<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, 1995
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 offices) (Zip Code)
(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
----- -----
On April 30, 1995, there were 23,091,674 shares of Common Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET
----------------------------------
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments................. $ 14,978,000 $ 21,249,000
Accounts receivable, net of reserve of
$5,606,000 in 1995 and $5,317,000 in 1994..... 140,620,000 138,554,000
Prepaid expenses and other current assets....... 20,146,000 17,675,000
------------ ------------
Total Current Assets.......................... 175,744,000 177,478,000
------------ ------------
Property and Equipment, at cost:
Land and land improvements...................... 10,712,000 10,711,000
Buildings....................................... 59,499,000 59,402,000
Equipment....................................... 172,854,000 169,487,000
------------ ------------
243,065,000 239,600,000
Less: Accumulated depreciation and
amortization........................... 140,183,000 134,513,000
------------ ------------
102,882,000 105,087,000
------------ ------------
Computer Software, net of accumulated
amortization of $38,234,000 in 1995 and
$36,158,000 in 1994............................. 39,595,000 38,801,000
------------ ------------
Other Assets...................................... 57,721,000 58,699,000
------------ ------------
$375,942,000 $380,065,000
============ ============
</TABLE>
The accompanying note is an integral part of this statement.
2
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET (Continued)
--------------------------------------
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Notes payable................................................................... $ 18,552,000 $ 12,383,000
Current portion of long-term obligations under capital leases................... 3,120,000 3,100,000
Dividends payable............................................................... 4,847,000 4,818,000
Accounts payable................................................................ 22,731,000 23,633,000
Accrued expenses................................................................ 20,953,000 38,189,000
Current deferred revenues....................................................... 27,091,000 28,133,000
Accrued and current deferred income taxes....................................... 9,927,000 6,591,000
------------ ------------
Total Current Liabilities..................................................... 107,221,000 116,847,000
------------ ------------
Deferred Revenues................................................................. 15,916,000 17,352,000
------------ ------------
Long-Term Obligations Under Capital Leases........................................ 4,164,000 4,974,000
------------ ------------
Deferred Income Taxes............................................................. 21,948,000 21,696,000
------------ ------------
Stockholders' Investment:
Preferred stock, par value $.10; authorized 1,000,000 shares; none issued....... - -
Common stock, par value $.01; authorized 60,000,000 shares;.....................
1995 1994
---------- ----------
Shares issued..................................... 27,103,165 26,964,821
Less-
Treasury shares:
Donated....................................... 1,114,400 1,114,400
Purchased..................................... 2,907,022 2,907,875
Shares outstanding................................ 23,081,743 22,942,546 271,000 270,000
Paid-in capital................................................................. 34,249,000 32,365,000
Retained earnings............................................................... 249,442,000 244,698,000
Purchased common stock in treasury, at cost..................................... (55,097,000) (55,116,000)
Cumulative translation adjustment............................................... (2,172,000) (3,021,000)
------------ ------------
Total Stockholders' Investment................................................ 226,693,000 219,196,000
------------ ------------
$375,942,000 $380,065,000
============ ============
</TABLE>
3
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
----------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------
1995 1994
------------ ------------
(unaudited)
<S> <C> <C>
Revenues:
Service and system fees............................ $134,138,000 $115,414,000
Hardware sales..................................... 11,201,000 9,756,000
------------ ------------
145,339,000 125,170,000
------------ ------------
Cost and Expenses:
Operating and development.......................... 63,291,000 53,164,000
Marketing and installation......................... 44,050,000 38,287,000
General and administrative......................... 12,586,000 11,177,000
Cost of hardware sales............................. 9,240,000 8,249,000
Interest........................................... 450,000 286,000
------------ ------------
129,617,000 111,163,000
------------ ------------
Income Before Income Taxes........................... 15,722,000 14,007,000
Provision for Income Taxes........................... 6,131,000 5,463,000
------------ ------------
Net Income........................................... $ 9,591,000 $ 8,544,000
============ ============
Net Income Per Common Share.......................... $.41 $.37
============ ============
Number of shares used to compute per share
amounts............................................ 23,565,000 23,225,000
============ ============
Dividends Declared Per Common Share.................. $.21 $.21
============ ============
</TABLE>
The accompanying note is an integral part of this statement.
4
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------
1995 1994
------------ ------------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income...................................... $ 9,591,000 $ 8,544,000
Adjustments to reconcile net income to net
cash used for operating activities -
Depreciation and amortization............... 8,632,000 7,458,000
Asset (increase) decrease -
Accounts receivable....................... (2,066,000) (1,846,000)
Prepaid expenses and other current
assets.................................. (2,471,000) 2,761,000
Other assets.............................. 650,000 (1,413,000)
Liability increase (decrease) -
Accounts payable and accrued expenses..... (18,138,000) (13,427,000)
Accrued and current deferred income
taxes................................... 3,336,000 (1,008,000)
Deferred revenues......................... (2,478,000) (2,165,000)
Deferred income taxes..................... 252,000 (57,000)
Other....................................... 928,000 (323,000)
------------ ------------
Net cash used for operating activities......... (1,764,000) (1,476,000)
------------ ------------
Cash Flows from Investing Activities:
Property and equipment additions................ (4,075,000) (2,747,000)
Investment in computer software................. (2,917,000) (3,137,000)
Dispositions of equipment....................... 20,000 214,000
------------ ------------
Net cash used for investing activities......... (6,972,000) (5,670,000)
------------ ------------
Cash Flows from Financing Activities:
Dividends paid.................................. (4,818,000) (4,778,000)
Change in treasury stock........................ 19,000 41,000
Payments on long-term obligations............... (790,000) (653,000)
Increase in notes payable....................... 6,169,000 1,262,000
Exercise of stock options....................... 1,885,000 1,167,000
------------ ------------
Net cash provided by (used for) financing
activities................................... 2,465,000 (2,961,000)
------------ ------------
Net Decrease in Cash and Short-Term
Investments...................................... (6,271,000) (10,107,000)
Cash and Short-Term Investments, Beginning
of Period........................................ 21,249,000 35,826,000
------------ ------------
Cash and Short-Term Investments, End
of Period........................................ $ 14,978,000 $ 25,719,000
============ ============
</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, 1995 (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, 1995.
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, 1995. 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 any
anticipated expenditures primarily through internally generated funds
supplemented by bank borrowings as necessary.
At March 31, 1995, the Company had lines of credit with banks totaling
$52,242,000, primarily at their prime interest rates. At March 31, 1995,
$33,690,000 of these lines of credit remained unused.
Material Changes in Results of Operations
- -----------------------------------------
Three Months Ended March 31, 1995 Compared to the Three Months Ended
March 31, 1994.
Revenues
--------
Service and system fees revenues increased by $18,724,000 (16.2%) in the
first quarter of 1995 compared to the first quarter of 1994. Contributing
to this increase were higher levels of professional services, system
processing fees, and revenues associated with the Company's MedSeries4
division which was acquired from a subsidiary of GTE Corporation on
September 30, 1994. No revenues for the MedSeries4 division are included
in the Company's results from operations for the first quarter of 1994.
The higher level of professional services was generally attributable to
systems installation and support. The increase in system processing fees
was primarily due to the higher level of customer applications processed at
the Company's Information Services Center.
6
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Hardware sales revenues increased to $11,201,000 for the first quarter of
1995 from $9,756,000 in the first quarter of 1994 primarily due to
differences in the timing and product mix of systems installed.
Cost and Expenses
-----------------
Operating and development expenses increased to 47.2% of service and system
fees revenues in the first quarter of 1995 from 46.1% in the first quarter
of 1994. This change was primarily due to increased computer hardware and
associated costs related to higher levels of system processing services
provided to the Company's customers.
Marketing and installation expenses decreased to 32.8% of service and
system fees revenues in the first quarter of 1995 from 33.2% in the first
quarter of 1994. This decrease was primarily due to improved efficiency in
providing installations and support services to the Company's customers.
General and administrative expenses, as a percentage of service and systems
fees revenues, decreased to 9.4% in the first quarter of 1995 from 9.7% in
the first quarter of 1994, primarily due to the Company's ongoing efforts
to control administrative costs.
Cost of hardware sales decreased to 82.5% of hardware sales revenues in the
first quarter of 1995 from 84.6% in the first quarter of 1994. This change
was primarily due to the different product mixes of systems installed in
each quarter.
Interest expense was $450,000 in the quarter ended March 31, 1995 compared
to $286,000 in the same period in 1994. This change was primarily due to a
higher level of outstanding borrowings associated with the Company's short-
term loan obligations.
Provision for Income Taxes
--------------------------
The provision for income taxes increased in the quarter ended
March 31, 1995, by $668,000 (12.2%) when compared to the same period in
1994. This change was due to an increase of $1,715,000 (12.2%) in income
before income taxes. The Company's effective tax rate was 39.0% in the
first quarter of 1995 and 1994.
Net Income
----------
Net income was $9,591,000 in the quarter ended March 31, 1995 compared to
$8,544,000 in the quarter ended March 31, 1994 for the reasons discussed
above.
7
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibit is included in this report:
No. Description
--- --------------------------------------------
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the three-month
period ended March 31, 1995.
8
<PAGE>
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 12, 1995 /S/ Terrence W. Kyle
- ------------ ----------------------------------
Date Terrence W. Kyle
Vice President of Finance
Principal Financial Officer and
Duly Authorized Officer
9
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Exhibit Index
No. Description
- --- -----------------------------------------------------------------------
(27) Financial Data schedule
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 14,978
<SECURITIES> 0
<RECEIVABLES> 146,226
<ALLOWANCES> 5,606
<INVENTORY> 0
<CURRENT-ASSETS> 175,744
<PP&E> 243,065
<DEPRECIATION> 140,183
<TOTAL-ASSETS> 375,942
<CURRENT-LIABILITIES> 107,221
<BONDS> 4,164
<COMMON> 271
0
0
<OTHER-SE> 226,422
<TOTAL-LIABILITY-AND-EQUITY> 375,942
<SALES> 11,201
<TOTAL-REVENUES> 145,339
<CGS> 9,240
<TOTAL-COSTS> 116,581
<OTHER-EXPENSES> 12,586
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 450
<INCOME-PRETAX> 15,722
<INCOME-TAX> 6,131
<INCOME-CONTINUING> 9,591
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,591
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
