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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File Number 0-17822
MEDICAL MANAGER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2975182
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
River Drive Center 2
669 River Drive
Elmwood Park, New Jersey 07407-1361
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (201) 703-3400
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares of the Registrant's Common Stock, $.01 par value,
outstanding at April 28, 2000 was 40,735,254.
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<PAGE>
MEDICAL MANAGER CORPORATION AND SUBSIDIARIES
Index
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2000 and June 30, 1999 3
Consolidated Statements of Operations --
Three and Nine Months Ended March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows --
Nine Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 23
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 25
Item 6. Exhibits and Reports on Form 8-K 27
Disclosure Regarding Forward-Looking Statements
This report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company's management as well as assumptions made by and information currently
available to the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and similar expressions, as they
relate to the Company, CareInsite, Medical Manager Health Systems, Porex, or the
Company's management, or the management of any of the Company's businesses, are
intended to identify forward- looking statements. Such statements reflect the
current view of the Company with respect to future events, are not guarantees of
future performance and are subject to certain risks and uncertainties. These
risks and uncertainties may include: product demand and market acceptance risks;
the feasibility of developing commercially profitable Internet healthcare
services; the effect of economic conditions; user acceptance; success of
transactions with third parties; the impact of competitive products, services
and pricing; product development, commercialization and technological
difficulties; the effect of government regulation of the Internet on healthcare
e-commerce services; outcome of litigation; risks associated with the
integration and management of acquired businesses; the ability of the Company to
attract and retain qualified personnel; risks associated with the Company's
pending merger with Healtheon/WebMD Corporation; and other risks described
elsewhere herein including those set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations," below and in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999
(the "Company's Form 10-K") and Current Report on Form 8-K dated March 23, 2000,
which was filed in connection with the Company's acquisitions of the following
companies: Clinical Management Solutions, Inc., MicroSense, Inc., Resource
America, Inc., Service Dimensions, Inc., Terry Kidd, Inc., d/b/a TKI Computer
Services and PSI Computer Systems during the three months ended December 31,
1999. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated or expected. The
Company does not intend to update these forward-looking statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
MEDICAL MANAGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
March 31, June 30,
2000 1999
-------------- -------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents.................................... $ 90,697 $154,893
Marketable securities........................................ 50,436 55,454
Accounts receivable, net of allowances for doubtful
accounts and sales returns of $4,826 and $4,434 at
March 31, 2000 and June 30, 1999, respectively............. 75,859 55,874
Inventories ................................................. 20,041 16,618
Other current assets......................................... 25,516 24,293
-------- --------
Total current assets....................................... 262,549 307,132
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements........................................ 3,630 3,642
Building and improvements .................................. 23,889 21,436
Machinery and equipment...................................... 78,233 62,253
Furniture and fixtures....................................... 10,871 6,599
Construction in progress..................................... 12,727 5,031
--------- --------
Property, plant and equipment, gross........................ 129,350 98,961
Less: accumulated depreciation............................... (55,558) (39,302)
-------- --------
Property, plant and equipment, net......................... 73,792 59,659
--------- --------
OTHER ASSETS:
Marketable securities........................................ 245,000 241,447
Capitalized software development costs, net of accumulated
amortization of $2,089 at March 31, 2000.................. 29,241 31,330
Goodwill and other intangible assets,
net of accumulated amortization of $20,204 and $8,655 at .
March 31, 2000 and June 30, 1999, respectively............. 434,353 171,263
Other........................................................ 16,971 7,243
-------------- -----------
Total other assets......................................... 725,565 451,283
------------- ---------
$1,061,906 $818,074
============ ========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
-3-
<PAGE>
<TABLE>
<CAPTION>
MEDICAL MANAGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
2000 1999
------------ -----------
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable ..................................................... $ 4,239 $ 4,206
Accounts payable.................................................... 20,941 13,422
Accrued liabilities and other....................................... 53,097 33,196
Customer deposits and deferred maintenance revenue.................. 27,741 15,250
Income taxes payable................................................ 9,477 6,123
-------- ------
Total current liabilities......................................... 115,495 72,197
-------- --------
LONG-TERM DEBT, LESS CURRENT PORTION................................... 14,241 170,041
--------- --------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY........................... 123,849 57,205
--------- --------
OTHER LIABILITIES...................................................... 51,707 33,382
--------- --------
COMMITMENTS AND CONTINGENCIES (Note 14)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
10,000,000 shares authorized; none issued......................... - -
Common stock, $.01 par value; 300,000,000 shares
authorized; 45,923,126 and 41,123,099 shares issued;
40,654,663 and 35,854,636 shares issued and outstanding
at March 31, 2000 and June 30, 1999, respectively................. 459 411
Paid-in capital..................................................... 732,706 455,699
Retained earnings................................................... 63,890 68,347
Treasury stock, at cost; 5,268,463 shares at
March 31, 2000 and at June 30, 1999............................... (38,287) (38,287)
Accumulated other comprehensive loss................................ (2,154) (921)
-------------- ------------
Total stockholders' equity........................................ 756,614 485,249
------------- ---------
$1,061,906 $818,074
=========== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
-4-
<PAGE>
<TABLE>
<CAPTION>
MEDICAL MANAGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ ------------------------
2000 1999 2000 1999
------ ------ ----- ----
<S> <C> <C> <C> <C>
Net revenues..................................... $ 88,401 $ 73,547 $ 264,808 $ 213,007
Costs and expenses:
Cost of revenues............................... 46,236 37,365 135,950 105,062
Selling, general and administrative............ 34,982 22,785 93,315 65,315
Research and development....................... 11,316 4,183 24,361 13,489
Minority interest in CareInsite................ (7,202) (764) (5,416) (764)
Net gain on sale of investments................ - - (24,887) -
Litigation expenses............................ 350 2,500 1,450 4,866
Merger and related expenses.................... - - 17,991 -
Depreciation and amortization.................. 14,002 3,818 25,610 10,530
Interest and other income...................... (7,096) (5,206) (20,710) (15,480)
Interest expense............................... 1,316 2,543 6,008 6,965
--------- ----------- -------- ---------
93,904 67,224 253,672 189,983
----------- ----------- -------- ---------
(Loss) income before provision for income taxes.. (5,503) 6,323 11,136 23,024
Provision for income taxes....................... 3,953 2,036 12,742 8,661
----------- ----------- ------- ---------
Net (loss) income ............................... $ (9,456) $ 4,287 $ (1,606) $ 14,363
=========== =========== ======== =========
Net (loss) income per share - basic:
Net (loss) income per share................... $ (0.25) $ 0.12 $ (0.04) $ 0.42
=========== =========== ======== =========
Weighted average shares outstanding........... 37,981 34,946 36,713 34,033
=========== =========== ======== =========
Net (loss) income per share - diluted:
Net (loss) income per share................... $ (0.25) $ 0.11 $ (0.04) $ 0.39
=========== =========== ======== =========
Weighted average shares outstanding........... 37,981 37,675 36,713 36,696
=========== =========== ======== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
MEDICAL MANAGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
March 31,
-----------------------
2000 1999
-------- ------
Cash flows (used in) provided by operating activities:
<S> <C> <C>
Net (loss) income ................................................. $ (1,606) $ 14,363
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Net gain on sale of investments ............................. (24,887) --
Depreciation and amortization ............................... 25,610 10,530
Write-off of equipment ...................................... 540 --
Write-off of capitalized software costs ..................... -- 2,381
Minority interest in net loss of consolidated subsidiary .... (5,416) (764)
Other ....................................................... 895 (235)
Changes in operating assets and liabilities:
Accounts receivable, net .................................... (10,704) (5,092)
Inventories ................................................. (576) (934)
Other assets ................................................ (11,128) 1,294
Accounts and notes payable .................................. (830) 3,200
Accrued liabilities and other ............................... (4,113) (9,519)
Income taxes payable ........................................ 3,331 (4,256)
Customer deposits and deferred maintenance revenue .......... (4,110) (2,579)
--------- ---------
Net cash (used in) provided by operating activities ..... (32,994) 8,389
--------- ---------
Cash flows used in investing activities:
Maturities and redemptions of marketable securities ............... 67,510 63,631
Purchases of marketable securities ................................ (90,396) (77,084)
Proceeds from the sale of investments ............................. 50,394 --
Capitalized software .............................................. -- (7,769)
Capital expenditures .............................................. (19,915) (9,573)
Net cash paid for acquired businesses ............................. (66,500) (30,996)
Payments for intangible assets .................................... -- (2,335)
Purchase of other investments ..................................... (6,000) --
Investment in unconsolidated affiliate ............................ -- (1,350)
--------- ---------
Net cash used in investing activities ......................... (64,907) (65,476)
--------- ---------
Cash flows provided by financing activities:
Proceeds from exercises of stock options, warrants and 401(k)
issuances, including related tax benefits ....................... 30,284 15,732
Proceeds from issuance of short-term obligations .................. -- 371
Payments on short-term and long-term obligations .................. (3,361) (4,706)
Dividends ......................................................... (1,062) (1,430)
Proceeds from sale of common stock ................................ -- 2,652
Proceeds from CareInsite's sale of convertible redeemable preferred
stock .......................................................... 10,000 --
Purchases of treasury stock and warrants .......................... (2,156) (364)
--------- ---------
Net cash provided by financing activities ..................... 33,705 12,255
--------- ---------
Net decrease in cash and cash equivalents ............................ (64,196) (44,832)
Cash and cash equivalents, beginning of period ....................... 154,893 137,229
--------- ---------
Cash and cash equivalents, end of period ............................. $ 90,697 $ 92,397
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
-6-
<PAGE>
MEDICAL MANAGER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Financial Statement Presentation:
The accompanying unaudited consolidated financial statements of Medical
Manager Corporation and subsidiaries ("Medical Manager" or the "Company") have
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year. In the opinion of management, the information furnished
reflects all the adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation of the results for the reported
interim periods. For further information refer to the consolidated historical
financial statements for the years ended June 30, 1999, 1998 and 1997 and notes
thereto included in the Company's Current Report on Form 8-K, dated March 23,
2000, which was filed in connection with the Company's acquisition of the Second
Quarter Acquired Companies referred to below.
Principles of Consolidation--
The accompanying unaudited consolidated financial statements include
the accounts of the Company and its wholly-owned operating subsidiaries, Medical
Manager Health Systems, Inc. ("MMHS"), Porex Corporation (collectively with the
Company's other plastics and filtration technology subsidiaries referred to
herein as "Porex"), and its majority owned operating subsidiary, CareInsite,
Inc. ("CareInsite"), after elimination of all material intercompany accounts and
transactions.
The Company has three operating segments: physician practice management
information systems, plastics and filtration technologies and healthcare
electronic commerce. The Company, through its wholly-owned subsidiary, MMHS is a
leading provider of comprehensive physician practice management information
systems to independent physicians, independent practice associations, management
service organizations, physician practice management organizations, management
care organizations and other providers of health care services in the United
States. The Company, through its wholly-owned Porex subsidiaries, designs,
manufactures and distributes porous and solid plastic components and products
used in life sciences, healthcare, industrial and consumer applications
(plastics and filtration technologies). Through its majority owned subsidiary
CareInsite, the Company is in the process of developing and deploying an
Internet-based healthcare electronic commerce, or e-commerce, network that links
physicians, payers, suppliers and patients and is developing a comprehensive set
of transaction, messaging and content services to the healthcare industry
participants.
Certain reclassifications have been made to prior year amounts to
conform to the current year presentation.
(2) Definitive Agreement with Healtheon/WebMD Corporation:
On February 13, 2000, the Company and CareInsite signed definitive
agreements (the "Healtheon/WebMD Agreements") to be acquired by Healtheon/WebMD
Corporation. Under the terms of the agreements, Healtheon/WebMD will pay 1.65
shares of Healtheon/WebMD common stock for each share of the Company's common
stock and 1.3 shares for each share of CareInsite's common stock not owned by
the Company. Completion of the acquisitions, which will be accounted for as
purchase transactions, is subject to certain conditions, including regulatory
and shareholder approvals.
(3) Business Combinations:
The Merger--
On July 23, 1999, the Company (formerly known as Synetic, Inc.)
acquired all of the outstanding stock of MMHS (formerly known as Medical Manager
Corporation) in exchange for 14,109,455 newly issued shares of the Company's
common stock. In connection with this acquisition, the Company changed its name
to Medical Manager Corporation. The merger has been accounted for as a tax-free
pooling-of-interests. The financial statements reflect the historical operations
of the Company for all periods prior to the business combination, and have been
retroactively restated to include the financial position, results of operations
and cash flows of MMHS.
-7-
<PAGE>
Physician Practice Management Information Systems Acquisitions --
Pooling-of-Interests Transactions - -
During the three months ended September 30, 1999, the Company acquired
the following resellers of the Medical Manager Software: Computer Business
Solutions, Inc. based in Indianapolis, Indiana and Modern Business Machines,
Inc. based in Chadron, Nebraska. The Company also acquired LaPook Lear Systems,
Inc. located in New York, New York (the "First Quarter Acquired Companies"). The
aggregate consideration paid for the First Quarter Acquired Companies was 98,390
shares of the Company's common stock. The acquisitions of the First Quarter
Acquired Companies were accounted for using the pooling-of-interests method of
accounting. The Company's results of operations and cash flows for the nine
months ended March 31, 2000 reflect the results of operations and cash flows of
the First Quarter Acquired Companies as if they were acquired as of July 1,
1999. Prior periods have not been restated as the combined results would not be
materially different from the results as previously presented.
During the three months ended December 31, 1999, the Company acquired
the following companies: Clinical Management Solutions, Inc. based in Norcross,
Georgia; MicroSense, Inc. based in Springfield, Missouri; Resource America, Inc.
based in Louisville, Kentucky; Service Dimensions, Inc. based in Overland Park,
Kansas; Terry Kidd, Inc., d/b/a TKI Computer Services based in Benton, Arkansas;
and PSI Computer Systems based in Highland, California (the "Second Quarter
Acquired Companies"). The aggregate consideration paid for the Second Quarter
Acquired Companies was 125,486 shares of the Company's common stock. The
acquisitions of the Second Quarter Acquired Companies were accounted for using
the pooling-of-interests method of accounting. The financial statements reflect
the historical operations of the Company for all periods prior to the business
combinations, and have been retroactively restated to include the financial
position, results of operations and cash flows of the Second Quarter Acquired
Companies. The accompanying financial statements include revenue and net income
of the Second Quarter Acquired Companies prior to the date of acquisition of
$7,093,000 and $810,000 for the nine months ended March 31, 2000 and $5,220,000
and $79,000 for the nine months ended March 31, 1999, respectively.
During the three months ended March 31, 2000, the Company acquired the
following companies: Direct 1 Medical, Inc., based in Marietta, Georgia;
Versyss-MidSouth Business Systems, Inc., based in Memphis, Tennessee; Briar Hill
Enterprises, Inc., based in Northbrook, Illinois; Aztec Financial, Inc., based
in Fort Myers, Florida; Innovative Healthcare Solutions, Inc., based in Chicago,
Illinois; Altman Information Systems, Inc., based in Chicago, Illinois; Medical
Software Specialists, Inc., based in Galesburg, Illinois; Americlaims, Ltd.,
based in Beaumont, Texas; MedsAmerica, Inc., based in Houston, Texas; Medical
Office Management Solutions, Inc., based in Little Rock, Arkansas; and Health
Pro Solutions, Inc., based in Windsor, California (the "Third Quarter Acquired
Companies"). The aggregate consideration paid for the Third Quarter Acquired
Companies was 963,640 shares of the Company's common stock. The acquisitions of
the Third Quarter Acquired Companies were accounted for using the
pooling-of-interests method of accounting. The financial statements reflect the
historical operations of the Company for all periods prior to the business
combinations, and have been retroactively restated to include the financial
position, results of operations and cash flows of the Third Quarter Acquired
Companies Acquired Companies. The accompanying financial statements include
revenue and net income of the Third Quarter Acquired Companies prior to the date
of acquisition of $9,141,000, $1,276,000, $6,693,000 and $136,000 for the three
months ended March 31, 2000 and March 31, 1999 and $26,254,000, $1,916,000,
$20,046,000 and $707,000 for the nine months ended March 31, 2000 and March 31,
1999, respectively.
During the three months ended March 31, 2000, the Company also acquired
Ebills, Ltd., based in Beaumont, Texas; Medcoast Services, LLC, based in
Houston, Texas; and RJR Enterprises, Ltd., based in Beaumont, Texas. The
aggregate consideration paid for these three companies was 19,232 shares of the
Company's common stock. These acquisitions were accounted for using the pooling
of interests method of accounting. The Company's results of operations and cash
flows for the three and nine months ended March 31, 2000 reflect the results of
operations and cash flows of Ebills, Ltd., Medcoast Services, LLC and RJR
Enterprises, Ltd. as if they were acquired as of January 1, 2000. Prior periods
have not been restated as the combined results would not be materially different
from the results as previously presented.
-8-
<PAGE>
Purchase Business Combinations --
Physician Computer Network, Inc. -
On March 30, 2000, the Company completed the acquisition of
substantially all of the operating assets of Physician Computer Network, Inc.
("PCN"), a provider of physician practice management information systems located
in Morris Plains, New Jersey, for $22,500,000 in cash (including foregiveness of
$7,000,000 of outstanding loans made by the Company to PCN) and 778,867 shares
of the Company's common stock, subject to adjustment based on the net
liabilities assumed at the time of closing. The fair value of the shares, as
determined by management, was approximately $48.15 per share.
The acquisition was accounted for using the purchase method of
accounting with the purchase price being allocated to the assets acquired based
on their estimated fair values. This transaction is a taxable transaction for
federal, state and local income tax purposes. PCN's results have been included
in the Company's financial statements beginning March 30, 2000.
A preliminary summary of the purchase price allocation is as follows
(in thousands):
Cash and cash equivalents $ 2,306
Accounts receivable 5,288
Inventories 806
Other current assets 1,778
Property, plant and equipment 541
Goodwill and other intangible assets 81,653
Other assets 102
-----------
$ 92,474
============
The goodwill is being amortized over a period of 5 years.
Other --
During the nine months ended March 31, 2000, the Company acquired
substantially all of the assets or all of the outstanding equity securities of
the following companies which individually, and in the aggregate, are not
significant (the "Purchased Companies"):
<TABLE>
<CAPTION>
Company Acquired Date of Acquisition Location
<S> <C> <C>
The Wismer Martin division of
Physician Computer Network July 9, 1999 Spokane, Washington
Hyperion Business Systems July 20, 1999 Oakland, California
Mooney Edward Enterprises, Inc.
d/b/a Medical Information Systems, Inc. July 28, 1999 Pensacola, Florida
Turnkey Business Systems, Inc. September 23, 1999 Nashville, Tennessee
Intellex Medical Management Systems, Inc. September 24, 1999 Ft. Myers, Florida
Abacus Data Systems, Inc. September 27, 1999 Elkhart, Indiana
Health-Net Services of WA & AK, Inc. October 12, 1999 Eagle River, Alaska
Micro Edge, Inc. December 16, 1999 Stamford, Connecticut
Mednetrix.com, Inc. January 21, 2000 Boca Raton, Florida
SCINET, Inc. March 7, 2000 Scottsdale, Arizona
Delta Computing Solutions, LLC March 14, 2000 Pittsburgh, Pennsylvania
HCC Communications, Inc. March 20, 2000 Lincoln, Nebraska
PC Anywhere Group, LLC March 23, 2000 Danbury, Connecticut
</TABLE>
The Purchased Companies were accounted for using the purchase method of
accounting. The aggregate consideration paid for the Purchased Companies was
$17,825,000 in cash and 645,020 shares of the Company's common stock.
-9-
<PAGE>
Healthcare Electronic Commerce Acquisitions --
The Health Information Network Connection LLC ("THINC")-
In January 2000, CareInsite acquired the 80% equity interest in THINC
owned by Empire Blue Cross and Blue Shield, Group Health Incorporated, HIP
Health Plans and Greater New York Hospital Association (the "THINC founding
members") for 600,800 shares of CareInsite's stock in a transaction valued at
$45,672,000. The fair value of the shares, as determined by management, was
$76.018 per common share. THINC is a New York-based provider of software and
services to facilitate the exchange of healthcare information in the
metropolitan New York area among physicians, hospitals, laboratories, and
payers. Concurrently with the acquisition, warrants to purchase an aggregate of
3,247,294 shares of CareInsite's common stock, which represented the THINC
founding members' interest in the warrants issued by CareInsite to THINC in
January 1999, were distributed to the THINC founding members. Immediately
following this transaction, the THINC founding members exercised their warrants
in full. All shares including those issued upon the exercise of the warrants are
subject to certain restrictions on transfer. Simultaneously, CareInsite acquired
Cerner Corporation's ("Cerner") 2% non-voting ownership interest in THINC for a
note payable of $2,735,000. The note bears interest at 5.8% per annum and is
repayable on demand after September 2002.
The acquisition of THINC was accounted for using the purchase method
of accounting with the purchase price being allocated to assets acquired and
liabilities assumed based on their fair values. The goodwill related to the
transaction will be amortized over a three-year period. THINC's results of
operations have been included in CareInsite's financial statements as of January
1, 2000.
A preliminary summary of the purchase price allocation is as follows
(in thousands):
Current assets.................................... $ 1,605
Goodwill.......................................... 61,412
Other noncurrent assets........................... 1,954
------------
$ 64,971
============
Provider Technology Group ("PTG")-
On March 27, 2000, CareInsite acquired substantially all of the assets
of Provider Technology Group ("PTG"), the e-commerce network of Blue Cross Blue
Shield of Massachusetts ("BCBSMA"), for $26,500,000 in cash and 651,968 shares
of CareInsite's common stock. Pursuant to the asset purchase agreement, if
BCBSMA does not realize at least $22,500,068 in proceeds from the sale of
325,984 of the common shares issued, CareInsite has agreed to pay BCBSMA an
amount equal to the shortfall in cash. Accordingly, the fair value of 325,984
of the common shares issued was $69.022 per share. The fair value of the
remaining 325,984 shares of common stock, as determined by management, was
$40.646 per share.
Based on the March 31, 2000 closing price for CareInsite's common
stock of $23.375, CareInsite would be obligated to remit $14,880,192 to BCBSMA
pursuant to CareInsite's guarantee of at least $22,500,068 in proceeds from the
sale of 325,984 of the common shares issued to acquire PTG.
BCBSMA has the right to require CareInsite to purchase from BCBSMA
325,984 shares of CareInsite's common stock at $69.022 per common share if a
registration statement for these shares has not been declared effective on or
before November 15, 2000. Additionally, if the registration statement referred
to above is not declared effective by December 29, 2000, BCBSMA has the right to
require CareInsite to purchase up to 651,968 shares of CareInsite common stock
from BCBSMA for a price equal to the average closing price per share of
CareInsite's common stock for the ten successive trading days ending December
29, 2000.
The acquisition of PTG was accounted for using the purchase method of
accounting with the purchase price being allocated to assets acquired and
liabilities assumed based on their fair values. The goodwill related to
the transaction will be amortized over a five year period. PTG's results of
operations have been included in the CareInsite's financial statements as of
March 27, 2000.
-10-
<PAGE>
A preliminary summary of the purchase price allocation is as follows
(in thousands):
Current assets.................................... $ 114
Goodwill.......................................... 64,406
Other noncurrent assets........................... 65
-----------
$ 64,585
===========
Other -
On March 13, 2000, CareInsite executed and closed a definitive
agreement to acquire Netics, Inc. ("Netics"), a Maryland based developer of
web-enabled software which is used in the provision of electronic data
interchange claims clearing, statement processing and remittance advice postage
and other services for medical practices. The consideration paid for the
acquisition of Netics was 35,125 shares of CareInsite common stock. The
acquisition was accounted for using the purchase method of accounting.
On March 7, 2000, Medical Manager sold to CareInsite the EDI division
of SCINET, Inc., a company acquired by Medical Manager on March 7, 2000. The
consideration paid was 182,197 shares of CareInsite common stock, valued at
$12,000,000.
Pending Transaction -
On March 16, 2000, CareInsite signed a binding letter of intent with
Medical Mutual of Ohio ("MMO") to acquire MMO's provider connectivity business
for 405,318 shares of CareInsite common stock. Under the terms of the binding
letter of intent, if MMO does not realize at least $10,000,000 in proceeds from
the sale of 202,659 of the common shares to be issued at closing, CareInsite has
agreed to pay MMO an amount equal to such shortfall in cash.
Plastics and Filtration Technologies Acquisitions -
On November 18, 1999, the Company executed and closed a definitive
agreement to acquire all of the outstanding equity securities of Mupor LTD,
located in Scotland, United Kingdom. The purchase of Mupor LTD was accounted for
using the purchase method of accounting. The aggregate consideration paid for
Mupor LTD was $2,420,000 in cash.
Pro Forma Information --
The following summary, prepared on a pro forma basis, combines the
results of operations of the Company, PCN, THINC and PTG assuming the
acquisitions were consummated at the beginning of the periods presented. The pro
forma financial data does not purport to represent what the Company's results of
operations actually would have been if these transactions had been consummated
on the dates or for the periods presented, or what such results will be for any
future date or for any future period. All other purchase acquisitions were not
material to the financial statements and results of operations of the Company.
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
Revenue $101,826 $92,849 $322,050 $276,375
Net (loss) $(19,011) $(15,940) $(31,542) $(45,393)
Net (loss) per share-basic $(0.49) $(0.45) $(0.84) $(1.30)
Net (loss) per share-diluted $(0.49) $(0.45) $(0.84) $(1.30)
-11-
<PAGE>
Merger and Related Expenses -
During three months ended September 30, 1999, the Company
recorded $17,991,000 of acquisition and related expenses primarily related to
the acquisition of MMHS. The major components of this charge are as follows:
$10,567,000 of transaction costs such as financial advisory fees, professional
fees and printing fees; $5,718,000 of amounts vested, as a result of the
acquisition, under certain MMHS employment agreements; $1,259,000 of acquisition
related severance costs attributable to employees terminated or notified of
termination as of September 30, 1999; and $447,000 of other related expenses.
(4) Inventories:
Inventories consisted of the following (in thousands):
March 31, June 30,
2000 1999
---------- ---------
(unaudited) (unaudited)
Raw materials and supplies............ $ 6,836 $ 4,645
Work-in-process....................... 1,837 1,600
Finished goods........................ 7,315 6,515
Peripheral computer equipment......... 4,053 3,858
---------- ---------
$ 20,041 $16,618
========== =========
(5) Marketable Securities:
Management determines the appropriate classification of its investments
in debt securities at the time of purchase and re-evaluates such determinations
at each balance sheet date. Debt securities are classified as held-to- maturity
when the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are carried at cost, net of unamortized
premium or discount. Debt securities for which the Company does not have the
intent or ability to hold to maturity are classified as available-for-sale.
Available-for-sale securities are carried at fair value as of the balance sheet
date. At March 31, 2000, the Company's investments consisted principally of U.S.
Treasury Notes and Federal Agency Notes. Of the investments at March 31, 2000,
$50,000,000 were debt securities classified as available-for-sale. Unrealized
losses on these securities were $482,000 at March 31, 2000. Unrealized gains on
marketable debt securities classified as available-for-sale were $278,000 at
June 30, 1999.
(6) Subordinated Debentures:
On January 31, 2000, the Company called for redemption on February 15,
2000, the entire $159,388,000 aggregate principal amount of its outstanding 5%
Convertible Subordinated Debentures due 2007 ("Debentures"). As an alternative
to redemption, the outstanding Debentures were convertible into the Company's
common stock at the rate of approximately 16.667 shares of common stock per
$1,000 principal amount of Debentures, with cash to be paid in lieu of any
fractional shares, for Debentures surrendered on or prior to February 14, 2000.
$159,114,000 aggregate principal amount of the Debentures were surrendered to
the Company for conversion into 2,651,828 shares of the Company's common stock.
The remaining $274,000 aggregate principal amount of Debentures were redeemed at
a redemption price of $1,053.57 per $1,000 principal amount of Debentures
including accrued interest. The Company recorded a charge of $3,404,000 in
selling, general and administrative expense, which consisted of financial
advisory and professional fees related to the call of the debentures.
(7) Increase in Carrying Value of CareInsite:
Securities and Exchange Commission Staff Accounting Bulletin No. 51,
Accounting for Sales of Stock by a Subsidiary, permits the difference between
the carrying value of the parent's investment in its subsidiary and underlying
book value of the subsidiary after a stock issuance by the subsidiary to be
reflected as a gain or loss in the consolidated financial statements, or as a
capital transaction. However, for sales of stock by a subsidiary in the
development stage, gain recognition is not permitted. Accordingly, as CareInsite
is a development stage company, the Company recorded a credit to paid-in capital
of $11,435,553, net of deferred taxes as a result of shares issued by CareInsite
during the three months ended March 31, 2000 related to its acquisitions.
-12-
<PAGE>
(8) Realignment of Porex Bio Products:
During the three months ended March 31, 2000, Porex consolidated its
manufacturing efforts in its Bio Products group by closing its manufacturing
facility in Newman, Georgia and moving the related equipment to its newly
expanded facility in California. The Company recorded a $1,950,000 charge,
included in selling, general and administrative expense, related to the
consolidation of its Bio Products business. The major components of this charge
are as follows: $705,000 of costs to disconnect and ship manufacturing equipment
to the new facility; $384,000 of severance costs related to employees terminated
or notified of termination as of March 31, 2000; $540,000 of write- downs,
primarily related to equipment used to manufacture vials which Porex will no
longer carry in its product offering; and $321,000 of other expenses.
(9) Settlement of Pension Obligation:
The Company had defined benefit pension plans covering certain of its
employees. On May 1, 1998, the Company ceased all benefit accruals which
resulted in a curtailment of the plan. During the three months ended March 31,
2000, the Company settled all of its obligations by either a cash settlement
paid to employees or the purchase of annuity contracts on behalf of plan
participants. The remaining assets, after settling all pension plan obligations,
reverted back to the Company resulting in a net gain of $2,246,000, and is
included in selling, general and administrative expense.
(10) America Online Agreement:
In September 1999, CareInsite entered into a strategic alliance with
America Online, Inc. ("AOL") for CareInsite to be AOL's exclusive provider of a
comprehensive suite of services that connect AOL's members, as well as
CompuServe members and visitors to AOL's Web-based services, Netcenter, AOL.COM
and Digital City (collectively, "AOL Members"), to physicians, health plans,
pharmacy benefit managers, covered pharmacies and labs. Under the agreement,
CareInsite and AOL have agreed to create co-branded sites which will enable AOL
Members to manage their healthcare through online communication with their
physicians, health plans, pharmacy benefit managers, covered pharmacies and
labs. The agreement has an initial term of four years, subject to the rights of
the parties to terminate the agreement under certain conditions, including the
right of AOL to terminate the agreement upon the completion of CareInsite's
pending merger with Healtheon/WebMD. Through this arrangement, AOL Members will
have access to CareInsite's secure, real-time services being developed that
allow them, among other things, to select and enroll in health plans, choose
their providers, schedule appointments, renew and refill plan-approved
prescriptions, view lab results, review claims status, receive explanations of
benefits, review patient education materials provided by their health plans,
understand plan policies and procedures and receive plan treatment
authorizations. CareInsite and AOL have also agreed to collaborate in sales and
marketing to the healthcare industry, and they intend to leverage their alliance
into cross-promotional and shared advertising revenue initiatives. Under the
financial terms of the arrangement, CareInsite has agreed to make $30,000,000 of
guaranteed payments to AOL over three years. CareInsite made the first payment
of $10,000,000 in September 1999. CareInsite is required to make the remaining
guaranteed payments of $10,000,000 on August 31, 2000 and $10,000,000 on August
31, 2001. If the pending merger with Healtheon/WebMD (Note 2) is completed, AOL
will have the right to terminate its strategic alliance with CareInsite, in
which case the remaining guaranteed payments due to AOL under the agreement
shall become immediately payable by CareInsite.
CareInsite also entered into a four year agreement with Netscape
Communications Corporation ("Netscape") under which CareInsite acquired a
nonexclusive and nontransferable right and license for the use of an unlimited
quantity of the Netscape and Sun Microsystems software offered via the Sun
Microsystems-Netscape Alliance. The cost of the products was $3,750,000, with a
maintenance fee of $750,000 in the initial year, and an option to purchase
maintenance at $1,000,000 per year in the second, third and fourth years of the
agreement.
Under a separate agreement entered into in September 1999, AOL
purchased 100 shares of newly issued CareInsite Series A Convertible Redeemable
Preferred Stock ("CareInsite Preferred Stock") at a price of $100,000 per
-13-
<PAGE>
share, or $10 million of CareInsite Preferred Stock in the aggregate, with an
option to purchase up to an additional 100 shares of CareInsite Preferred Stock
in September 2000 at the same price ("CareInsite Preferred Option"). At the
option of AOL, in March 2002, the CareInsite Preferred Stock is either
redeemable in whole for $100,000 per share in cash or convertible in whole, on a
per share basis, into (i) the number of shares of CareInsite's common stock
equal to $100,000 divided by $49.25 (or 2,030.5 shares) and (ii) a warrant
exercisable for the same number of shares of CareInsite's common stock, or
2,030.5 shares, at a price of $49.25 per share. In the event that AOL elects to
convert the 100 shares of CareInsite Preferred Stock it purchased in September
1999, it would receive 203,046 shares of CareInsite's common stock and a warrant
exercisable into an additional 203,406 shares at a price of $49.25 per share.
Prior to March 2002, AOL has the right to require CareInsite to redeem the
CareInsite Preferred Stock in whole at $100,000 per share in the event of
certain changes in control of CareInsite, which would not include the pending
mergers of the Company and CareInsite with Healtheon/WebMD under the
Healtheon/WebMD Agreements. The CareInsite Preferred Stock is non-voting except
under certain extraordinary circumstances and no dividend is payable on the
CareInsite Preferred Stock unless CareInsite declares a dividend on its common
stock.
The proceeds received of $10,000,000 were allocated based on the
relative fair values of the CareInsite Preferred Stock and the CareInsite
Preferred Option, as determined by management. Accordingly, $7,608,000 was
allocated to the CareInsite Preferred Stock and $2,392,000 was allocated to the
CareInsite Preferred Option. Additionally, as the CareInsite Preferred Stock is
convertible into equity securities with a value in excess of $10,000,000 (the
"beneficial conversion feature"), a portion of the proceeds has been allocated
to the beneficial conversion feature and is reflected as a discount to the
CareInsite Preferred Stock. The value of the beneficial conversion feature, as
determined by management, was $5,268,000. The discount is being amortized
through March 2002 using the effective interest method and is reflected in
minority interest in net loss of consolidated subsidiary in the accompanying
statement of operations. The CareInsite Preferred Stock and CareInsite Preferred
Option are classified as a component of minority interest in the accompanying
balance sheets.
(11) Accumulated Other Comprehensive Income:
For the three and nine months ended March 31, 2000, the Company had
comprehensive losses of $(9,925,000) and $(2,839,000), respectively. For the
three and nine months ended March 31, 1999, the Company had comprehensive income
of $3,627,000 and $13,492,000, respectively. The elements of accumulated other
comprehensive income/(loss) for the Company arise as a result of the change in
foreign currency translation adjustments and the change in unrealized gains and
losses on marketable securities.
(12) Computation of Net Income Per Share:
Basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted net
income per share reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common
stock. The Company's 5% Convertible Subordinated Debentures due 2007 (the
"Convertible Debentures"), if converted, would not have had a dilutive effect on
net income per share for the periods presented. The following table sets forth
the computation of basic and diluted earnings per share (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------- ------------------
2000(b) 1999 2000(b) 1999
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net (loss) income $(9,456) $ 4,287 $ (1,606) $ 14,363
======== ======== ========= ========
Weighted average shares outstanding (basic) 37,981 34,946 36,713 34,033
Common stock equivalents(a) - 2,729 - 2,663
------- -------- -------- -------
Weighted average shares outstanding
assuming dilution (diluted) 37,981 37,675 36,713 36,696
======= ======= ======== ======
</TABLE>
-------------------------------------
(a) Issuable primarily under stock option plans
(b) Common stock equivalents of 4,115,000 and 3,790,000 for the three and
nine months ended March 31, 2000, respectively, were not reflected
above as they were anti-dilutive
-14-
<PAGE>
(13) Supplemental Cash Flow Information:
Nine Months Ended
March 31,
----------------
2000 1999
---- ----
(in thousands)
(unaudited)
Cash paid during the periods for:
Interest......................................... $ 4,789 $8,396
Income taxes..................................... 3,830 7,069
Noncash activity:
Issuance of warrants by CareInsite................ 555 1,700
Issuance of equity by CareInsite
for software technology licensed from Cerner...... - 20,800
Conversion of a note receivable into a stock
investment........................................ - 2,000
(14) Commitments and Contingencies:
Legal Proceedings-
In the normal course of business, the Company is involved in various
claims and legal proceedings. While the ultimate resolution of these matters has
yet to be determined, the Company does not believe that their outcome will have
a material adverse effect on its financial position.
On February 18, 1999, Merck & Co., Inc. ("Merck") and Merck-Medco
Managed Care, L.L.C ("Merck-Medco") filed a complaint in the Superior Court of
New Jersey against the Company, CareInsite, Martin J. Wygod, Chairman of the
Company, and Paul C. Suthern, Roger C. Holstein and Charles A. Mele, officers
and/or directors of the Company. Merck and Merck-Medco asserted that the
Company, CareInsite and the individual defendants were in violation of certain
non-competition, non-solicitation and other agreements. The complaint sought to
enjoin the Company, CareInsite, and the individual defendants from conducting
the Company's healthcare e-commerce business and from soliciting Merck-Medco's
customers. A hearing was held on March 22, 1999 on the plaintiffs' application
for a preliminary injunction. On April 15, 1999, the Superior Court denied that
application. In March 2000, the Superior Court ruled in favor of the Company,
CareInsite and Messrs. Wygod, Suthern, Holstein and Mele and entered an order
dismissing with prejudice all of the plaintiffs' claims. The Court's orders
terminate Merck's and Merck- Medco's right to seek any claim for injunctive
relief or damages arising out of the Company's and CareInsite's activities to
deploy its healthcare e-commerce services. The Company's and CareInsite's
counterclaims against Merck and Merck-Medco are still pending.
The Company has recorded $350,000, $2,500,000, $1,450,000 and
$2,500,000 in litigation costs associated with the Merck and Merck-Medco
litigation for the three months ended March 31, 2000 and March 31, 1999 and the
nine months ended March 31, 2000 and March 31, 1999, respectively.
On March 14, 2000, CareInsite was served with a summons in a lawsuit
which was filed on February 17, 2000, against CareInsite, the Company and
certain of their officers and directors, among other parties, in the New Jersey
Superior Court, Chancery Division, in Bergen County. The plaintiff purports to
be a holder of CareInsite common stock. The lawsuit, captioned Ina Levy, et al.
vs. Martin J. Wygod, et al. purports to bring an action on behalf of the
plaintiff and others similarly situated to enjoin the defendants from
consummating the proposed merger of the Company and CareInsite with
Healtheon/WebMD Corp. (the "Merger"). The plaintiff alleges that the defendants
have breached their fiduciary duties in that the proposed Merger favors the
interests of the Company and its shareholders over the interests of CareInsite's
minority shareholders. The plaintiff also alleges that the proposed Merger
provides the defendants and other shareholders of the Company with a premium
which exceeds the premium provided to CareInsite's minority shareholders. The
lawsuit seeks, among other things, an injunction prohibiting the proposed Merger
unless certain mechanisms are implemented by CareInsite, as well as plaintiff's
costs and disbursements. The Company and CareInsite believe that this lawsuit is
without merit and intend to vigorously defend against it.
-15-
<PAGE>
(15) Segment Reporting:
The Company's operations have been classified into three operating
segments: physician practice management information systems, plastics and
filtration technologies and healthcare electronic commerce. The accounting
policies of the reportable segments are the same as those described in Note 1 to
the consolidated financial statements. The Company evaluates the performance of
its operating segments based on pre-tax income. Summarized financial information
concerning the Company's reportable segments is shown in the following tables
(in thousands):
<TABLE>
<CAPTION>
Physician
Practice
Management Plastics & Healthcare
Information Filtration Electronic Corporate
Three months ended March 31, 2000 Systems Technologies Commerce and Other Total
- --------------------------------- ------- ------------ -------- --------- -----
<S> <C> <C> <C> <C> <C>
Net revenues.................................... $ 55,600 $ 31,150 $ 1,651 $ - $ 88,401
Cost of revenues................................ 29,868 15,581 787 - 46,236
Selling, general and administrative............. 15,200 5,394 9,015 5,373 34,982
Research and development........................ 2,112 818 8,386 - 11,316
Minority interest in CareInsite................. - - (7,202) - (7,202)
Litigation costs................................ - - 350 - 350
---------- --------- ---------- ---------- --------
Earnings (loss) before interest, taxes,
depreciation and amortization................. 8,420 9,357 (9,685) (5,373) 2,719
Depreciation and amortization................... (2,207) (2,604) (8,924) (267) (14,002)
Interest income, net............................ 445 654 1,534 3,147 5,780
---------- --------- ---------- ---------- --------
Income/(loss) before income taxes............... $ 6,658 $ 7,407 $ (17,075) $ (2,493) $ (5,503)
---------- --------- ---------- ---------- --------
Three months ended March 31, 1999
- ---------------------------------
Net revenues.................................... $ 48,265 $25,069 $ 213 $ - $ 73,547
Cost of revenues................................ 25,445 11,707 213 - 37,365
Selling, general and administrative............. 14,560 4,841 1,960 1,424 22,785
Research and development........................ 1,602 623 1,958 - 4,183
Minority interest in CareInsite................. - - (764) - (764)
Litigation costs ............................... - - 2,500 - 2,500
---------- --------- ---------- ---------- --------
Earnings (loss) before interest, taxes,
depreciation and amortization................. 6,658 7,898 (5,654) (1,424) 7,478
Depreciation and amortization................... (1,302) (2,212) (275) (29) (3,818)
Interest income, net............................ 557 321 19 1,766 2,663
---------- --------- ---------- ---------- --------
Income/(loss) before income taxes............... $ 5,913 $ 6,007 $ (5,910) $ 313 $ 6,323
---------- --------- ---------- ---------- --------
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
Physician
Practice
Management Plastics & Healthcare
Information Filtration Electronic Corporate
Nine months ended March 31, 2000 Systems Technologies Commerce and Other Total
- -------------------------------- ------- ------------ -------- --------- -----
<S> <C> <C> <C> <C> <C>
Net revenues .......................... $ 169,194 $ 90,805 $ 4,809 $ - $ 264,808
Cost of revenues ...................... 90,290 42,775 2,885 - 135,950
Selling, general and administrative ... 44,859 17,546 21,881 9,029 93,315
Research and development .............. 5,856 2,218 16,287 - 24,361
Minority interest in CareInsite ....... - - (5,416) - (5,416)
Litigation costs ...................... - - 1,450 - 1,450
Merger and related expenses ........... 14,855 - - 3,136 17,991
--------- -------- -------- -------- ---------
Earnings (loss) before interest, taxes,
depreciation and amortization ....... 13,334 28,266 (32,278) (12,165) (2,843)
Depreciation and amortization ......... (5,995) (7,670) (11,609) (336) (25,610)
Gain/(loss) on sale of investments .... (624) -- 25,511 -- 24,887
Interest income, net .................. 1,345 1,965 4,801 6,591 14,702
--------- -------- -------- -------- ---------
Income/(loss) before income taxes ..... $ 8,060 $ 22,561 $(13,575) $ (5,910) $ 11,136
--------- -------- -------- -------- ---------
Nine months ended March 31, 1999
- --------------------------------
Net revenues .......................... $ 144,064 $ 68,730 $ 213 $ - $ 213,007
Cost of revenues ...................... 73,595 31,254 213 - 105,062
Selling, general and administrative ... 43,559 13,229 4,283 4,244 65,315
Research and development .............. 4,221 1,622 7,646 - 13,489
Minority interest in CareInsite ....... - - (764) - (764)
Litigation costs ...................... 2,366 - 2,500 - 4,866
--------- -------- -------- -------- ---------
Earnings (loss) before interest, taxes,
depreciation and amortization ....... 20,323 22,625 (13,665) (4,244) 25,039
Depreciation and amortization ......... (3,641) (5,646) (1,162) (81) (10,530)
Interest income, net .................. 1,572 1,007 110 5,826 8,515
--------- -------- -------- -------- ---------
Income/(loss) before income taxes ..... $ 18,254 $ 17,986 $(14,717) $ 1,501 $ 23,024
--------- -------- -------- -------- ---------
</TABLE>
-17-
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
On July 23, 1999, Medical Manager Corporation (the "Company")
(formerly known as Synetic, Inc.) acquired all of the outstanding stock of
Medical Manager Health Systems, Inc. (formerly known as Medical Manager
Corporation) ("MMHS") in exchange for 14,109,455 newly issued shares of Medical
Manager Corporation common stock. In connection with the acquisition, Synetic,
Inc. changed its name to Medical Manager Corporation. The acquisition has been
accounted for as a tax-free pooling-of-interests. The Company's consolidated
financial statements have been restated to reflect the merger with MMHS.
Accordingly, management's discussion and analysis of financial condition and
results of operations reflect the historical operations of Medical Manager
Corporation, restated to reflect the acquisition of MMHS for all periods
presented. As discussed below, the Company has recorded a charge for the merger
and other related costs.
On February 13, 2000, the Company and CareInsite signed definitive
agreements (the "Healtheon/WebMD Agreements") to be acquired by Healtheon/WebMD
Corporation ("Healthcom/WebMd"). Under the terms of the agreements,
Healtheon/WebMD will pay 1.65 shares of Healtheon/WebMD common stock for each
share of the Company's common stock and 1.3 shares for each share of
CareInsite's common stock not owned by the Company. Completion of the
acquisitions, which will be accounted for as purchase transactions, is subject
to certain conditions, including regulatory and shareholder approvals.
Consolidated Results of Operations
The Company has three operating segments: physician practice
management information systems, plastics and filtration technologies and
healthcare electronic commerce. The Company, through its wholly-owned
subsidiary, MMHS is a leading provider of comprehensive physician practice
management information systems to independent physicians, independent practice
associations, management service organizations, physician practice management
organizations, management care organizations and other providers of health care
services in the United States. The Company, through its wholly-owned Porex
subsidiaries, designs, manufactures and distributes porous and solid plastic
components and products used in life sciences, healthcare, industrial and
consumer applications (plastics and filtration technologies). Through its
majority owned subsidiary CareInsite, the Company is in the process of
developing and deploying an Internet-based healthcare electronic commerce, or
e-commerce, network that links physicians, payers, suppliers and patients and is
developing a comprehensive set of transaction, messaging and content services to
the healthcare industry participants.
Net revenues -
The Company's consolidated net revenues for the three and nine months
ended March 31, 2000 increased 20.2% and 24.3%, respectively, from the
comparable prior year periods.
Net revenues for the three and nine months ended March 31, 2000 at
MMHS increased 15.2% and 17.4%, respectively, to $55,600,000 and $169,194,000
from $48,265,000 and $144,064,000 in the comparable prior year periods. The
increase for the three months ended March 31, 2000, includes (i) approximately
$4,100,000 related to expansion of the owned MMHS dealer network (primarily
through acquisition of independent dealers); (ii) approximately, $2,961,000
attributable to the acquisition of Physician Computer Network, Inc. ("PCN") and
certain PCN independent dealers; and (iii) $3,118,000 related to increases in
network services revenue (which are fees related to the handling of claims,
electronic statements and other value added services provided to the physician's
office). This increase was partially offset by a decrease in revenues from
system sales, primarily upgrades, due to the post Y2K reduction in demand. MMHS'
increase in net revenues for the nine months ended March 31, 2000, include
revenues from purchased companies acquired from September 1, 1998 through March
30, 2000, for which there were no revenues in the comparable prior year period.
Excluding the revenues from purchased companies, sales at MMHS increased 6.2%
over the prior year. The increase is due primarily to increases in MMHS' network
service revenues, as well as new system sales and upgrades, offset by fewer
enterprise business group sales, which are typically larger high margin sales
made to larger national and regional clients ("EBG sales") over the prior year
period.
Net revenues for the three and nine months ended March 31, 2000 at
Porex increased 24.3% and 32.1%, respectively, to $31,150,000 and $90,805,000
from $25,069,000 and $68,730,000 in comparable prior year periods.
-18-
<PAGE>
Included in these increases are revenues from Porex Medical Products, Inc.
(formerly known as The KippGroup) and Mupor LTD, which were acquired on January
22, 1999 and November 18, 1999, respectively. Excluding the impact of these
acquisitions, revenues for the three and nine months ended March 31, 2000
increased 12.8% and 7.9%, respectively, versus the comparable prior year
periods. The increase is due primarily to increased sales in Porex's Bio
Products group, primarily laboratory products for both the three and nine months
ended March 31, 2000, as well as development revenues for the three months ended
March 31, 2000, offset by decreased sales of writing instrument components over
the comparable prior year periods.
Revenues for CareInsite for the three and nine months ended March 31,
2000 were $1,651,000 and $4,809,000, respectively, as compared to $213,000 for
the three and nine months ended March 31, 1999. Total revenues were comprised of
(i) electronic data interchange revenue of $1,651,000 and $3,236,000 for the
three and nine months ended March 31, 2000, respectively, and (ii) management
services revenue of $1,573,000 for the nine months ended March 31, 2000 and
$213,000 for the three and nine months ended March 31, 1999. There was no
management services revenue for the three months ended March 31, 2000, due to
the acquisition of THINC in January 2000. All of CareInsite's electronic data
interchange revenue in the three and nine months ended March 31, 2000 was
derived from the acquisitions for which there were no comparable amounts in the
prior year periods.
Cost of revenues -
The Company's consolidated cost of revenues as a percentage of
revenues for the three and nine months ended March 31, 2000 increased to 52.3%
and 51.3%, respectively, from 50.8% and 49.3% in the comparable prior year
periods.
Cost of revenues as a percentage of revenues at MMHS for the three
and nine months ended March 31, 2000 increased to 53.7% and 53.4%, respectively,
from 52.7% and 51.1% in the comparable prior year periods. For the three months
ended March 31, 2000, the increase relates primarily to sales mix as a result of
an increase in lower margin network service revenues, and a decrease in higher
margin software upgrades. For the nine months ended March 31, 2000, the decrease
relates to sales mix as a result of fewer higher margin EBG sales as well as the
increase in network service revenues.
Cost of revenues as a percentage of revenues for the three and nine
months ended March 31, 2000 at Porex increased to 50.0% and 47.1%, respectively,
from 46.7% and 45.5% in the comparable prior year periods. The operations of
Porex Medical Products, which have lower margin sales, accounted for
substantially all of the increase.
Cost of revenues at CareInsite, other than to affiliates, was
$787,000 and $1,312,000 for the three and nine months ended March 31, 2000,
respectively. Cost of services to affiliates was $1,573,000 for the nine months
ended March 31, 2000, as compared to $213,000 for the three and nine months
ended March 31, 1999, and consisted primarily of employee compensation and
benefits expense for those employees supporting the THINC business. The increase
in costs of revenues in the three and nine months ended March 31, 2000 was
attributable to CareInsite's electronic data interchange services revenue,
derived from the acquisitions, for which there were no comparable amounts in the
prior year periods.
Selling, general and administrative expenses -
The Company's consolidated selling general and administrative
expenses for the three and nine months ended March 31, 2000 increased to 39.6%
and 35.2% of net revenues, respectively, from 31.0% and 30.7% of net revenues in
the comparable prior year periods.
Selling, general and administrative expenses at MMHS decreased to
27.3% and 26.5% of net revenues for the three and nine months ended March 31,
2000, from 30.2% and 30.2% in the comparable prior year periods. This decrease
is principally due to increased sales, which were not proportionately offset by
expenses, since these expenses do not vary directly with sales.
Selling, general and administrative expenses at Porex for the three
and nine months ended March 31, 2000 include a $1,950,000 charge related to the
realignment of Porex Bio Products Group and a one-time gain related to the
settlement of pension obligation at Porex Corporation of $2,246,000. Excluding
the impact of these non-recurring items,
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selling general and administrative expenses at Porex remained relatively
constant at 18.3% and 19.6% of net revenues for the three and nine months ended
March 31, 2000, as compared to 19.3% and 19.2% of net revenues in the comparable
prior year periods.
Selling, general and administrative expenses at CareInsite for the
three and nine months ended March 31, 2000 increased $7,055,000 and $17,598,000
over the comparable prior year periods. The increase is primarily due to
marketing expenses related to the AOL agreement for which there were no
comparable amounts in the prior year periods, increased salaries and benefits
due to increased staffing, increased promotional expenses and continued business
development efforts.
Selling, general and administrative expenses at Corporate and other
for the three and nine months ended March 31, 2000 include $3,404,000 in
expenses, primarily professional fees, related to the call of the Company's
convertible debentures in January 2000.
Research and development expenses -
The Company's consolidated research and development expenses for the
three and nine months ended March 31, 2000 increased $7,133,000 and $10,872,000
over the comparable prior year periods. Excluding the impact of (i) a $2,381,000
charge recorded by CareInsite related to the write-off of software and (ii) the
capitalization by CareInsite of $2,366,000 of internal research and development
expenditures during the nine months ended March 31, 1999, consolidated research
and development expenses for the three and nine months ended March 31, 2000
increased $7,133,000 and $10,887,000 over the comparable prior year periods. The
increase is principally due to the continued development of CareInsite's
physician portal, software products and data centers. Also contributing to the
increase were development projects at MMHS regarding future versions of the
Medical Manager software with graphical user interfaces and relational database
technologies, along with web-based access and services.
Net gain on sale of investments -
For the nine months ended March 31, 2000, the Company recorded a net
gain of $24,887,000 primarily related to the sale by CareInsite of common stock
of a publicly held company. These shares were acquired through the conversion of
its $2,000,000 investment in Series B Preferred Stock of a privately held
company, which was subsequently merged into this publicly held company.
Litigation expenses -
The Company recorded $350,000, $1,450,000, $2,500,000 and $2,500,000
in litigation charges for the three and nine months ended March 31, 2000 and the
three and nine months ended March 31, 1999, respectively, related to its ongoing
defense against assertions that it violated certain agreements with Merck and
Co., Inc. and Merck-Medco Managed Care, L.L.C. For the nine months ended March
31, 1999, MMHS recorded $2,366,000 in litigation charges related to the
settlement of six lawsuits brought against the Company alleging Year 2000 issues
with previous versions of The Medical Manager software.
Merger and related expenses -
For the nine months ended March 31, 2000, the Company recorded
$17,991,000 of merger and related expenses primarily related to the merger with
MMHS. The major components of this charge are as follows: $10,567,000 of
transaction costs such as financial advisory fees, professional fees and
printing fees; $5,718,000 of amounts vested, as a result of the merger, under
certain MMHS employment agreements; $1,259,000 of merger related severance costs
attributable to employees terminated or notified of termination as of September
30, 1999 and; $447,000 of other related expenses.
Depreciation amortization expense -
The Company's consolidated depreciation and amortization increased
$10,184,000 and $15,080,000 for the three and nine months ended March 31, 2000
over the comparable prior year periods, primarily related to the acquisitions of
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THINC, PTG and Med-Link Technologies, Inc. by CareInsite, Porex Medical
Products, Inc. and companies acquired at MMHS for which there were no amounts in
the comparable prior year periods, as well as the amortization related to
CareInsite's capitalized software costs and certain contracts and other
intangibles.
Interest and other income -
The Company's consolidated interest and other income, net of interest
expense, increased by $3,117,000 and $6,187,000 for the three and nine months
ended March 31, 2000, over the comparable prior year periods. This increase was
primarily due to increased investments from funds raised as a result of
CareInsite's initial public offering, interest income on the funds generated by
the sale of CareInsite's investment and lower interest expense due to the call
for redemption of the Company's Convertible Subordinated Debentures.
Income taxes -
The Company's effective tax rate was impacted by (i) the results of
operations at CareInsite, which are no longer included in the Company's
consolidated federal income tax return, as well as (ii) a significant portion of
the merger expenses which are not deductible for federal or state income tax
purposes. Excluding the impact of these items, the Company's effective tax rate
for the three and nine months ended March 31, 2000 was 41.8% and 41.3% versus
32.1% and 37.6% for the comparable prior year periods.
Liquidity and Capital Resources
As of March 31, 2000, the Company had $90,697,000 of cash and cash
equivalents and $295,436,000 of marketable securities. At March 31, 2000, the
Company's marketable securities consisted primarily of U.S. Treasury Notes and
Federal Agency Notes.
Net cash used in operating activities for the nine months ended March
31, 2000 was $39,994,000, an increase of $48,383,000 from the comparable prior
year period. This increase was primarily related to higher expenditures related
to the development of CareInsite, as well as expenses associated with the merger
with MMHS.
Net cash used in investing activities was $57,907,000 for the nine
months ended March 31, 2000, reflecting the net cash paid for the businesses
acquired, purchases of marketable securities, net of maturities and redemptions
as well as the capital expenditures during the past nine months.
Net cash provided by financing activities was $33,705,000 for the
nine months ended March 31, 2000, primarily due to the proceeds received from
the exercise of stock options and warrants, including the related tax benefit,
as well as the issuance of convertible redeemable preferred stock ("Preferred
Stock") by CareInsite. The funds generated from financing activities are
reinvested in existing businesses and are used to fund capital expenditures.
On January 31, 2000, the Company called for redemption on February
15, 2000, the entire $159,388,000 aggregate principal amount of its outstanding
5% Convertible Subordinated Debentures due 2007 ("Debentures"). As an
alternative to redemption, the outstanding Debentures were convertible into the
Company's common stock at the rate of approximately 16.667 shares of common
stock per $1,000 principal amount of Debentures, with cash to be paid in lieu of
any fractional shares, for Debentures surrendered on or prior to February 14,
2000. $159,114,000 aggregate principal amount of the Debentures were surrendered
to the Company for conversion into 2,651,828 shares of the Company's common
stock. The remaining $274,000 aggregate principal amount of Debentures were
redeemed at a redemption price of $1,053.57 per $1,000 principal amount of
Debentures including accrued interest.
The Company believes that its cash and investments, cash flow from
operations and the income earned on its investments are sufficient to meet the
anticipated working capital requirements of the Company's business.
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Subject to the provisions of the Healtheon/WebMD Agreements, the
Company continues to pursue an acquisition program pursuant to which it seeks to
affect one or more acquisitions or other similar business combinations with
businesses it believes have significant growth potential. Financing for such
acquisitions may come from several sources, including, without limitation, (i)
the Company's cash, cash equivalents and marketable securities and (ii) proceeds
from the incurrence of additional indebtedness or the issuance of common stock,
preferred stock, convertible debt or other securities. There can be no assurance
that the Company's acquisition program will be successful.
As a result of the continuing efforts in developing the Company's
healthcare electronic commerce business, CareInsite has incurred substantial
operating losses since its inception and there can be no assurance that it will
generate significant revenues or profitability in the future. CareInsite intends
to continue its expenditures primarily in the areas of development, sales and
marketing, data center operations and customer support. Accordingly, CareInsite
expects to continue to incur substantial operating losses.
In light of the Company's and CareInsite's pending acquisitions by
Healtheon/WebMD, the Company and CareInsite made certain strategic decisions,
including the decision to delay deployment of certain of its healthcare
e-commerce services. During this period of delay, CareInsite has been conducting
a review of its systems and applications to determine among other things, what
additional efforts are required to fully develop certain services for broad
deployment to customers. As part of this review, CareInsite is also evaluating
(i) the possible integration of its technology with Healtheon/WebMD's technology
if the Company's and CareInsite's pending acquisitions by Healtheon/WebMD are
completed, (ii) the recently acquired technology assets of Provider Technology
Group and the possible integration of those assets into CareInsite's overall
technology platform, (iii) the unique requirements of existing customers and
potential customers with whom CareInsite is currently in discussions and (iv)
the limited availability of cost-effective, high-speed Internet connections into
physicians' offices in our target geographic markets, to assess any potential
impact that they may have on its development efforts. As a result of these
factors and risks and uncertainties described herein and in the Company's Form
10-K, the Company and CareInsite believe that the development and deployment of
certain services by CareInsite will take longer and cost more than previously
expected.
The Company and CareInsite currently anticipate that CareInsite may
require additional funding during fiscal 2001 to meet CareInsite's presently
anticipated working capital, capital expenditure and business expansion
requirements, including the requirements of CareInsite's acquisitions. If such
additional funds are required, CareInsite may seek additional equity or debt
financing. There can be no assurance that such financing will be available on
acceptable terms, if at all, or that such financing will not be dilutive to
CareInsite's stockholders.
On February 14, 2000, CareInsite agreed to acquire substantially all
of the assets of Provider Technology Group ("PTG"), the e-commerce network of
Blue Cross Blue Shield of Massachusetts ("BCBSMA"), for $26,500,000 in cash and
651,968 shares of CareInsite's common stock. Pursuant to the asset purchase
agreement, if BCBSMA does not realize at least $22,500,068 in proceeds from the
sale of 325,984 of the common shares issued, CareInsite has agreed to pay BCBSMA
an amount equal to such shortfall in cash. Based on the March 31, 2000 closing
price for CareInsite common stock of $23.375, CareInsite would be obligated to
remit $14,880,192 to BCBSMA pursuant to CareInsite's guarantee of at least
$22,500,068 in proceeds from the sale of 325,984 of the common shares issued to
acquire PTG.
BCBSMA has the right to require CareInsite to purchase from BCBSMA
325,984 shares of CareInsite common stock at $69.022 per common share if a
registration statement for these shares has not been declared effective on or
before November 15, 2000. Additionally, if the registration statement referred
to above is not declared effective by December 29, 2000, BCBSMA has the right to
require CareInsite to purchase up to 651,968 shares of CareInsite common stock
from BCBSMA for a price equal to the average closing price per share of
CareInsite common stock for the ten successive trading days ending December 29,
2000.
On March 16, 2000, CareInsite signed a binding letter of intent with
Medical Mutual of Ohio ("MMO") to acquire MMO's provider connectivity business
for 405,318 shares of CareInsite Common Stock. Under the terms of the binding
letter of intent, if MMO does not realize at least $10,000,000 in proceeds from
the sale of 202,659 common shares issued at closing, CareInsite has agreed to
pay MMO an amount equal to such shortfall in cash.
Under the terms of the strategic alliance and agreement with AOL,
CareInsite is required to make guaranteed payments of $10,000,000 in August 2000
and $10,000,000 in August 2001. If CareInsite's pending merger with
Healtheon/WebMD is completed, AOL will have the right to terminate its strategic
alliance with CareInsite, in which case these guaranteed payments due to AOL
under the agreement shall become immediately payable by CareInsite.
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Year 2000 Update
Many currently installed computer systems and software products are
coded to accept or recognize only two digit entries for the year in the date
code field. This problem is often referred to as the "Year 2000 Problem." These
systems and software products need to accept four digit year entries to
distinguish 21st century dates from 20th century dates. Though the Company did
not experience any Year 2000 problems on January 1, 2000, additional Year 2000
problems may become evident after that date.
The Company believes that the systems of its CareInsite, MMHS, and
Porex businesses are Year 2000 compliant and, to date, those systems have not
experienced any Year 2000 problems. Although each of the Company's businesses
continues to have contingency plans in place for operational problems which may
arise as a result of a Year 2000 problem, we cannot assure you that Year 2000
issues will not potentially pose significant operational problems or have a
material adverse effect on the Company's business, financial condition and
results of operations in the future.
To date, the Company has not incurred any material expenditures in
connection with identifying or evaluating Year 2000 compliance issues. The
Company does not expect its future costs related to Year 2000 to be material.
The Company is not aware of any material Year 2000 problems encountered
by suppliers or customers of the Company's businesses to date but has not yet
obtained confirmations from such suppliers and customers that they did not
experience Year 2000 problems. Accordingly, the Company cannot determine whether
any suppliers have experienced Year 2000 problems that may impact their ability
to supply the Company with equipment and services or any customers have
experienced disruptions to their business. Further, the Company cannot determine
the state of its suppliers' and customers' Year 2000 readiness on a going
forward basis. The Company cannot be assured that the Company's suppliers and
customers will be successful in ensuring that their systems have been or will be
Year 2000 compliant or that their failure to do so will not have an adverse
effect on the Company's business, financial condition and results of operations.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk from potential changes
in interest rates and foreign exchange rates. The Company believes that the
amount of risk as it relates to its investments, debt obligations and changes in
foreign exchange rates is not material to the Company's financial condition or
results of operations. The Company has taken the following steps to mitigate its
risks: the countries in which the Company owns assets and operates its foreign
operations are politically stable; the Company does not invest in derivative
financial instruments; the Company's investments consist primarily of highly
liquid U.S. Treasury Notes and Federal Agency Notes.
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MEDICAL MANAGER CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, the Company is involved in various
claims and legal proceedings. For legal proceedings, please refer to "Item
3-Legal Proceedings" filed in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999.
On February 18, 1999, Merck & Co., Inc. ("Merck") and Merck-Medco
Managed Care, L.L.C. ("Merck-Medco") filed a complaint in the Superior Court of
New Jersey against the Company, CareInsite, Martin J. Wygod, Chairman of the
Company, and Paul C. Suthern, Roger C. Holstein and Charles A. Mele, officers
and/or directors of the Company. Merck and Merck-Medco asserted that the
Company, CareInsite and the individual defendants were in violation of certain
non-competition, non-solicitation and other agreements. The complaint sought to
enjoin the Company, CareInsite, and the individual defendants from conducting
the Company's healthcare e-commerce business and from soliciting Merck-Medco's
customers. A hearing was held on March 22, 1999 on the plaintiffs' application
for a preliminary injunction. On April 15, 1999, the Superior Court denied that
application. In March 2000, the Superior Court ruled in favor of the Company,
CareInsite and Messrs. Wygod, Suthern, Holstein and Mele and entered an order
dismissing with prejudice all of the plaintiffs' claims. The Court's orders
terminate Merck's and Merck-Medco's right to seek any claim for injunctive
relief or damages arising out of the Company's and CareInsite's activities to
deploy its healthcare e-commerce services. The Company's and CareInsite's
counterclaims against Merck and Merck-Medco are still pending.
The Company has recorded $350,000, $2,500,000, $1,450,000, and
$2,500,000 in litigation costs associated with the Merck and Merck-Medco
litigation for the three months ended March 31, 2000 and March 31, 1999 and the
nine months ended March 31, 2000 and March 31, 1999, respectively.
On March 14, 2000, CareInsite was served with a summons in a lawsuit
which was filed on February 17, 2000, against CareInsite, the Company and
certain of their officers and directors, among other parties, in the New Jersey
Superior Court, Chancery Division, in Bergen County. The plaintiff purports to
be a holder of CareInsite common stock. The lawsuit, captioned Ina Levy, et al.
vs. Martin J. Wygod, et al. purports to bring an action on behalf of the
plaintiff and others similarly situated to enjoin the defendants from
consummating the proposed mergers of the Company and CareInsite with
Healtheon/WebMD Corp. (the "Mergers"). The plaintiff alleges that the defendants
have breached their fiduciary duties in that the proposed Mergers favor the
interests of the Company and its shareholders over the interests of CareInsite's
minority shareholders. The plaintiff also alleges that the proposed Mergers
provide the defendants and other shareholders of the Company with a premium
which exceeds the premium provided to CareInsite's minority shareholders. The
lawsuit seeks, among other things, an injunction prohibiting the proposed
Mergers unless certain mechanisms are implemented by CareInsite, as well as
plaintiff's costs and disbursements. The Company and CareInsite believe that
this lawsuit is without merit and intend to vigorously defend against it.
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<PAGE>
Item 2. Changes in Securities and Use of Proceeds
During the nine months ended March 31, 2000 the Company issued a total
of 2,630,635 shares of common stock, par value $.01 per share ("Common Stock")
in connection with the acquisition of 32 companies. The Common Stock was issued
pursuant to the exemption from registration set forth in Section 4(2) of the
Securities Act of 1933, as amended. The details of each such issuance are as
follows:
On July 20, 1999, the Company issued 44,408 shares of Common Stock to
the shareholders of Hyperion Business Systems ("Hyperion") in consideration for
the acquisition of substantially all of the assets of Hyperion by the Company.
On August 27, 1999, the Company issued 85,456 shares of Common Stock to
the former shareholders of LaPook Lear Systems, Inc. ("LLS") in consideration
for the acquisition of all of the capital stock of LLS by the Company.
On September 22, 1999, the Company issued 5,337 shares of Common Stock
to the shareholders of Computer Business Solutions, Inc. ("CBS") in
consideration for the acquisition of substantially all of the assets of CBS by
the Company.
On September 23, 1999, the Company issued 8,247 shares of Common Stock,
together with $1,475,000 in cash, to the former shareholder of Turnkey Business
Systems, Inc. ("TBS") in consideration for the acquisition of all of the capital
stock of TBS by the Company.
On September 24, 1999, the Company issued 7,597 shares of Common Stock
to the shareholders of Modern Business Machines, Inc. ("MBM") in consideration
for the acquisition of substantially all of the assets of MBM by the Company.
On September 24, 1999, the Company issued 12,136 shares of Common
Stock, together with $700,000 in cash, to the shareholder of Intellex Medical
Management Systems, Inc. ("Intellex") in consideration for the acquisition of
substantially all of the assets of Intellex by the Company.
On October 12, 1999, the Company issued 6,861 shares of Common Stock,
together with $325,000 in cash, to the shareholders of Health-Net Services of WA
& AK, Inc. ("Healthnet") in consideration for the acquisition of substantially
all of the assets of Healthnet by the Company.
On December 13, 1999, the Company issued 27,174 shares of Common Stock
to the shareholders of Clinical Management Solutions, Inc. ("CMS") in
consideration for the acquisition of substantially all of the assets of CMS by
the Company.
On December 16, 1999, the Company issued 7,011 shares of Common Stock,
together with $500,000 in cash, to the shareholders of Micro Edge, Inc. ("Micro
Edge") in consideration for the acquisition of substantially all of the assets
of Micro Edge by the Company.
On December 22, 1999, the Company issued 30,024 shares of Common Stock
to the shareholders of Resource America, Inc. ("RA") in consideration for the
acquisition of substantially all of the assets of RA by the Company.
On December 22, 1999, the Company issued 32,420 shares of Common Stock
to the shareholders of Micro Sense, Incorporated ("Micro Sense") in
consideration for the acquisition of substantially all of the assets of Micro
Sense by the Company.
On December 22, 1999, the Company issued 19,048 shares of Common Stock
to the shareholders of Service Dimensions, Inc. ("SD") in consideration for the
acquisition of substantially all of the assets of SD by the Company.
On December 23, 1999, the Company issued 5,175 shares of Common Stock
to Paul J. Walling d/b/a PSI Computer Systems ("PSI") in consideration for the
acquisition of substantially all of the assets of PSI by the Company.
On December 23, 1999, the Company issued 11,645 shares of Common Stock
to the shareholder of Terry Kidd, Inc. ("TKI") in consideration for the
acquisition of substantially all of the assets of TKI by the Company.
On January 21, 2000, the Company issued 11,251 shares of Common Stock
to the shareholders of Direct 1 Medical, Inc. ("Direct 1") in consideration for
the acquisition of substantially all of the assets of Direct 1 by the Company.
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<PAGE>
On January 21, 2000, the Company issued 68,700 shares of Common Stock
to the shareholders of Mednetrix.com, Inc. ("Med.com") in consideration for the
acquisition of substantially all of the assets of Med.com by the Company.
On February 25, 2000, the Company issued 58,462 shares of Common Stock
to the shareholders of Versyss- Midsouth Business Systems, Inc. ("VMBS") in
consideration for the acquisition of substantially all of the assets of VMBS by
the Company.
On March 7, 2000, the Company issued 440,000 shares of Common Stock to
the shareholders of SCINET, Inc. ("SCINET") in consideration for the acquisition
of substantially all of the assets of SCINET by the Company.
On March 13, 2000, the Company issued 11,387 shares of Common Stock to
the shareholder of Aztec Financial, Inc. ("Aztec") in consideration for the
acquisition of substantially all of the assets of Aztec by the Company.
On March 13, 2000, the Company issued 92,911 shares of Common Stock to
the shareholders of Briar Hill Enterprises, Inc. ("BHE") in consideration for
the acquisition of substantially all of the assets of BHE by the Company.
On March 20, 2000, the Company issued 57,657 shares of Common Stock to
the shareholders of HCC Communications, Inc. ("HCC") in consideration for the
acquisition of substantially all of the assets of HCC by the Company.
On March 24, 2000, the Company issued 230,964 shares of Common Stock to
the shareholders of Healthpro Solutions, Incorporated ("HPS") in consideration
for the acquisition of substantially all of the assets of HPS by the Company.
On March 25, 2000, the Company issued 30,356 shares of Common Stock to
the shareholders of Innovative Healthcare Solutions, Inc. ("IHS") in
consideration for the acquisition of substantially all of the assets of IHS by
the Company.
On March 29, 2000, the Company issued 24,979 shares of Common Stock to
the shareholder of Altman Information Systems, Inc. ("AIS") in consideration for
the acquisition of substantially all of the assets of AIS by the Company.
On March 30, 2000, the Company issued 778,867 shares of Common Stock to
the shareholders of Physician Computer Network, Inc. ("PCN") in consideration
for the acquisition of substantially all of the assets of PCN by the Company.
On March 31, 2000, the Company issued 64,103 shares of Common Stock to
the partners of Americlaims, Ltd. ("Ameri") in consideration for the acquisition
of substantially all of the assets of Ameri by the Company.
On March 31, 2000, the Company issued 15,385 shares of Common Stock to
the partners of Ebills, Ltd. ("Ebill") in consideration for the acquisition of
substantially all of the assets of Ebill by the Company.
On March 31, 2000, the Company issued 3,206 shares of Common Stock to
the members of Medcoast Services, LLC ("MCS") in consideration for the
acquisition of substantially all of the assets of MCS by the Company.
On March 31, 2000, the Company issued 107,078 shares of Common Stock to
the shareholders of Medical Office Management Solutions, Inc. ("MOMS") in
consideration for the acquisition of substantially all of the assets of MOMS by
the Company.
On March 31, 2000, the Company issued 75,738 shares of Common Stock to
the shareholders of Medical Software Specialists, Inc. ("MSS") in consideration
for the acquisition of substantially all of the assets of MSS by the Company.
On March 31, 2000, the Company issued 256,411 shares of Common Stock
to the shareholders of MedsAmerica, Inc. ("MA") in consideration for the
acquisition of substantially all of the assets of MA by the Company.
On March 31, 2000, the Company issued 641 shares of Common Stock to the
partners of R.J.R Enterprises, Ltd. ("RJR") in consideration for the acquisition
of substantially all of the assets of RJR by the Company.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of February
13, 2000, between Healtheon/WebMD Corporation and
Medical Manager Corporation (incorporated by
reference to Exhibit 2.1 to the amendment filed on
February 17, 2000 to the Current Report on Form 8-K
filed by the Company on February 14, 2000)
2.2 Agreement and Plan of Merger, dated as of
February 13, 2000, among Healtheon/WebMD
Corporation, Avicenna Systems Corporation and
CareInsite, Inc. (incorporated by reference to
Exhibit 2.2 to the amendment filed on February 17,
2000 to the Current Report on Form 8-K filed by the
Company on February 14, 2000)
27* Financial Data Schedule
* Attached hereto
(b) Reports on Form 8-K
On January 25, 2000, the Company filed a report on Form 8-K restating
its historical consolidated financial statements and data for the years ended
June 30, 1999, 1998 and 1997, in connection with the Company's July 23, 1999
merger with Medical Manager Health Systems, Inc. (formerly Medical Manager
Corporation) accounted for by the pooling of interests method.
On January 31, 2000, the Company filed a report on Form 8-K with a copy
of the press release announcing the call for redemption on February 15, 2000,
the entire aggregate principal amount of its outstanding 5% Convertible
Subordinated Debentures Due 2007.
On February 14, 2000, the Company filed a report on Form 8-K
disclosing that Healtheon/WebMD Corporation entered into an Agreement and Plan
of Merger both with the Company and with Avicenna Systems Corporation ("ASC"), a
wholly-owned subsidiary of the Company, and CareInsite, Inc., a majority-owned
subsidiary of ASC (the "Merger Agreements"). Also on February 14, 2000, the
Company filed an amendment to the Form 8-K previously filed on February 14,
2000, attaching as an exhibit thereto a copy of the joint press release
announcing the Merger Agreements.
On February 14, 2000, the Company filed a report on Form 8-K with a
copy of the press release disclosing that the signing of the Merger Agreements
with Healtheon/WebMD Corporation announced on February 14, 2000, will not affect
the timing of the previously announced call for redemption of the Company's 5%
Convertible Subordinated Debentures due 2007.
On February 17, 2000, the Company filed an amendment to the Form 8-K
filed on February 14, 2000, attaching as exhibits thereto copies of the Merger
Agreements.
On March 23, 2000, the Company filed a report on Form 8-K restating its
historical consolidated financial statements and data for the years ended June
30, 1999, 1998 and 1997, in connection with the Company's acquisitions of the
following companies during the three months ended December 31, 1999, which have
been accounted for by the pooling of interests method: Clinical Management
Solutions, Inc., MicroSense, Inc., Resource America, Inc., Service Dimensions,
Inc., Terry Kidd, Inc., d/b/a TKI Computer Service and PSI Computer Systems.
On March 29, 2000, the Company filed a report on Form 8-K
disclosing that a holder of CareInsite, Inc. ("CareInsite") common stock filed a
lawsuit on February 17, 2000 alleging that the Company, CareInsite, and certain
of their officers and directors have breached their fiduciary duty to the
shareholders of CareInsite based upon the terms of the proposed merger with
Healtheon/WebMD, ASC, the Company and CareInsite.
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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.
MEDICAL MANAGER CORPORATION
/s/ James R. Love
--------------------------------------------
James R. Love
Executive Vice President - Finance and
Administration and Chief Financial Officer
/s/ Kirk G. Layman
--------------------------------------------
Kirk G. Layman
Senior Vice President - Finance
and Chief Accounting Officer
Dated: May 15, 2000
<PAGE>
EXHIBIT INDEX
Number Description
------ -----------
2.1 Agreement and Plan of Merger, dated as of
February 13, 2000, between Healtheon/WebMD
Corporation and Medical Manager Corporation
(incorporated by reference to Exhibit 2.1 to
the amendment filed on February 17,2000 to the
Current Report on From 8-K filed on February
14, 2000 by The Company)
2.2 Agreement and Plan of Merger, dated as of
February 13, 2000, among Healtheon/WebMD,
Avicenna Systems Corporation and CareInsite,
Inc. (incorporated by reference to Exhibit 2.2
to the amendment filed on February 17, 2000 to
the Current Report on Form 8-K filed on
February 14, 2000 by the Company)
27* Financial Data Schedule
* Attached hereto
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidate Balance Sheets and Consolidated Statement of Operations as reported
on the third quarter Form 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000850436
<NAME> Medical Manager Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 90,697
<SECURITIES> 0
<RECEIVABLES> 80,685
<ALLOWANCES> (4,826)
<INVENTORY> 20,041
<CURRENT-ASSETS> 262,549
<PP&E> 129,350
<DEPRECIATION> 55,558
<TOTAL-ASSETS> 1,061,906
<CURRENT-LIABILITIES> 115,495
<BONDS> 0
459
0
<COMMON> 0
<OTHER-SE> 756,155
<TOTAL-LIABILITY-AND-EQUITY> 1,061,906
<SALES> 260,000
<TOTAL-REVENUES> 264,808
<CGS> 133,064
<TOTAL-COSTS> 135,950
<OTHER-EXPENSES> 69,412
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,008
<INCOME-PRETAX> 11,136
<INCOME-TAX> 12,742
<INCOME-CONTINUING> (1,606)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,606)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
