set forth above. The sales of the securities listed
above were deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, or Regulation D promulgated
thereunder, as transactions by an issuer not involving a public offering. The
recipients of securities in such transactions represented their intentions to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the instruments representing such securities issued in such transactions. All
recipients had adequate access to information about us through our SEC filings
and their relationships with us.
USE OF PROCEEDS. On October 7, 1999, we effected a registration
statement with the SEC on Form S-1, as amended, Registration No. 333-84533,
whereby we registered shares of our common stock raising net proceeds of $36.0
million. As of June 30, 2000, we have used a total of approximately $24.7
million of the net proceeds from our initial public offering, of which
approximately $8.9 million was used for working capital and other general
corporate purposes, approximately $2.6 million was used to pay down debt,
approximately $4.4 million was used for the purchase of property and equipment,
approximately $1.2 million was used for acquisition costs related to Erisco, and
approximately $7.6 million was used to acquire new businesses.
LIMITATIONS ON PAYMENTS OF DIVIDENDS. The payment of cash dividends by
us is restricted by our current bank credit facilities, which contain
restrictions prohibiting us from paying any cash dividends without the bank's
prior consent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 16, 2000, we entered into an Agreement and Plan of Reorganization
with Elbejay Acquisition Corp., a wholly-owned subsidiary of TriZetto, IMS
Health Incorporated, and ERISCO Managed Care Technologies, Inc. pursuant to
which Erisco will merge with and into Elbejay resulting in Erisco becoming a
wholly-owned subsidiary of TriZetto ("Merger Agreement"). TriZetto will issue
shares of common stock of TriZetto, par value $0.001 per share (the "TriZetto
Common Stock"), having a value of $255 million to IMS HEALTH; provided, however,
that TriZetto will not issue less than 8.8 million shares nor more than 12.1
million shares of TriZetto Common Stock. The final exchange ratio will be
determined based upon the average daily price of TriZetto Common Stock for the
15 trading days ending on the third day prior to the Closing Date. By execution
of the Merger Agreement, IMS HEALTH and TriZetto agreed to terminate the
Agreement and Plan of Reorganization, dated as of March 28, 2000, between IMS
HEALTH and TriZetto that provided for the merger of IMS HEALTH with and into
TriZetto.
In connection with the proposed merger, TriZetto, its directors,
executive officers and certain other members of management solicited proxies
from certain holders of an aggregate of approximately 51% of the outstanding
common stock of TriZetto. Such stockholders have entered into Voting Agreements
with IMS HEALTH to vote in favor of the merger and the transactions contemplated
thereby. Consummation of the merger is subject to
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the approval of TriZetto's stockholders as well as various third parties and
federal agencies. As of the date hereof, a special stockholders meeting to
approve the proposed merger has not been held.
TriZetto's annual meeting of stockholders was held on June 29, 2000. Of
the 21,331,193 shares of common stock issued and outstanding and entitled to
vote at the meeting, there were present at the meeting, in person or by proxy,
the holders of 15,901,912 common shares, representing 74.55% of the total number
of shares entitled to vote at the meeting. This percentage represents a quorum.
The following three proposals were presented and voted on at the stockholders'
meeting:
Proposal One: The one nominee to the Board of Directors, Paul F. LeFort,
was elected to serve a three-year term by the stockholders. The voting results
were: For 15,852,713; Withheld 49,199. The Class I director, Paul F. LeFort,
shall serve until the annual meeting of stockholders in 2003. The Class II
directors, William E. Fisher and Peter D. Mann, shall serve until the annual
meeting of stockholders in 2001. The Class III directors, Jeffrey H. Margolis
and Donald J. Lothrop shall serve until the annual meeting of stockholders in
2002.
Proposal Two: Amendment of our 1998 Stock Option Plan to increase the
number of shares authorized under the plan by 3,200,000 to a total of 7,200,000.
The voting results were: For 11,147,150; Against 1,868,505; Abstain 131,077;
Broker Non-Votes 2,755,180.
Proposal Three: To ratify the appointment of PricewaterhouseCoopers
LLP as independent auditors for the fiscal year ending December 31, 2000. The
voting results were: For 15,754,841; Against 144,898; Abstain 2,173; Broker
Non-Votes 0.
ITEM 5. OTHER INFORMATION
We expect to hold our 2001 Annual Meeting of the Stockholders on May 16,
2001. Any stockholder desiring to submit a proposal for action at our 2001
Annual Meeting of Stockholders and presentation in our proxy statement for such
meeting should deliver the proposal to us at our principal place of business no
later than January 17, 2001 in order to be considered for inclusion in our proxy
statement relating to that meeting. Matters pertaining to proposals, including
the number and length thereof, eligibility of persons entitled to have such
proposals included and other aspects are regulated by the Securities Exchange
Act of 1934, Rules and Regulations of the SEC and other laws and regulations to
which interested persons should refer.
On May 21, 1998 the SEC adopted an amendment to Rule 14a-4, as
promulgated under the Securities and Exchange Act of 1934, as amended. The
amendment governs our use of our discretionary proxy voting authority with
respect to a stockholder proposal, which is not addressed in our proxy
statement. The new amendment provides that if a proponent of a proposal fails to
notify us at least 45 days prior to the current year's anniversary of the date
of mailing of the prior year's proxy statement, then we will be allowed to use
our discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement. If we do not
receive any stockholder proposals for our 2001 Annual Meeting before April 1,
2001, we will be able to use our voting authority as outlined above.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibits are filed as a part of this report:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Agreement and Plan of Reorganization, dated as of May 16,
2000, by and between The TriZetto Group, Inc., Elbejay
Acquisition Corp., IMS Health Incorporated and ERISCO
Managed Care Technologies, Inc. (Incorporated by
reference to Exhibit 2.1 of TriZetto's Form 8-K as filed
with the SEC on May 19, 2000, File No. 000-27501)
10.1 First Amended and Restated 1998 Stock Option Plan
(Incorporated by reference to Exhibit 4.1 of TriZetto's
Form S-8 as filed with the SEC on August 7, 2000, File
No. 333-43220)
10.2 Form of Voting Agreement (Incorporated by reference to
Exhibit 2.1 of TriZetto's Form 8-K as filed with the SEC
on May 19, 2000, File No. 000-27501)
10.3 Form of Restricted Stock Agreement between TriZetto and
certain consultants
27.1 Financial Data Schedule
99.1 Press release, dated May 16, 2000, issued by The TriZetto
Group, Inc. and IMS Health Incorporated (Incorporated by
reference to Exhibit 99.1 of TriZetto's Form 8-K as filed
with the SEC on May 19, 2000, File No. 000-27501)
(b) REPORTS ON FORM 8-K.
On April 21, 2000, we filed a Form 8-K (Item 5) announcing the Agreement
and Plan of Reorganization which we entered into with IMS Health Incorporated
effective March 28, 2000, pursuant to which IMS Health Incorporated will merge
with and into TriZetto.
On May 19, 2000, we filed a Form 8-K (Item 5) announcing the Agreement
and Plan of Reorganization which we entered into with Elbejay Acquisition Corp.,
IMS Health Incorporated, ERISCO Managed Care Technologies, Inc., effective May
16, 2000, pursuant to which Erisco will merge with and into Elbejay resulting in
Erisco becoming a wholly-owned subsidiary of TriZetto. By execution of this
subsequent Agreement and Plan of Reorganization, IMS HEALTH and TriZetto agreed
to terminate the March 28, 2000 agreement that provided for the merger of IMS
HEALTH into TriZetto.
There were no other items to be reported under Part II of this report.
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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.
THE TRIZETTO GROUP, INC.
Date: August 14, 2000 By: /s/ MICHAEL J. SUNDERLAND
--------------------------------
Michael J. Sunderland
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Agreement and Plan of Reorganization, dated as of May 16, 2000,
by and between The TriZetto Group, Inc., Elbejay Acquisition
Corp., IMS Health Incorporated and ERISCO Managed Care
Technologies, Inc. (Incorporated by reference to Exhibit 2.1 of
TriZetto's Form 8-K as filed with the SEC on May 19, 2000, File
No. 000-27501)
10.1 First Amended and Restated 1998 Stock Option Plan (Incorporated
by reference to Exhibit 4.1 of TriZetto's Form S-8 as filed with
the SEC on August 7, 2000, File No. 333-43220)
10.2 Form of Voting Agreement (Incorporated by reference to Exhibit
2.1 of TriZetto's Form 8-K as filed with the SEC on May 19,
2000, File No. 000-27501)
10.3 Form of Restricted Stock Agreement between TriZetto and certain
consultants
27.1 Financial Data Schedule
99.1 Press release, dated May 16, 2000, issued by The TriZetto Group,
Inc. and IMS Health Incorporated (Incorporated by reference to
Exhibit 99.1 of TriZetto's Form 8-K as filed with the SEC on May
19, 2000, File No. 000-27501)
