<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING MARCH 31, 1996
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 0-9900
HBO & COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 37-0986839
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or organization) Number)
</TABLE>
301 PERIMETER CENTER NORTH
ATLANTA, GEORGIA
30346
(Address of principal executive offices)
(Zip Code)
(770) 393-6000
(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. Yes _X_ No ____.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT APRIL 30, 1996
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Common Stock, $.05 par value 40,386,274
</TABLE>
Exhibit Index on Page 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 1 of 14
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED BALANCE SHEETS -- UNAUDITED
(000 OMITTED)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DEC. 31,
1996 1996
----------- ---------
CURRENT ASSETS:
<S> <C> <C>
Cash and Cash Equivalents........................................... $ 67,941 $ 65,263
Receivables, Net of Allowance For Doubtful Accounts of $7,954 and
$8,330............................................................. 164,268 156,210
Current Deferred Income Taxes....................................... 13,713 17,794
Inventories......................................................... 8,143 6,757
Prepaids and Other Current Assets................................... 6,745 6,346
----------- ---------
Total Current Assets.............................................. 260,810 252,370
----------- ---------
INTANGIBLES
Net of Accumulated Amortization of $17,625 and $13,801.............. 183,994 184,051
----------- ---------
CAPITALIZED SOFTWARE
Net of Accumulated Amortization of $23,527 and $22,054.............. 36,456 34,098
----------- ---------
PROPERTY AND EQUIPMENT
Net of Accumulated Depreciation of $74,064 and $71,263.............. 32,490 33,609
----------- ---------
DEFERRED INCOME TAXES................................................. 24,309 25,098
----------- ---------
OTHER NONCURRENT ASSETS, NET.......................................... 7,152 5,908
----------- ---------
TOTAL ASSETS.......................................................... $ 545,211 $ 535,134
----------- ---------
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Deferred Revenue.................................................... $ 73,235 $ 71,684
Other Current Liabilities........................................... 120,077 133,436
----------- ---------
Total Current Liabilities......................................... 193,312 205,120
----------- ---------
LONG-TERM DEBT........................................................ 446 582
----------- ---------
OTHER LONG-TERM LIABILITIES........................................... 7,281 10,702
----------- ---------
Total Liabilities................................................. 201,039 216,404
----------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, 1,000 Shares Authorized and No Shares Issued....... -- --
Common Stock, $.05 Par Value, 60,000 Shares Authorized and 56,597
Shares Issued...................................................... 2,830 2,830
Additional Paid-in Capital.......................................... 322,162 315,906
Retained Earnings................................................... 98,301 80,255
----------- ---------
423,293 398,991
Treasury Stock, at Cost (16,241 and 16,478 Shares).................. (79,121) (80,261)
----------- ---------
Total Stockholders' Equity........................................ 344,172 318,730
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................ $ 545,211 $ 535,134
----------- ---------
----------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these consolidated financial statements.
Page 2 of 14
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME -- UNAUDITED
(000 OMITTED EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
--------------------
1996 1995
--------- ---------
<S> <C> <C>
REVENUE:
Recurring....................................................................... $ 63,796 $ 37,163
One-Time Sales.................................................................. 81,282 62,020
--------- ---------
Total Revenue................................................................. 145,078 99,183
OPERATING EXPENSE:
Cost of Operations.............................................................. 65,095 48,482
Marketing....................................................................... 20,460 13,648
Research and Development........................................................ 11,788 9,020
General and Administrative...................................................... 15,972 9,948
--------- ---------
Total Operating Expense....................................................... 113,315 81,098
--------- ---------
Operating Income................................................................ 31,763 18,085
Other (Income) Expense, Net..................................................... (524) 242
--------- ---------
Income Before Provision for Income Taxes........................................ 32,287 17,843
Provision for Income Taxes...................................................... 12,915 7,137
--------- ---------
NET INCOME........................................................................ $ 19,372 $ 10,706
--------- ---------
--------- ---------
EARNINGS PER SHARE:
Primary......................................................................... $ 0.46 $ 0.29
Fully Diluted................................................................... $ 0.46 $ 0.29
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary......................................................................... 41,881 36,993
Fully Diluted................................................................... 41,914 37,099
CASH DIVIDENDS DECLARED PER SHARE................................................. $ 0.04 $ 0.04
--------- ---------
--------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these consolidated financial statements.
Page 3 of 14
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(000 OMITTED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
--------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES:
Net Income for the Period....................................................... $ 19,372 $ 10,706
--------- ---------
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities:
Depreciation and Amortization................................................. 9,137 5,809
Provision for Noncurrent Deferred Income Taxes................................ 789 2,319
Changes in Assets and Liabilities, Net of Acquisitions:
Receivables................................................................. (8,058) 3,111
Current Deferred Income Taxes............................................... 4,081 507
Inventories................................................................. (1,386) (1,311)
Prepaids and Other Current Assets........................................... (438) (1,144)
Other Noncurrent Assets..................................................... (1,238) (629)
Deferred Revenue............................................................ 1,551 7,373
Other Current Liabilities................................................... (15,176) (17,885)
Other, Net.................................................................... 280 246
--------- ---------
Total Adjustments......................................................... (10,458) (1,604)
--------- ---------
Net Cash Provided by Operating Activities................................. 8,914 9,102
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of Business................................................................ 430 --
Sale of Property and Equipment.................................................. 493 39
Capital Expenditures............................................................ (3,237) (1,771)
Capitalized Software............................................................ (3,861) (2,919)
Purchase of Business, Net of Cash Acquired...................................... (4,000) (7,010)
--------- ---------
Net Cash Used in Investing Activities..................................... (10,175) (11,661)
--------- ---------
Net Cash Used Before Financing Activities................................. (1,261) (2,559)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Long-Term Debt.................................................... -- 22,000
Proceeds from Issuance of Common Stock.......................................... 5,773 3,486
Repayment of Long-Term Debt..................................................... (229) (17,141)
Payment of Dividends............................................................ (1,605) (1,271)
Repayment of Short-Term Debt.................................................... -- (5,000)
--------- ---------
Net Cash Provided by Financing Activities................................. 3,939 2,074
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................. 2,678 (485)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................................. 65,263 14,951
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................................ $ 67,941 $ 14,466
--------- ---------
--------- ---------
Cash Paid During the Period For:
Interest........................................................................ $ 232 $ 681
Income Taxes.................................................................... $ 4,841 $ 6,382
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these consolidated financial statements.
Page 4 of 14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements include all adjustments that, in the
opinion of management, are necessary for a fair presentation of the results for
the periods indicated. All such adjustments are of a normal recurring nature.
Quarterly results of operations are not necessarily indicative of annual
results. Certain previously reported amounts may have been reclassified to
conform to the current presentation. These statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's 1995 Annual Report to Stockholders.
2. During the first quarter of 1996, the Company increased the amount available
under its existing long-term revolving credit agreement from $25 million to $30
million. As of March 31, 1996, there was no outstanding balance. Interest is
payable at the Company's option of prime or LIBOR plus a margin determined by
certain of the Company's financial ratios (6-1/16 as of March 31, 1996). A
commitment fee on the revolving credit agreement is payable quarterly on the
unused portion of the commitment. The agreement, which expires June 30, 1997,
contains certain net worth, income, cash flow and financial ratio covenants. The
Company is in compliance with these covenants at March 31, 1996.
During the first quarter of 1996, the Company canceled one of its two $5
million unsecured lines of credit.
The Company has extended until June 30, 1997, its agreement with a financial
institution whereby the Company can sell on an ongoing basis, with partial
recourse, an undivided interest in a pool of customer receivables. As of March
31, 1996, the amount available to be sold was $30 million and the amount sold
was $25 million. Interest is payable at the Company's option of prime or LIBOR
plus a margin determined by certain of the Company's financial ratios (6-1/16 as
of March 31, 1996). The Company, as agent for the purchaser, retains collection
and administrative responsibilities for the receivables sold.
------------------------
The financial information included in this Quarterly Report on Form 10-Q has
been reviewed by Arthur Andersen LLP, independent public accountants, in
accordance with established professional standards and procedures for such a
review as set forth in their review letter presented on page 8 of this report.
------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1996, COMPARED TO QUARTER ENDED MARCH 31, 1995:
For the first quarter of 1996, HBO & Company posted record earnings per
share of $.46, a 59% increase over earnings per share of $.29 for the first
quarter of 1995. Quarterly revenue increased 46% to $145.1 million from $99.2
million for the first quarter of 1995, while operating expense increased only
40% to $113.3 million from $81.1 million in 1995. These changes in revenue and
expense combined to boost quarterly net income 81% to $19.4 million from $10.7
million for the first quarter of 1995.
The Company's revenue growth was fueled primarily by the healthcare
industry's growing interest in enterprisewide solutions and the Company's
ability to provide products and services that fit this profile. In addition, the
June 1995 acquisition of First Data Health Systems Corporation (now known as the
Charlotte Product Group or CPG) contributed to the growth in maintenance and
remote processing revenue. Revenue per average employee increased to $170,000
for the first quarter of 1996, from $149,000 for the same period in 1995.
Software license fee revenue grew 38% to $34.2 million for the first quarter
of 1996 from $24.8 million in the first quarter of 1995. The increase was
primarily due to the growing demand for the Pathways 2000 line of enterprisewide
solutions and continued strong sales of TRENDSTAR decision support products.
Page 5 of 14
<PAGE>
Hardware revenue increased 33% to $21.0 million for the first quarter of
1996 from $15.8 million for the first quarter of 1995. This increase was mainly
due to hardware deliveries related to strong sales in the fourth quarter of 1995
and the first quarter of 1996. Hardware revenue also increased due to sales of
add-on hardware resulting from a more focused effort to sell additional items to
existing customers. The Company has successfully maintained stable hardware
margins and continues to design its software products to run on a variety of
hardware platforms.
Implementation services revenue for the first quarter of 1996 increased 22%
from the first quarter of 1995, primarily due to greater system sales and the
addition of CPG. The Company continues to invest in programs designed to
streamline the implementation process and encourage customer ownership of each
step of that process. As a result, the productivity of the Company's
implementation personnel continues to improve.
Maintenance and support revenue increased 55% to $41.0 million for the first
quarter of 1996 from $26.4 million in the first quarter of 1995. This increase
was mainly due to the continued expansion of the customer base from acquisitions
and internal growth. The Company is in the process of implementing a central
support system which will service all product lines and business units to
streamline the timeliness and quality of issue resolution.
Recurring revenue as a percent of total revenue increased to 44% in the
first quarter of 1996 from 37% for the same period in 1995. This was due to the
addition of new customers and product lines as well as the CPG remote processing
business. This continuing shift from one-time sales to recurring revenue
provides a stable basis of cash flows to fund further expansion.
Cost of operations as a percent of revenue dropped to 45% in the first
quarter of 1996 from 49% in the first quarter of 1995 as a result of
productivity enhancements. This in turn, increased the gross margin to 55% in
1996 from 51% in 1995. Cost of operations expense increased over the first
quarter of 1995 primarily due to increased hardware costs associated with the
growth in hardware sales, costs associated with the remote processing data
center, increased software and hardware maintenance expense related to
acquisitions, and increased personnel expense due to the overall growth of the
Company.
Marketing expense as a percent of revenue remained constant at 14% from the
first quarter of 1995 to 1996. Marketing expense increased from quarter to
quarter, primarily due to higher personnel, travel and commission expenses all
directly related to the growth in revenue of the Company.
Research and development (R&D) expense as a percent of revenue decreased to
8% in the first quarter of 1996 from 9% in the first quarter of 1995, while the
R&D capitalization rate increased from 24% to 25% for the same periods. R&D
expense increased primarily due to increased personnel costs related to the
Company's plan of aggressively developing enhancements to existing products and
bringing new products to the point of general availability.
General and administrative expense as a percent of revenue increased to 11%
in the first quarter of 1996 from 10% in the first quarter of 1995. This
increase was primarily due to increased facilities costs and increased personnel
expense due to acquisitions and overall growth in the Company.
Operating expense grew at a slower rate than revenue due to successful cost
control programs and productivity enhancements. Total operating income increased
76%, and operating income as a percent of revenue increased to 22% in 1996
compared to 18% in 1995. These increases demonstrate a significant growth in
volume and increased efficiency in operations.
The tax rate remained constant at 40% for all periods presented.
Page 6 of 14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
MARCH 31, 1996, COMPARED TO DECEMBER 31, 1995:
HBOC continues to maintain a strong balance sheet. At March 31, 1996, with
$67.9 million in cash, no debt and an improving current ratio, the Company
remains well positioned for continued growth.
During the first quarter of 1996, the Company generated $8.9 million in cash
flow from operations. The Company used $10.2 million in investing activities
primarily consisting of a $4.0 million contractual contingency payment
associated with the 1995 purchase of Pegasus Medical Ltd., $3.9 million for
software development capitalization and $3.2 million for capital expenditures.
An additional $3.9 million was generated from financing activities. As a result,
the Company's cash balance increased slightly to $67.9 million at March 31, 1996
from $65.3 million at December 31, 1995.
The Company's current ratio increased to 1.35:1 at March 31, 1996 from
1.23:1 at December 31, 1995. Current assets increased $8.4 million mainly
reflecting increases in receivables and cash, partially offset by a decrease in
current deferred income taxes. Receivables management is a key performance
factor for the Company, and although management believes that the Company has
better receivables performance than most of its competitors, it continues to
place a high priority on this area. Current liabilities decreased $11.8 million
due to the reduction in year-end accruals and payables, specifically those
related to employee incentive plans, partially offset by an increase in customer
deposits.
The Company has access to several financing sources including a $5 million
line of credit and a $30 million revolving credit agreement. As of March 31,
1996, there were no outstanding balances on either.
The stability of the Company's liquidity is enhanced as the revenue mix
continues to shift towards recurring revenue. This provides a stable, growing
source of cash for operating, investing and financing needs that should enable
the Company to achieve its strategic objectives.
Page 7 of 14
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
HBO & Company:
We have reviewed the accompanying consolidated balance sheet of HBO &
Company (a Delaware corporation) and Subsidiaries as of March 31, 1996 and the
related consolidated statements of income and cash flows for the three-month
period then ended. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of HBO & Company as of December 31, 1995 (presented
herein), and in our report dated February 6, 1996, we expressed an unqualified
opinion on that statement.
Arthur Andersen LLP
Atlanta, Georgia
April 16, 1996
Page 8 of 14
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C> <C> <C>
(a) Exhibits: PAGE
---------
10 Indemnification Agreement, dated as of April 11, 1996, between Bank of
America National Trust and Savings Association and HBO & Company of
Georgia.................................................................... 11
11 Statement regarding computation of per share earnings...................... 12
15 Letter re: unaudited interim financial information......................... 13
27 Financial Data Schedule.................................................... 14
(b) Reports on Form 8-K during the quarter ended March 31, 1996, or subsequent to that date but prior
to the filing date of this Form 10-Q:
FORM 8-K DATED FEBRUARY 27, 1996:
Reporting under Item 5 that the Company's Board of Directors: i) approved an amendment
to the Certificate of Incorporation to increase the number of shares of authorized
Common Stock from 60 million to 250 million subject to stockholder approval; ii)
announced its intention to declare a two-for-one stock split in the form of a stock
dividend contingent upon stockholder approval of the increase in authorized shares;
and iii) declared a quarterly dividend of $.04 per share payable April 22, 1996 to
stockholders of record March 29, 1996.
</TABLE>
Page 9 of 14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HBO & COMPANY
(Registrant)
<TABLE>
<S> <C>
Date: May 2, 1996 By: /s/JAY P. GILBERTSON
Jay P. Gilbertson
Senior Vice President-Finance,
Chief Financial Officer,
Principal Accounting Officer,
Treasurer and Assistant Secretary
</TABLE>
Page 10 of 14
<PAGE>
EXHIBIT 10
INDEMNIFICATION AGREEMENT
Indemnification Agreement, dated as of April 11, 1996, between Bank of
America National Trust and Savings Association, a national bank (the "Bank") and
HBO & Company of Georgia, a Delaware corporation (the "Company").
WHEREAS, the Bank has notified the Company that the grid note, dated June
25, 1993 with respect to that certain $5,000,000 uncommitted demand line of
credit (the "Note") payable to the order of the Bank in the original principal
amount of U.S. dollars of Five Million ($5,000,000) and issued by the Company to
the Bank;
WHEREAS, the Company has requested that the Note be returned to the Company;
WHEREAS, the Bank considers the Note paid in full and canceled as of the
date hereof;
IT IS THEREFORE, AGREED AS FOLLOWS:
1. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank warrants and
represents to the Company that (a) the Note was not endorsed by the Bank; (b)
neither the right to receive payment under the Note nor any other rights of the
Bank therein have been assigned, transferred, hypothecated, pledged or otherwise
disposed of by the Bank, either in whole or in part; and (c) the Note has been
lost, stolen or destroyed and diligent efforts made to locate it have failed to
do so.
2. INDEMNIFICATION. The Bank hereby agrees that (a) in case the original
Note can be found or comes into the hands, custody or power of the Bank or its
successors or assigns, or into the hands, custody or power of any entity
controlled by the Bank or its successors or assigns, the Note shall be delivered
to the Company in order to be canceled, and (b) the Bank, its successors or
assigns, shall at all times indemnify and save harmless the Company from and
against any and all claims, actions and suits, and from and against any and all
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character by reason of the original Note, until the redelivery
and cancellation of the original Note.
IN WITNESS THEREOF, the undersigned has executed this Agreement as of the
date first above written.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:_MICHAEL J. MCKENNEY_______________
Title:________________________________
Michael J. McKenney
Vice President
Page 11 of 14
<PAGE>
EXHIBIT 11
HBO & COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(000 OMITTED EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
MARCH 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING............................................................................... 40,244 35,353
ADD -- Shares of common stock assumed issued upon exercise of stock options using the
"treasury stock" method as it applies to the computation of primary earnings per
share............................................................................... 1,637 1,640
--------- ---------
NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING.................................. 41,881 36,993
ADD -- Additional shares of common stock assumed issued upon exercise of stock options
using the "treasury stock" method as it applies to the computation of fully diluted
earnings per share.................................................................. 33 106
--------- ---------
NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING ASSUMING FULL DILUTION........... 41,914 37,099
--------- ---------
--------- ---------
NET EARNINGS FOR PRIMARY AND FULLY DILUTED EARNINGS
PER SHARE................................................................................. $ 19,372 $ 10,706
--------- ---------
--------- ---------
EARNINGS PER SHARE:
PRIMARY.................................................................................. $ 0.46 $ 0.29
--------- ---------
--------- ---------
FULLY DILUTED............................................................................ $ 0.46 $ 0.29
--------- ---------
--------- ---------
</TABLE>
Page 12 of 14
<PAGE>
EXHIBIT 15
ARTHUR ANDERSEN LLP
To HBO & Company:
We are aware that HBO & Company has incorporated by reference in its
previously filed registration statements on Form S-8 its Form 10-Q for the
quarter ended March 31, 1996, which includes our report dated April 16, 1996
covering the unaudited interim consolidated financial information contained
therein. Pursuant to Regulation C of the Securities Act of 1933 (the "Act"),
that report is not considered a part of the registration statement prepared or
certified by our firm or a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
Arthur Andersen LLP
Atlanta, Georgia
April 16, 1996
Page 13 of 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from HBO &
Company Consolidated Statement of Income for the Three Months Ended 3/31/96
and HBO & Company Consolidated Balance Sheet at 3/31/96 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 67,941
<SECURITIES> 0
<RECEIVABLES> 172,222
<ALLOWANCES> 7,954
<INVENTORY> 8,143
<CURRENT-ASSETS> 260,810
<PP&E> 106,554
<DEPRECIATION> 74,064
<TOTAL-ASSETS> 545,211
<CURRENT-LIABILITIES> 193,312
<BONDS> 0
0
0
<COMMON> 2,830
<OTHER-SE> 341,342
<TOTAL-LIABILITY-AND-EQUITY> 545,211
<SALES> 0
<TOTAL-REVENUES> 145,078
<CGS> 0
<TOTAL-COSTS> 65,095
<OTHER-EXPENSES> 48,220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 32,287
<INCOME-TAX> 12,915
<INCOME-CONTINUING> 19,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,372
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
