<PAGE>
UNITED STATES
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, 1996
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 19355
Malvern, Pennsylvania (Zip Code)
(Address of principal executive 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
----- -----
On April 30, 1996, there were 23,449,879 shares of Common Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET
----------------------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments................... $ 15,520 $ 23,310
Accounts receivable, net.......................... 179,966 171,320
Prepaid expenses and other current assets......... 27,830 25,975
-------- --------
Total Current Assets............................ 223,316 220,605
Property and Equipment, net........................ 98,253 101,164
Computer Software, net............................. 43,987 42,955
Other Assets....................................... 65,857 70,249
-------- --------
$431,413 $434,973
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Notes payable..................................... $ 37,851 $ 20,920
Current portion of long-term debt and
capital leases................................... 3,346 4,654
Dividends payable................................. 4,917 4,885
Accounts payable.................................. 17,163 28,301
Accrued expenses.................................. 25,617 39,469
Current deferred revenues......................... 21,790 23,557
Accrued and current deferred income taxes......... 11,764 10,913
-------- --------
Total Current Liabilities....................... 122,448 132,699
-------- --------
Deferred Revenues.................................. 10,301 13,209
-------- --------
Long-Term Debt and Capital Leases.................. 16,766 16,960
-------- --------
Deferred Income Taxes.............................. 23,817 23,285
-------- --------
Commitments
Stockholders' Investment:
Preferred stock, par value $.10;
authorized 1,000,000 shares; none issued........ - -
Common stock, par value $.01; authorized
60,000,000 shares; 27,452,290 shares issued in
1996 and 27,288,942 in 1995..................... 274 273
Paid-in capital.................................. 43,755 39,561
Retained earnings................................ 270,895 265,010
Common stock in treasury, at cost, 4,031,078
shares in 1996 and 4,027,815 in 1995............ (55,599) (55,286)
Cumulative translation adjustment................ (1,244) (738)
-------- --------
Total Stockholders' Investment.................. 258,081 248,820
-------- --------
$431,413 $434,973
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
----------------------------------
(Amounts in thousands, except for
per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------------
1996 1995
---------- ----------
(unaudited)
<S> <C> <C>
Revenues:
Service and system fees.................... $159,482 $134,138
Hardware sales............................. 10,870 11,201
-------- --------
170,352 145,339
-------- --------
Cost and Expenses:
Operating and development.................. 75,130 63,291
Marketing and installation................. 52,846 44,050
General and administrative................. 14,591 12,586
Cost of hardware sales..................... 9,444 9,240
Interest................................... 804 450
-------- -------
152,815 129,617
-------- --------
Income Before Income Taxes.................. 17,537 15,722
Provision for Income Taxes.................. 6,734 6,131
-------- --------
Net Income.................................. $ 10,803 $ 9,591
======== ========
Net Income Per Common Share................. $.45 $.41
======== ========
Number of shares used to compute per share
amounts.................................... 24,085 23,565
======== ========
Dividends Declared Per Common Share......... $.21 $.21
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------
1996 1995
-------- --------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income...................................... $ 10,803 $ 9,591
Adjustments to reconcile net income to net
cash used for operating activities -
Depreciation and amortization................ 9,243 8,632
Asset (increase) decrease -
Accounts receivable........................ (8,646) (2,066)
Prepaid expenses and other current assets.. (1,854) (2,471)
Other assets............................... 3,885 650
Liability increase (decrease) -
Accounts payable and accrued expenses...... (24,987) (18,138)
Accrued and current deferred income taxes.. 851 3,336
Deferred revenues.......................... (4,678) (2,478)
Deferred income taxes...................... 532 252
Other........................................ (396) 928
-------- --------
Net cash used for operating activities..... (15,247) (1,764)
-------- --------
Cash Flows from Investing Activities:
Property and equipment additions................ (4,109) (4,075)
Investment in computer software................. (3,493) (2,917)
Dispositions of equipment....................... 205 20
-------- --------
Net cash used for investing activities..... (7,397) (6,972)
-------- --------
Cash Flows from Financing Activities:
Dividends paid.................................. (4,885) (4,818)
Change in treasury stock........................ (313) 19
Payments on long-term obligations............... (1,074) (790)
Increase in notes payable....................... 16,931 6,169
Exercise of stock options....................... 4,195 1,885
-------- --------
Net cash provided by financing activities.. 14,854 2,465
-------- --------
Net Decrease in Cash and Short-Term Investments.. (7,790) (6,271)
Cash and Short-Term Investments, Beginning
of Period....................................... 23,310 21,249
-------- --------
Cash and Short-Term Investments, End of Period... $ 15,520 $ 14,978
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Notes to Consolidated Financial Statements
March 31, 1996 (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, 1996.
Note 2 - At March 31, 1996 and December 31, 1995, the Company's trade
------
accounts receivable were reduced by allowances for doubtful accounts of
$4,595,000 and $4,847,000, respectively.
Note 3 - The major classes of property and equipment at March 31, 1996 and
------
December 31, 1995 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
---------- -----------
(unaudited)
<S> <C> <C>
Land and land improvements...... $ 10,719 $ 10,719
Buildings....................... 60,676 60,597
Equipment....................... 171,629 172,335
---------- -----------
243,024 243,651
Less accumulated depreciation
and amortization.............. 144,771 142,487
---------- -----------
$ 98,253 $101,164
========== ===========
</TABLE>
Note 4 - The accumulated amortization for capitalized internally produced
------
computer software and purchased software at March 31, 1996 and
December 31, 1995 was $47,440,000 and $45,317,000, respectively.
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, 1996. Management is not aware of any potential material
impairments to, or material changes in, the Company's current financial
position.
The most significant requirements for funds now anticipated are for purchases of
equipment and payment of cash dividends. The Company plans to fund
anticipated expenditures primarily through internally generated funds
supplemented from time to time by bank borrowings.
At March 31, 1996, the Company had lines of credit with banks of approximately
$71,400,000, generally at their prime interest rates. At March 31, 1996,
approximately $33,600,000 of these lines of credit were unused.
5
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Material Changes in Results of Operations
- -----------------------------------------
Three Months Ended March 31, 1996 Compared to the Three Months Ended
March 31, 1995.
Revenues
--------
Service and system fees revenues were $159,452,000, an increase of 18.9%
compared to the first quarter of 1995. This increase was primarily due to
higher levels of professional services, system processing fees and system
sales. The higher level of professional services was generally
attributable to system installations 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. Also
affecting this change were revenues associated with the acquisitions of two
businesses in Europe in June and September 1995.
Hardware sales revenues decreased to $10,870,000 for the first quarter of
1996 from $11,201,000 in the first quarter of 1995, primarily due to
differences in the timing and product mix of systems installed.
Cost and Expenses
-----------------
Operating and development expenses decreased to 47.1% of service and system
fees revenues in the first quarter of 1996 from 47.2% for the first quarter
1995. This change was primarily due to efficiencies gained through
decreased costs for computer hardware at the Company's Information Services
Center and a lower rate of growth for personnel costs as compared to the
growth in service and system fees revenues, partially offset by increased
costs for certain customer related expenses.
Marketing and installation expenses increased to 33.1% of service and
system fees revenues in the first quarter of 1996 from 32.8% in the first
quarter of 1995, primarily due to higher levels of installations and
support services provided to the Company's customers.
General and administrative expenses, as a percentage of service and systems
fees revenues, decreased to 9.1% in the first quarter of 1996 from 9.4% in
the first quarter of 1995, primarily due to the Company's continuing
efforts to leverage administrative costs over an increasing revenue base.
Cost of hardware sales increased to 86.9% of hardware sales revenues in the
first quarter of 1996 from 82.5% in the first quarter of 1995. This change
was primarily due to the different product mixes of systems installed in
each quarter.
Interest expense was $804,000 in the quarter ended March 31, 1996 compared
to $450,000 in the same period in 1995. This change was primarily due to a
higher level of outstanding borrowings which was partially attributable to
funds used for the acquisitions of two businesses in Europe in June and
September 1995.
6
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Provision for Income Taxes
--------------------------
Income taxes increased $603,000 in the quarter ended March 31, 1996 when
compared to the same period in 1995. This change was primarily due to an
increase of $1,815,000 in income before income taxes. The Company's
effective tax rate for federal, state and foreign income taxes was 38.4% in
the first quarter of 1996 and 39.0% in the first quarter of 1995. The
change in the effective tax rate was primarily due to a decrease in the
Company's effective state income tax rate.
Net Income
----------
Net income was $10,803,000 in the quarter ended March 31, 1996 compared to
$9,591,000 in the quarter ended March 31, 1995 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 exhibits are included in this report:
No. Description
---- -----------------------------------------------------------
(10) Material Contract
Deferred compensation agreement:
Robert J. McNeill
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the three-month
period ended March 31, 1996.
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 14, 1996 /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
--- ------------------------------------
(10) Material Contract -
Deferred compensation agreement:
Robert J. McNeill
(27) Financial Data Schedule
10
<PAGE>
Exhibit (10)
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made this 29th day of March, 1996, between SHARED
MEDICAL SYSTEMS CORPORATION (the "Company") and ROBERT J. MCNEILL ("Employee"),
who is a member of a select group of management or highly compensated employees
within the meaning of section 201(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
The parties hereto, intending to be legally bound, agree as follows:
1. Grantor Trust; Deferred Compensation Account.
--------------------------------------------
The Company has established an irrevocable grantor trust (the "Trust")
within the meaning of section 671 of the Internal Revenue Code of 1986, as
amended (the "Code"), pursuant to a trust agreement (the "Trust Agreement")
executed on March 29, 1996 with a trustee selected by the Company (the
"Trustee"). Concurrent with the execution of this Agreement, the Company will
contribute to the Trust 10,000 newly-issued shares of Company Common Stock
("Original Shares") by delivery of such Shares to the Trustee.
The Trustee shall, on behalf of the Company, hold a deferred
compensation account for Employee (the "Deferred Compensation Account" or the
"Account"). The Account shall have two sub-accounts, the Stock Account and the
Cash Account. The Trustee shall hold the Original Shares in the Stock Account.
Any stock dividends, stock splits, and other non-cash distributions received on
the Original Shares shall be held in the Stock Account, while any cash dividends
received on the Original Shares shall be held in the Cash Account and shall be
invested in accordance with investment guidelines established by the Company.
The Accounts shall also be reduced for distributions made under the terms of
this Agreement.
Notwithstanding the foregoing, the Trust assets shall be treated as
assets of the Company and shall remain, in the event the Company becomes
Insolvent (as such term is defined in Section 5(a)(i) of the Trust Agreement)
subject to the claims of the Insolvency Creditors (within the meaning of Section
5(a)(ii) of the Trust Agreement) of the Company. Employee shall not have any
property interest in the assets held in the Trust. Employee shall have only the
rights of an unsecured creditor against the Company for any distribution due
under this Agreement, and this Agreement shall constitute a mere promise by the
Company to make such distributions in the future. It is the intention of the
parties
-1-
<PAGE>
that the Agreement be unfunded for Federal income tax purposes and for purposes
of Title I of ERISA.
2. Entitlement to Benefits.
-----------------------
(a) Benefits at Normal Retirement.
-----------------------------
Upon the termination of Employee's employment with the Company
occurring on or after the Employee attains the age of 65 (his "Normal
Retirement Age"), Employee shall be entitled to receive and shall have
distributed to him the balance in his sub-accounts, as provided in Exhibit
A.
(b) Termination Before Normal Retirement Age.
----------------------------------------
If Employee's employment with the Company is terminated for any
reason prior to his Normal Retirement Age, Employee shall not be entitled
to receive any amount in his Account, and no distributions shall be made to
Employee, except under the following circumstances:
(i) Disability.
----------
If Employee's termination of employment results from his
permanent disability prior to his Normal Retirement Age, Employee
shall be entitled to receive and shall have distributed to him the
balance in his sub-accounts, as provided in Exhibit A. Employee shall
be deemed "permanently disabled," only if he can no longer perform the
duties of his position, as determined by the Management and
Compensation Committee of the Company's Board of Directors, in his or
their sole discretion.
(ii) Death.
-----
If Employee's termination of employment results from the
Employee's death prior to his Normal Retirement Age, Employee's
beneficiary designated pursuant to Section 3(b) below shall be
entitled to receive within 30 days of Employee's death and shall have
distributed to him or her the balance in Employee's sub-accounts, in a
lump sum.
-2-
<PAGE>
(iii) Discharge After Age 55.
----------------------
Except as otherwise provided in Section 2(b)(iv) below, if
Employee is discharged by the Company for any reason other than
"cause" after he reaches age 55 but prior to his Normal Retirement
Age, the balance in his sub-accounts shall be reduced to the balance
in his sub-accounts as of his date of termination multiplied by the
Adjustment Fraction. For purposes of this subsection only,
"Adjustment Fraction" shall mean a fraction, the numerator of which
shall be the number of full months the Employee worked for the Company
after attaining age 55, and the denominator of which shall be 120.
The balance in his sub-accounts shall be distributed to the Employee,
as provided in Exhibit A.
As used herein, the term "cause" shall mean Employee's (A)
dishonest or illegal conduct, (B) conduct contrary to the best
interests of the Company, (C) insubordination, incompetence,
misconduct, or neglect of his duties, or (D) willful violation of any
express direction of the senior management or the Board of Directors
of the Company, as determined by the Management and Compensation
Committee of the Company's Board of Directors, in his or their sole
discretion.
(iv) Change in Control.
-----------------
(A) Acceleration of Account.
-----------------------
If, prior to Employee's Normal Retirement Age, (aa)
there is a "Change in Control" of the Company, (bb) the Chief
Executive Officer of the Company immediately prior to the Change
in Control is replaced, and (cc) within 3 months subsequent
thereto Employee is discharged by the Company or Employee resigns
because his place of work is changed such that his commute would
be increased by 50 miles or more or his responsibilities or his
aggregate compensation is reduced, Employee shall be entitled to
receive and shall have distributed to him the balance in his sub-
accounts, as provided in Exhibit A.
-3-
<PAGE>
(B) Definition.
----------
As used herein, the term "Change in Control" shall mean
the acquisition by any person (other than the Company or any
affiliate or associate of the Company), as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), of beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) of 40% or more
of the combined voting power of the Company's then outstanding
securities, or the approval by the stockholders of the Company of
(aa) any merger or consolidation where stockholders of the
Company immediately prior to the merger or consolidation do not
immediately thereafter hold more than 50% of the combined voting
power of the surviving company's then outstanding securities,
(bb) a liquidation or dissolution of the Company, or (cc) a sale
of all or substantially all of the Company's assets.
(c) Forfeiture of Benefits.
----------------------
Notwithstanding the foregoing, if at any time after the date
hereof, Employee, without the express written consent of the Company,
manages, operates, or controls, or becomes an officer, director or employee
of, or consultant to, any business or enterprise determined by the Company
to be engaged in the manufacture, distribution or marketing of any product,
or the provision of any service, substantially similar to or in competition
with any product or service offered by the Company, Employee shall forfeit
all rights to receive any benefits under this Agreement, and no
distributions under this Agreement shall be made to Employee, or continued
to be made, as the case may be.
(d) Acceleration of Payments.
------------------------
Notwithstanding any other provision of this Agreement or the
Trust Agreement, if the Company's independent public accountants determine,
based on a change in the tax or revenue laws of the United States of
America, a published ruling or similar announcement issued by the Internal
Revenue Service, a regulation issued by the Secretary of the Treasury or
his delegate, a final decision by a court of competent jurisdiction
involving the Employee, or a closing agreement
-4-
<PAGE>
involving the Employee made under section 7121 of the Code that is approved
by the Commissioner, that the Employee has recognized or will recognize
income for Federal income tax purposes with respect to benefits that are or
will be payable to the Employee hereunder, before they otherwise would be
paid to the Employee, the Company shall discuss with the Employee
appropriate measures to eliminate a negative economic impact on the
Employee, including if approved by the Company, an immediate distribution
by the Trustee from the Trust to the Employee or Beneficiary of the amount
so taxable.
3. Beneficiaries.
-------------
(a) Death of Employee Entitled to Benefits.
--------------------------------------
If Employee dies after becoming entitled to benefits under
Section 2(a) or 2(b)(i), 2(b)(iii) or 2(b)(iv), the balance then in his
Account, shall, within 30 days of Employee's death, be distributed in a
lump sum to Employee's beneficiary designated pursuant to Section 3(b)
below.
(b) Beneficiary Designation.
-----------------------
Employee shall have the right to designate a beneficiary or
beneficiaries to receive any benefits hereunder which may be distributed
upon Employee's death. Employee shall have the right to change any
beneficiaries so designated, provided, however, that a change of a
beneficiary designation will be effective only if made in a manner
acceptable to the Company. If Employee fails to designate a beneficiary or
if no designated beneficiary survives the Employee, his estate shall be his
beneficiary.
4. Claims and Appeals Procedure.
----------------------------
The Company has provided to the Employee a copy of the Claims and
Appeals procedures which will be followed under this Agreement and which are
incorporated herein by reference.
5. Non-alienation.
--------------
No benefits under this Agreement shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, or encumbrance,
and any attempt to do so shall be void and unenforceable. Such benefits shall
not be subject to or liable for the debts, contracts, liabilities, engagements,
or torts of Employee or his beneficiary or beneficiaries.
-5-
<PAGE>
6. Investment Purposes.
-------------------
Unless the Company has theretofore notified Employee that a
registration statement covering Shares deposited with the Trustee has become
effective under the Securities Act of 1933 and the Company has not thereafter
notified Employee that such registration is no longer effective, it shall be a
condition of this Agreement that any Shares to be distributed to Employee
hereunder shall be acquired for investment and not with a view to distribution
in violation of the Securities Act of 1933 (or of any rules or regulations
promulgated thereunder), and Employee hereby agrees to submit to the Company a
certificate of such investment intent, together with such other evidence
supporting the same as the Company may request. The Company shall be entitled
to restrict the transferability of any Shares distributed hereunder to the
extent necessary to avoid a risk of violations of the Securities Act of 1933 (or
of any rules or regulations promulgated thereunder) or of any state laws or
regulation. Such restrictions may, at the option of the Company, be noted or
set forth in full on the Share certificates.
7. Amendment or Termination of Agreement.
-------------------------------------
This Agreement may be amended or terminated upon the mutual agreement
of Company, by resolution of the Management and Compensation Committee of its
Board of Directors adopted at a duly held meeting of said Committee or by
unanimous written consent of said Committee, and Employee.
8. Authority to Interpret Agreement Vested in Company.
--------------------------------------------------
The Company shall have full power and authority to interpret,
construe, administer and make factual determinations with respect to this
Agreement, and the interpretation and construction thereof, and actions
thereunder, including any valuation of the Deferred Compensation Account, or any
decisions regarding the amount or recipient of any distribution to be made
therefrom, shall be binding and conclusive on all persons for all purposes. The
Company shall not be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Agreement unless
attributable to its own willful misconduct or lack of good faith.
9. No Contract of Employment.
-------------------------
Nothing contained herein shall be construed as conferring upon the
Employee the right to continue in the employ of the Company.
-6-
<PAGE>
10. Right to Withhold.
-----------------
The Company and the Trustee shall have the right to withhold from all
distributions under the Agreement any Federal, state, or local taxes required by
law to be withheld with respect to such distributions.
11. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania to the extent not preempted by
federal law.
12. Agreement Binding.
-----------------
This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns, and Employee and his heirs, executors,
administrators and legal representatives.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
ATTEST: SHARED MEDICAL SYSTEMS CORPORATION
[SEAL]
/s/ Bonnie L. Shuman By: /s/ Terrence W. Kyle
- --------------------- --------------------------
Assistant Secretary Name: Terrence W. Kyle
Title: Vice President of Finance
WITNESS:
/s/ John P. Dougherty /s/ Robert J. McNeill
- ---------------------- ------------------------------
Robert J. McNeill
-7-
<PAGE>
Exhibit A
I. Distribution of Benefits.
------------------------
(a) Timing of Distributions.
-----------------------
Distributions pursuant to Section 2(a) shall be made in 20 annual
installment payments, commencing on a date no later than 30 days after the date
of Employee's termination of employment. Distributions pursuant to Sections
2(b)(i), 2(b)(iii), and 2(b)(iv) shall be made in 20 annual installment
payments, commencing on a date no later than 30 days after the date the Employee
reaches his Normal Retirement Age. Annual installments shall be distributed on
the anniversary of the first such distribution.
(b) Amount of Distributions Under Sections 2(a), 2(b)(i) and 2(b)(iv).
-----------------------------------------------------------------
For each installment payment made pursuant to Sections 2(a), 2(b)(i)
and 2(b)(iv), the Employee shall receive (i) an amount (payable in Shares, or
with respect to non-cash assets other than Company stock, in kind) equal to the
percentage of the Original Shares (and the stock dividends, stock splits and
other non-cash distributions deemed received on the Original Shares) as
indicated for the installment under II below, and (ii) cash in the amount of
$11,100. In the event that the amount of cash to be distributed in an
installment exceeds the current balance in the Cash Account on the date of such
distribution, then the amount of the cash distribution shall be limited to the
balance in the Cash Account on such date. In the event that the balance in the
Cash Account on the date of the last installment is greater than $11,100 then
the entire balance in the Cash Account shall be distributed with such last
installment.
Fractional Shares shall be disregarded in computing the amount of
distributions hereunder. All applicable taxes shall be withheld from
distributions under the Agreement.
(c) Amount of Distributions under Section 2(b)(iii).
-----------------------------------------------
For each installment payment made pursuant to Section 2(b)(iii), the
Employee shall receive (i) an amount (payable in Shares, or with respect to non-
cash assets other than Company stock, in kind) equal to the percentage of the
Original Shares then remaining in the Stock Account, as provided in Section
2(b)(iii) (and the stock dividends, stock splits and other non-cash
distributions received on such remaining Original Shares) indicated
A-i
<PAGE>
for the installment under II below, and (ii) cash in an amount equal to (aa)
$11,100, multiplied by (bb) the Adjustment Fraction set forth in Section
2(b)(iii). In the event that the amount of cash to be distributed in an
installment exceeds the current balance in the Cash Account on the date of such
distribution, then the amount of the cash distribution shall be limited to the
balance in the Cash Account on such date. In the event that the balance in the
Cash Account on the date of the last installment is greater than the amount of
cash determined pursuant to subclause (ii) of the preceding sentence, then the
entire balance in the Cash Account shall be distributed with such last
installment.
Fractional Shares shall be disregarded in computing the amount of
distributions hereunder. All applicable taxes shall be withheld from
distributions under the Agreement.
II. Distribution Schedule.
---------------------
<TABLE>
<CAPTION>
Percentage of Original Shares
(and other assets in Stock Account)
Installment Distributed
<S> <C>
#1 8.8%
#2 8.2%
#3 7.6%
#4 7.0%
#5 6.5%
#6 6.0%
#7 5.6%
#8 5.2%
#9 4.9%
#10 4.7%
#11 4.4%
#12 4.2%
#13 3.9%
#14 3.7%
#15 3.6%
#16 3.4%
#17 3.3%
#18 3.2%
#19 3.0%
#20 2.8%
----
Total: 100%
</TABLE>
A-ii
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 15,520
<SECURITIES> 0
<RECEIVABLES> 184,561
<ALLOWANCES> 4,595
<INVENTORY> 0
<CURRENT-ASSETS> 223,316
<PP&E> 243,024
<DEPRECIATION> 144,771
<TOTAL-ASSETS> 431,413
<CURRENT-LIABILITIES> 122,448
<BONDS> 16,766
0
0
<COMMON> 274
<OTHER-SE> 257,807
<TOTAL-LIABILITY-AND-EQUITY> 431,413
<SALES> 10,870
<TOTAL-REVENUES> 170,352
<CGS> 9,444
<TOTAL-COSTS> 127,976
<OTHER-EXPENSES> 14,591
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 804
<INCOME-PRETAX> 17,537
<INCOME-TAX> 6,734
<INCOME-CONTINUING> 10,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,803
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
