FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: MARCH 31, 1995
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from to
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Commission file number 1-9815
CYCARE SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 91-0842322
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 1000, 7001 North Scottsdale Road, Scottsdale, Arizona 85253
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code................................(602) 596-4300
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 .
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. At April 24, 1995, 5,012,013
shares of common stock were outstanding, net of 1,085,944 shares of treasury
stock.
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INDEX
CYCARE SYSTEMS, INC.
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
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Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994. 3
Condensed Consolidated Income Statements -
Three months ended March 31, 1995 and 1994. 4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 1995 and 1994. 5
Notes to Condensed Consolidated Financial Statements -
March 31, 1995. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 7 - 8
PART II. OTHER INFORMATION
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Item 6. Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 1995.
SIGNATURES 8
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PART I
FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994
(In thousands, except per share data)
<CAPTION>
Unaudited
1995 1994
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Cash and cash equivalents .......................................................... $ 13,241 $ 13,760
Accounts receivable, net ........................................................... 5,901 4,184
Unbilled work at estimated realizable value ........................................ 1,904 1,868
Supply and equipment inventories ................................................... 815 723
Prepaid and other assets ........................................................... 3,413 3,223
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Total Current Assets ...................................................... 25,274 23,758
Property and equipment at cost, net ................................................ 9,893 9,778
Software products, net ............................................................. 9,760 9,353
Goodwill, net ...................................................................... 540 545
Other intangibles, net ............................................................. 230 252
Other assets ....................................................................... 310 296
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Total Assets .............................................................. $ 46,007 $ 43,982
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Current portion of long-term debt .................................................. $ 1,336 $ 1,546
Accounts payable ................................................................... 1,845 1,989
Accrued expenses ................................................................... 2,499 2,753
Accrued payroll .................................................................... 1,667 1,208
Client deposits and unearned income ................................................ 864 1,225
Current and deferred income taxes .................................................. 63 137
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Total Current Liabilities ................................................. 8,274 8,858
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Long-term debt, less current portion ............................................... 3,821 4,153
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Other long-term liabilities ........................................................ 2,629 2,671
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Deferred income taxes .............................................................. 2,918 3,077
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Shareholders' equity:
Common stock ....................................................................... 61 61
Capital in excess of par value ..................................................... 30,367 29,505
Retained earnings .................................................................. 7,284 7,114
Less treasury stock ................................................................ (9,347) (11,457)
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Total Shareholders' Equity ................................................ 28,365 25,223
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Total Liabilities and Shareholders' Equity ................................ $ 46,007 $ 43,982
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Book value per share ............................................................... $ 5.67 $ 5.24
Common shares outstanding excluding treasury shares of
1,095,944 at March 31, 1995 and 1,280,569 at
December 31, 1994 ................................................................. 5,002 4,817
See notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED INCOME STATEMENTS
Three Months Ended March 31, 1995 and 1994
(In thousands, except per share data)
(Unaudited)
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1995 1994
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Revenues:
Services ...................................................................... $12,048 $10,737
Systems sales ................................................................. 3,361 1,922
Interest and dividends ........................................................ 195 129
Other income .................................................................. 157 208
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15,761 12,996
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Costs and Expenses:
Cost of services .............................................................. 4,597 4,085
Cost of systems sold .......................................................... 2,376 1,455
Software product amortization ................................................. 582 518
Research and development ...................................................... 1,187 927
Selling and administrative .................................................... 5,248 4,831
Interest ...................................................................... 123 132
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14,113 11,948
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Income before income taxes ....................................................... 1,648 1,048
Income taxes ..................................................................... 635 440
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Net Income .............................................................. $ 1,013 $ 608
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Earnings per share ...................................................... $ .20 $ .12
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Common and common equivalent shares used
in the calculation of net income per share ....................................... 5,094 4,956
See notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1995 and 1994
(In thousands)
(Unaudited)
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1995 1994
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Operating activities
Net income ......................................................................... $ 1,013 $ 608
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of goodwill and intangibles ........................................ 27 19
Depreciation and amortization ................................................... 416 460
Software product amortization ................................................... 582 518
Provision for losses on accounts receivable ..................................... 103 234
Provision for deferred income taxes ............................................. 207 447
Loss on sale or retirement of equipment ......................................... 1 3
Changes in operating assets and liabilities:
Increase in accounts receivable
and unbilled work ......................................................... (1,856) (1,105)
(Increase) decrease in other assets .......................................... (299) 1,461
Increase (decrease) in accounts payable and
accrued expenses .......................................................... (298) 908
Decrease in contract reserve ................................................. 0 (25)
Increase (decrease) in current income taxes .................................. 453 (2,127)
Increase (decrease) in other long-term liabilities ........................... (42) 15
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Net cash provided by operating activities ............................... 307 1,416
Investing activities
Purchase of property and equipment ................................................ (531) (416)
Proceeds from sale of equipment ................................................... 0 15
Capitalized software products ..................................................... (989) (709)
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Net cash used in investing activities ...................................... (1,520) (1,110)
Financing activities
Proceeds from revolving line of credit
and long-term borrowings ....................................................... 0 4,100
Principal payments on revolving line of credit,
long-term borrowings and capital lease obligations ............................. (542) (4,408)
Translation adjustment ............................................................ (28) (3)
Net proceeds from sale of common stock, warrants, options
and treasury stock ............................................................. 1,412 340
Purchase of treasury stock ........................................................ (148) (5,727)
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Net cash provided by (used in) financing activities ........................ 694 (5,698)
Decrease in cash and cash equivalents ...................................... (519) (5,392)
Cash and cash equivalents at beginning of period ..................................... 13,760 18,245
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Cash and cash equivalents at end of period ........................................... $ 13,241 $ 12,853
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CYCARE SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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 month period ended March 31, 1995
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report for the year ended December 31, 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The Company's first quarter 1995 net income was $1,013,000 an increase of
$405,000 or 67% as compared to first quarter 1994. First quarter 1995 revenues
were $15,761,000, an increase of 21% over first quarter 1994. The Company has
seen continuing market acceptance of its CS3000 product for larger physician
groups and for SpectraMED, its Windows(R)-based system for smaller physician
groups. Additionally, CyData, the Company's wholly owned subsidiary, has been
steadily adding to its claims and medical statement processing volumes.
Systems revenues for first quarter 1995 were $3,361,000, an increase of
$1,439,000, or 75% from first quarter 1994. Systems margins were 29% in first
quarter 1995 versus 24% for first quarter 1994. The improvement in revenues and
margins is primarily the result of increased shipments of the CS3000, both to
new and existing clients.
Services revenues increased 12% to $12,048,000 during first quarter 1995 as
compared to $10,737,000 for first quarter 1994. Services margins remained
constant at 62%. CyData saw its year over year revenues rise $747,000 due to
increased claims and medical statement processing. The remainder of the services
revenue increase was attributable to added license renewal fees and support
services related to CS3000 contracts signed during 1994 that went on-line in
fourth quarter 1994 and first quarter 1995.
Software product amortization was $582,000 in first quarter 1995, an increase of
12% over first quarter 1994. The increase is primarily due to new releases of
the CS3000 and SpectraMED products, which are continually being enhanced to meet
the latest health care reporting requirements.
Net research and development increased $260,000, or 28% to $1,187,000 in first
quarter 1995 versus $927,000 in first quarter 1994, with a comparable increase
in gross research and development during this same period. In addition to
enhancements to the CS3000 and SpectraMED, the Company continues to develop its
electronic medical records and enterprise scheduling products that are scheduled
for release during 1995.
Selling and administrative expenses were $5,248,000 during first quarter 1995,
an increase of $417,000, or 9% over first quarter 1994. This increase is
primarily due to added sales personnel and incentive compensation related to
increased systems sales. The 21% increase in revenues year over year with only a
9% increase in selling and administrative expenses during the comparable period
resulted in selling and administrative expenses running at 33% of revenue in
first quarter 1995 versus 37% in first quarter 1994.
First quarter 1995 interest expense decreased $9,000, or 7% from first quarter
1994. The Company's reduction in average debt outstanding was offset by higher
interest rates.
LIQUIDITY AND CAPITAL RESOURCES:
Significant items affecting cash flow in 1995 were as follows: cash provided
from operations was $307,000, capitalization of software products was $989,000;
and, principal payments on long term debt were $542,000. Cash and cash
equivalents as of March 31, 1995 were $13,241,000.
The Company has no material commitments for capital expenditures.
The Company has a $3,500,000 line of credit with a financial institution. The
entire line is available as of March 31, 1995.
The Company's Board of Directors has authorized the repurchase of up to
1,500,000 shares of its common stock at prevailing market rates. To date the
Company has purchased 1,342,700 shares at an average price of $8.79. This
includes 10,000 shares purchased, at an average price of $14.81 per share,
during the first quarter of 1995.
The Company anticipates that funds generated from operations and the Company's
remaining funds will be sufficient to meet working capital requirements, debt
obligations and finance any capital additions.
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.
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Date May 5, 1995 Mark R. Schonau
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Mark R. Schonau
Chief Financial Officer
Secretary and Treasurer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
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<CURRENT-LIABILITIES> 8274
<BONDS> 3821
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