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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Quality Systems, Inc.
(Name of Issuer)
Common Stock
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(Title of Class of Securities)
747582104
(CUSIP Number)
Andrew E. Shapiro, Manager Christopher J. Rupright, Esq.
Lawndale Capital Management, LLC Shartsis Friese & Ginsburg
One Sansome Street, Suite 3900 One Maritime Plaza, 18th Floor
San Francisco, CA 94104 San Francisco, CA 94111
(415) 288-2330 (415) 421-6500
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May 28, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
Potential persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays
a currently valid OMB control number.
SEC 1746 (10-97)
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CUSIP No. 747582104 Page 2 of 11 pages
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1 NAME OF REPORTING PERSON
SS OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Lawndale Capital Management, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / X /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(E) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY --------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 408,400
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
408,400
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
408,400
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.8
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14 TYPE OF REPORTING PERSON*
OO and IA
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CUSIP No. 747582104 Page 3 of 11 pages
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1 NAME OF REPORTING PERSON
SS OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Andrew E. Shapiro
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(E) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY --------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 408,400
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
408,400
- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
408,400
- ---------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.8
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14 TYPE OF REPORTING PERSON*
IN<PAGE>
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CUSIP No. 747582104 Page 4 of 11 pages
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1 NAME OF REPORTING PERSON
SS OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Diamond A Partners, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(E) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY --------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 347,500
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
347,500
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
347,500
- ---------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.8
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14 TYPE OF REPORTING PERSON*
PN
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CUSIP No. 747582104 Page 5 of 11 pages
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1 NAME OF REPORTING PERSON
SS OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Diamond A Investors, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(E) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY --------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 60,900
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
60,900
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
60,900
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.0
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14 TYPE OF REPORTING PERSON*
PN
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CUSIP No. 747582104 Page 6 of 11 pages
ITEM 1. SECURITY AND ISSUER.
This statement relates to Common Stock (the "Stock") of Quality Systems, Inc.
("QSII"). The principal executive office of QSII is located at 17822 East
17th Street, Tustin, CA 92780.
ITEM 2. IDENTITY AND BACKGROUND.
The persons filing this statement and the persons enumerated in Instruction
C of Schedule 13D and, where applicable, their respective places of
organization, general partners, directors, executive officers and controlling
persons, and the information regarding them, are as follows:
(a) Lawndale Capital Management, LLC, a California limited liability company
("LCM"); Diamond A Partners, L.P., a California limited partnership
("DAP"); Diamond A Investors, L.P., a California limited partnership
("DAI"); and Andrew E. Shapiro ("Shapiro").
(b) The business address of LCM, DAP, DAI and Shapiro is One Sansome Street,
Suite 3900, San Francisco, California 94104.
(c) LCM is the investment adviser to and general partner of DAP and DAI,
which are investment limited partnerships. Shapiro is the sole manager
of LCM.
(d) During the last five years, none of such persons has been convicted in
a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, none of such persons was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
(f) Shapiro is a citizen of the United States of America.
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CUSIP No. 747582104 Page 7 of 11 pages
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source and amount of funds used in purchasing the Stock were as follows:
Purchaser Source of Funds Amount
LCM Funds Under Management(1) $2,715,408.60
DAP Working Capital $2,310,180.00
DAI Working Capital $ 405,228.60
(1) Includes funds of DAP and DAI invested in Stock.
ITEM 4. PURPOSE OF TRANSACTION.
Subsequent to their filing of Schedule 13Ds in December 1997 and January
1998, the Reporting Persons ("Lawndale") have been in additional contact with
management and members of the Board of Directors of QSII to discuss the
strategies QSII plans to employ to maximize shareholder value, including, but
not limited to, the composition of QSII's Board of Directors, the integration
of QSII's separate businesses and QSII's acquisition strategy.
Lawndale has communicated with members of QSII's Board of Directors,
including its Chairman, Lawndale's views as to the merits of changes in the
makeup of QSII's current Board of Directors. Lawndale believes that active
independent directors with a long-term strategic view of maximizing
shareholder value will provide useful guidance to QSII management. As part
of Lawndale's desire to strengthen the composition of QSII's Board of
Directors, Lawndale has introduced a prospective independent director for
consideration to be nominated to the Board at QSII's upcoming annual meeting.
Lawndale believes that shareholder value could be further enhanced if the
Board increased its focus on evaluating strategic alternatives to unlocking
the value in QSII's businesses. Therefore, Lawndale has also introduced QSII
management to several prospective customers and joint venture partners.
Lawndale has also been in contact with other significant shareholders of QSII
regarding all the above-mentioned matters. Lawndale may continue such
activities. Lawndale did not at the time of the purchase of the Stock, and
does not presently, have any plan to acquire control of QSII. Lawndale may
buy or sell additional shares of Stock in the open market from time to time.
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CUSIP No. 747582104 Page 8 of 11 pages
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
The beneficial ownership of the Stock of the persons named in Item 2 of this
statement is as follows at the date hereof:
Aggregate
Beneficially
Owned Voting Power Dispositive Power
Name Number Percent Sole Shared Sole Shared
LCM 408,400 6.8 -0- 408,400 -0- 408,400
Shapiro 408,400 6.8 -0- 408,400 -0- 408,400
DAP 347,500 5.8 -0- 347,500 -0- 347,500
DAI 60,900 1.0 -0- 60,900 -0- 60,900
The persons filing this statement effected the following transactions in the
Stock on the dates indicated, and such transactions are the only transactions
in the Stock by the persons filing this statement since March 28, 1998.
Purchase Number Price
Name or Sale Date of Shares Per Share
DAP P 3-30-98 800 7.438
DAI P 3-30-98 200 7.438
DAP P 3-31-98 800 7.438
DAI P 3-31-98 200 7.438
DAP P 4-17-98 3,000 7.542
DAP P 4-21-98 1,200 7.563
DAP P 4-24-98 1,000 7.563
DAP P 4-27-98 5,300 7.429
DAP S 4-27-98 2,500 7.663
DAP P 4-28-98 2,500 7.625
DAP P 5-5-98 2,300 7.500
DAI P 5-5-98 200 7.500
DAP P 5-6-98 1,000 7.438
DAP P 5-8-98 700 7.375
DAI P 5-8-98 300 7.375
(Table continued on Page 9)<PAGE>
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CUSIP No. 747582104 Page 9 of 11 pages
(Table continued from Page 8)
DAP P 5-11-98 1,100 7.438
DAI P 5-11-98 200 7.438
DAP S 5-11-98 2,100 7.723
DAI S 5-11-98 400 7.723
DAP P 5-12-98 3,800 7.500
DAI P 5-12-98 700 7.500
DAP P 5-18-98 4,400 7.500
DAI P 5-18-98 600 7.500
DAP P 5-21-98 500 7.563
DAP P 5-22-98 2,100 7.625
DAI P 5-22-98 400 7.625
DAP P 5-26-98 8,500 7.500
DAI P 5-26-98 1,500 7.500
DAP P 5-27-98 16,200 7.535
DAI P 5-27-98 2,800 7.535
DAP P 5-27-98 4,200 7.625
DAI P 5-27-98 800 7.625
DAP P 5-28-98 4,300 7.600
DAI P 5-28-98 700 7.600
DAP S 6-3-98 1,700 9.563
DAI S 6-3-98 300 9.563
DAP P 6-4-98 1,300 9.750
DAI P 6-4-98 200 9.750
DAP S 6-4-98 8,600 9.875
DAI S 6-4-98 1,400 9.875
DAP P 6-5-98 800 10.250
DAI P 6-5-98 200 10.250
DAP S 6-5-98 14,000 10.318
DAI S 6-5-98 2,500 10.318
All transactions were executed through the Nasdaq National Market System.
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CUSIP No. 747582104 Page 10 of 11 pages
ITEM. 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
LCM is the general partner of DAP and DAI pursuant to limited partnership
agreements providing to LCM the authority, among other things, to invest the
funds of DAP and DAI in Stock, to vote and dispose of Stock and to file this
statement on behalf of DAP and DAI. Pursuant to such limited partnership
agreements, the general partner of DAP and DAI is entitled to allocations
based on assets under management and realized and unrealized gains.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
A. Agreement Regarding Joint Filing of Statement on Schedule 13D or 13G.
SIGNATURES
After reasonable inquiry and to the best of my knowledge, I certify that
the information set forth in this statement is true, complete and correct.
DATED: June 8, 1998.
DIAMOND A PARTNERS, L.P. DIAMOND A INVESTORS, L.P.
By: Lawndale Capital Management, LLC By: Lawndale Capital Management, LLC
General Partner General Partner
By: /s/ Andrew E. Shapiro By: /s/ Andrew E. Shapiro
Andrew E. Shapiro Andrew E. Shapiro
Manager Manager
LAWNDALE CAPITAL MANAGEMENT, LLC
By: /s/ Andrew E. Shapiro /s/ Andrew E. Shapiro
Andrew E. Shapiro Andrew E. Shapiro
Manager
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CUSIP No. 747582104 Page 11 of 11 pages
EXHIBIT A
AGREEMENT REGARDING JOINT FILING
OF STATEMENT ON SCHEDULE 13D OR 13G
The undersigned agree to file jointly with the Securities and Exchange
Commission (the "SEC") any and all statements on Schedule 13D or Schedule 13G
(and any amendments or supplements thereto) required under section 13(d) of
the Securities Exchange Act of 1934, as amended, in connection with purchases
by the undersigned of Common Stock of Quality Systems, Inc. For that
purpose, the undersigned hereby constitute and appoint Lawndale Capital
Management, LLC, a California limited liability company, as their true and
lawful agent and attorney-in-fact, with full power and authority for and on
behalf of the undersigned to prepare or cause to be prepared, sign, file with
the SEC and furnish to any other person all certificates, instruments,
agreements and documents necessary to comply with section 13(d) and
section 16(a) of the Securities Exchange Act of 1934, as amended, in
connection with said purchases, and to do and perform every act necessary and
proper to be done incident to the exercise of the foregoing power, as fully
as the undersigned might or could do if personally present.
DATED: December 22, 1997.
DIAMOND A PARTNERS, L.P. DIAMOND A INVESTORS, L.P.
By: Lawndale Capital Management, LLC By: Lawndale Capital Management, LLC
General Partner General Partner
By: /s/ Andrew E. Shapiro By: /s/ Andrew E. Shapiro
Andrew E. Shapiro Andrew E. Shapiro
Manager Manager
LAWNDALE CAPITAL MANAGEMENT, LLC
By: /s/ Andrew E. Shapiro /s/ Andrew E. Shapiro
Andrew E. Shapiro Andrew E. Shapiro
Manager
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