<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to___________
Commission file number 0-7416
SHARED MEDICAL SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1704148
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
51 Valley Stream Parkway
Malvern, Pennsylvania 19355
(Address of principal executive (Zip Code)
offices)
(610) 219-6300
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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On April 30, 1994, there were 22,856,113 shares of Common Stock outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET
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<TABLE>
<CAPTION>
March 31 December 31
1994 1993
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments........... $ 25,719,000 $ 35,826,000
Accounts receivable, net of reserve of
$4,376,000 in 1994 and $4,279,000 in
1993...................................... 114,984,000 113,138,000
Prepaid expenses, inventories, etc........ 13,811,000 16,572,000
------------ ------------
Total Current Assets.................... 154,514,000 165,536,000
------------ ------------
Property and Equipment, at cost:
Land and land improvements................ 10,703,000 10,703,000
Buildings................................. 57,534,000 57,368,000
Equipment................................. 180,465,000 183,257,000
------------ ------------
248,702,000 251,328,000
Less: Accumulated depreciation and
amortization..................... 146,917,000 146,463,000
------------ ------------
101,785,000 104,865,000
------------ ------------
Computer Software, net of accumulated
amortization of $30,225,000 in 1994 and
$28,552,000 in 1993....................... 34,957,000 33,547,000
------------ ------------
Other Assets................................ 38,788,000 37,494,000
------------ ------------
$330,044,000 $341,442,000
============ ============
</TABLE>
The accompanying note is an integral part of this statement.
2
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SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET (Continued)
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<TABLE>
<CAPTION>
March 31 December 31
1994 1993
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(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Notes payable........................................................................ $ 7,092,000 $ 5,830,000
Current portion of long-term obligations
under capital leases............................................................... 2,404,000 2,433,000
Dividends payable.................................................................... 4,796,000 4,778,000
Accounts payable..................................................................... 14,668,000 16,509,000
Accrued expenses..................................................................... 20,848,000 32,434,000
Current deferred revenues............................................................ 22,627,000 23,477,000
Accrued and current deferred income taxes............................................ 6,371,000 7,379,000
------------ ------------
Total Current Liabilities.......................................................... 78,806,000 92,840,000
------------ ------------
Deferred Revenues...................................................................... 20,304,000 21,619,000
------------ ------------
Long-Term Obligations Under Capital Leases............................................. 5,771,000 6,395,000
------------ ------------
Deferred Income Taxes.................................................................. 22,325,000 22,382,000
------------ ------------
Stockholders' Investment:
Preferred stock, par value $.10;
authorized 1,000,000 shares; none
issued............................................................................. -- --
Common stock, par value $.01; authorized
60,000,000 shares;
1994 1993
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Shares issued............................................ 26,855,050 26,770,731
Less-
Treasury shares:
Donated.............................................. 1,114,400 1,114,400
Purchased............................................ 2,901,020 2,903,523
Shares
outstanding............................................. 22,839,630 22,752,808 269,000 268,000
Paid-in capital...................................................................... 29,995,000 28,829,000
Retained earnings.................................................................... 232,577,000 228,831,000
Purchased common stock in treasury,
at cost............................................................................ (54,907,000) (54,948,000)
Cumulative translation adjustment.................................................... (5,096,000) (4,774,000)
------------ ------------
Total Stockholders' Investment..................................................... 202,838,000 198,206,000
------------ ------------
$330,044,000 $341,442,000
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</TABLE>
3
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SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
----------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------
1994 1993
------------ ------------
(unaudited)
<S> <C> <C>
Revenues:
Service and system fees......................... $115,414,000 $108,114,000
Hardware sales.................................. 9,756,000 9,106,000
------------ ------------
125,170,000 117,220,000
Cost of Hardware Sales............................ 8,249,000 7,333,000
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Revenues Less Cost of Hardware Sales.............. 116,921,000 109,887,000
------------ ------------
Expenses:
Operating and development....................... 53,164,000 51,006,000
Marketing and installation...................... 38,287,000 35,791,000
General and administrative...................... 11,177,000 10,667,000
Interest........................................ 286,000 264,000
------------ ------------
102,914,000 97,728,000
------------ ------------
Income Before Income Taxes........................ 14,007,000 12,159,000
Provision for Income Taxes........................ 5,463,000 4,620,000
------------ ------------
Net Income........................................ $ 8,544,000 $ 7,539,000
============ ============
Net Income Per Common Share....................... $.37 $.33
============ ============
Number of shares used to compute per share
amounts......................................... 23,225,000 23,031,000
============ ============
Dividends Declared Per Common Share............... $.21 $.21
============ ============
</TABLE>
The accompanying note is an integral part of this statement.
4
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SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------
1994 1993
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(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................. $ 8,544,000 $ 7,539,000
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization............... 7,458,000 7,335,000
Asset (increase) decrease -
Accounts receivable........................ (1,846,000) (566,000)
Prepaid expenses, inventories, etc......... 2,761,000 (3,628,000)
Other assets............................... (1,413,000) (1,537,000)
Liability increase (decrease) -
Accounts payable and accrued expenses...... (13,427,000) (3,053,000)
Deferred revenues.......................... (2,165,000) 1,080,000
Accrued and deferred income taxes.......... (1,065,000) 2,544,000
Other....................................... (323,000) (651,000)
------------ ------------
Net cash (used) provided by operating
activities............................... (1,476,000) 9,063,000
------------ ------------
Cash Flows from Investing Activities:
Property and equipment additions............ (2,747,000) (9,482,000)
Investment in computer software............. (3,137,000) (2,873,000)
Dispositions of equipment................... 214,000 139,000
Partnership investment and related loan..... - (8,200,000)
------------ ------------
Net cash used for investing activities..... (5,670,000) (20,416,000)
------------ ------------
Cash Flows from Financing Activities:
Dividends paid.............................. (4,778,000) (4,739,000)
Change in treasury stock.................... 41,000 58,000
Payments on long-term obligations under
capital leases............................. (653,000) (412,000)
Increase (decrease) in notes payable........ 1,262,000 (6,000)
Exercise of stock options................... 1,167,000 243,000
------------ ------------
Net cash used for financing activities..... (2,961,000) (4,856,000)
------------ ------------
Net Decrease in Cash and Short-Term
Investments.................................. (10,107,000) (16,209,000)
Cash and Short Term Investments, Beginning
of Period.................................... 35,826,000 30,854,000
------------ ------------
Cash and Short-Term Investments, End
of Period.................................... $ 25,719,000 $ 14,645,000
============ ============
</TABLE>
The accompanying note is an integral part of this statement.
5
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SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Note to Consolidated Financial Statements
March 31, 1994 (unaudited) -
Note 1 - The information furnished in this Form 10-Q reflects all normal and
------
recurring adjustments which are, in the opinion of management, necessary for a
fair presentation of the financial statements as of March 31, 1994.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Material Changes in Financial Condition
- ---------------------------------------
The Company's financial condition has remained strong throughout the three
months ended March 31, 1994. Management is not aware of any potential material
impairments to the Company's current financial position nor is it aware of any
material changes.
The most significant requirements for funds now anticipated are for purchases of
equipment and payment of cash dividends. The Company plans to fund these
expenditures primarily through internally generated funds.
At March 31, 1994, the Company had lines of credit with banks totaling
$50,684,000, primarily at their prime interest rates. At March 31, 1994,
$43,592,000 of these lines of credit remained unused.
Material Changes in Results of Operations
- -----------------------------------------
Three Months Ended March 31, 1994 Compared to the Three Months Ended
March 31, 1993.
Revenues
--------
Service and system fees revenues increased by $7,300,000 (6.8%) in the
first quarter of 1994 compared to the first quarter of 1993. Contributing
to this increase were higher levels of system processing fees and
professional services support fees.
Hardware sales revenues increased to $9,756,000 for the first quarter of
1994 from $9,106,000 in the first quarter of 1993 due primarily to changes
in the timing and product mix of systems installed.
Cost of Hardware Sales
----------------------
Cost of hardware sales increased by $916,000 in the quarter ended March 31,
1994 compared to the same period in 1993. This increase was primarily due
to the increase in hardware sales revenues. Additionally, cost of hardware
sales fluctuated due to changes in the timing and product mix of systems
installed.
6
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SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Expenses
--------
Operating and development expenses increased by $2,158,000 (4.2%) in the
quarter ended March 31, 1994 compared to the same period in 1993. This
increase was primarily due to increased personnel and related costs to
support the higher levels of professional services provided by the Company.
These increases were partially offset by efficiencies gained through
decreased costs for computer hardware at the Company's Information Systems
Center.
Marketing and installation expenses increased by $2,496,000 (7.0%) in the
quarter ended March 31, 1994 compared to the same period in 1993 primarily
due to increased costs for personnel and outside consulting fees related to
the higher levels of professional services provided by the Company.
General and administrative expenses increased by $510,000 (4.8%) in the
quarter ended March 31, 1994 compared to the same period in 1993 primarily
due to increased personnel and related costs to support the business.
Provision for Income Taxes
--------------------------
The provision for income taxes increased in the quarter ended March 31,
1994, by $843,000 (18.2%) when compared to the same period in 1993. This
increase was primarily due to an increase of $1,848,000 (15.2%) in income
before income taxes. Additionally, the Company's effective tax rate was 39%
in the first quarter of 1994 compared to 38% in the first quarter of 1993.
The change in the effective tax rate was primarily due to an increase in the
statutory corporate income tax rate for federal income taxes enacted in the
third quarter of 1993.
Net Income
----------
Net income was $8,544,000 in the quarter ended March 31, 1994 compared to
$7,539,000 in the quarter ended March 31, 1993 for the reasons discussed
above.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) None
(b) No reports on Form 8-K were filed during the three-month
period ended March 31, 1994.
7
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SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
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.
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Registrant
May 13, 1994 /s/ Terrence W. Kyle
- ------------ ----------------------------------
Date Terrence W. Kyle
Vice President of Finance
Principal Financial Officer and
Duly Authorized Officer
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