<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _______ TO ________
Commission file number 0-7416
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
SMS Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Shared Medical Systems Corporation
51 Valley Stream Parkway
Malvern, Pennsylvania 19355
<PAGE>
SMS RETIREMENT SAVINGS PLAN
---------------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
-------------------------------------------
<TABLE>
<CAPTION>
PAGE
REFERENCE
-----------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS -
DECEMBER 31, 1997 and 1996 2
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997 3
NOTES TO FINANCIAL STATEMENTS 5
SCHEDULE I: ITEM 27(a) - SCHEDULE OF ASSETS HELD
FOR INVESTMENT - DECEMBER 31, 1997 9
SCHEDULE II: ITEM 27(d) SCHEDULE OF REPORTABLE
TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1997 10
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 12
SIGNATURE PAGE 13
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
SMS Retirement Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the SMS Retirement Savings Plan (the "Plan") as of December 31, 1997 and
1996, and the related statement of changes in net assets available for benefits,
for the year ended December 31, 1997. These financial statements and the
schedules referred to below are the responsibility of the Administrative
Committee ("Management"). Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1997 and 1996, and the changes in net assets available for
benefits, for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment as of December 31, 1997 and of reportable transactions for
the year ended December 31, 1997 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The fund information in the statements of net assets
available for benefits and the statement of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for plan benefits and changes in net assets available
for plan benefits of each fund. The supplemental schedules and fund information
have been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, are fairly stated, in all
material respects, in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA
May 29, 1998
1
<PAGE>
<TABLE>
<CAPTION>
SMS RETIREMENT SAVINGS PLAN
---------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
-----------------------------------------------
(amounts in thousands)
DECEMBER 31
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>
RECEIVABLES:
Participant Contributions..................... $ 1,388 $ 1,281
Company Contributions......................... 203 282
Dividends, Interest and Capital Gains......... - 65
Participant Loan Repayments................... 129 102
PARTICIPANTS' LOANS RECEIVABLE.................. 4,696 3,795
INVESTMENTS, AT FAIR VALUE:
SMS Common Stock.............................. 18,568 15,122
Vanguard Wellington Fund...................... 11,769 7,413
Vanguard Windsor Fund......................... 76,851 59,932
Vanguard W.L. Morgan Growth Fund.............. 32,931 23,877
Vanguard Fixed Income Securities Fund......... 18,756 16,889
Vanguard Money Market Fund.................... 10,361 9,722
Vanguard Index Trust.......................... 44,568 29,846
Vanguard Primecap Fund........................ 14,249 5,763
Vanguard International Growth Portfolio....... 4,820 3,364
Vanguard Bond Index Fund...................... 986 535
------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS........ $ 240,275 $ 177,988
============= =============
The accompanying notes are an integral part of these statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SMS RETIREMENT SAVINGS PLAN
---------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------
(amounts in thousands)
COMMON MORGAN
STOCK WELLINGTON WINDSOR GROWTH
FUND FUND FUND FUND
------------ ------------ ------------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest, Dividends, Capital Gain Distributions.... $ 263 $ 979 $ 12,286 $ 4,410
PARTICIPANTS' CONTRIBUTIONS............................. 1,360 1,602 6,016 2,516
COMPANY CONTRIBUTIONS................................... 301 310 1,106 473
PARTICIPANT REDISTRIBUTIONS............................. (2,997) 807 (1,453) (391)
NET REALIZED/UNREALIZED GAINS (LOSSES)
ON INVESTMENTS..................................... 5,155 1,000 1,195 3,047
DISTRIBUTIONS TO PARTICIPANTS........................... (674) (272) (1,862) (885)
PARTICIPANTS' LOANS ISSUED, NET OF
REPAYMENTS......................................... (42) (47) (369) (104)
------------ ------------ ------------------- -----------
NET INCREASE (DECREASE) IN PLAN ASSETS.................. 3,366 4,379 16,919 9,066
NET ASSETS AVAILABLE FOR BENEFITS:
BEGINNING OF YEAR.................................. 15,316 7,541 60,433 24,085
------------ ------------ ------------------- -----------
END OF YEAR........................................ $18,682 $11,920 $ 77,352 $33,151
============ ============ =================== ===========
FIXED MONEY
INCOME MARKET
FUND FUND
------------ ------------
INVESTMENT INCOME:
Interest, Dividends, Capital Gain Distributions.... $ 1,348 $ 547
PARTICIPANTS' CONTRIBUTIONS............................. 1,496 1,111
COMPANY CONTRIBUTIONS................................... 308 147
PARTICIPANT REDISTRIBUTIONS............................. (1,725) (334)
NET REALIZED/UNREALIZED GAINS (LOSSES)
ON INVESTMENTS..................................... 944 -
DISTRIBUTIONS TO PARTICIPANTS........................... (453) (929)
PARTICIPANTS' LOANS ISSUED, NET OF
REPAYMENTS......................................... (58) (4)
------------ ------------
NET INCREASE (DECREASE) IN PLAN ASSETS.................. 1,860 538
NET ASSETS AVAILABLE FOR BENEFITS:
BEGINNING OF YEAR.................................. 17,028 9,829
------------ ------------
END OF YEAR........................................ $18,888 $10,367
============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SMS RETIREMENT SAVINGS PLAN
---------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997(continued)
------------------------------------
(amounts in thousands)
INDEX INTERNATIONAL TOTAL BOND
TRUST PRIMECAP GROWTH MARKET
FUND FUND FUND FUND
------------ ------------ --------------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest, Dividends, Capital Gain Distributions...... $ 912 $ 493 $ 208 $ 61
PARTICIPANTS' CONTRIBUTIONS............................... 3,711 1,754 760 163
COMPANY CONTRIBUTIONS..................................... 665 282 127 30
PARTICIPANT REDISTRIBUTIONS............................... 1,034 4,253 572 234
NET REALIZED/UNREALIZED GAINS (LOSSES)
ON INVESTMENTS....................................... 9,528 1,988 (133) 26
DISTRIBUTIONS TO PARTICIPANTS............................. (1,012) (190) (68) (37)
PARTICIPANTS' LOANS ISSUED, NET OF
REPAYMENTS........................................... (95) (16) 14 (6)
------------ ------------ --------------------- -------------
NET INCREASE (DECREASE) IN PLAN ASSETS.................... 14,743 8,564 1,480 471
NET ASSETS AVAILABLE FOR BENEFITS:
BEGINNING OF YEAR.................................... 30,160 5,865 3,405 531
------------ ------------ --------------------- -------------
END OF YEAR.......................................... $44,903 $14,429 $ 4,885 $ 1,002
============ ============ ==================== ============
PARTICI-
PANT
LOANS TOTAL
------------ ------------
INVESTMENT INCOME:
Interest, Dividends, Capital Gain Distributions...... $ 304 $21,811
PARTICIPANTS' CONTRIBUTIONS............................... - 20,489
COMPANY CONTRIBUTIONS..................................... - 3,749
PARTICIPANT REDISTRIBUTIONS............................... - -
NET REALIZED/UNREALIZED GAINS (LOSSES)
ON INVESTMENTS....................................... - 22,750
DISTRIBUTIONS TO PARTICIPANTS............................. (130) (6,512)
PARTICIPANTS' LOANS ISSUED, NET OF
REPAYMENTS........................................... 727 -
----------- ------------
NET INCREASE (DECREASE) IN PLAN ASSETS.................... 901 62,287
NET ASSETS AVAILABLE FOR BENEFITS:
BEGINNING OF YEAR.................................... 3,795 177,988
----------- ------------
END OF YEAR.......................................... $ 4,696 $240,275
=========== ============
</TABLE>
4
<PAGE>
SMS RETIREMENT SAVINGS PLAN
---------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997 and 1996
---------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
The accompanying financial statements have been prepared on the accrual
basis of accounting.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
changes of net assets available for benefits, and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Shared Medical Systems Corporation (the "Company") has elected to file with
the Securities and Exchange Commission financial statements prepared in
conformance with guidelines issued under the Employee Retirement Income
Security Act of 1974, as amended.
Investments of the Plan are presented in the statements of net assets
available for benefits at fair value.
Plan receivables reported on the statements of net assets available for
benefits have not been allocated on an individual fund basis. Therefore,
the December 31, 1997 fair values reported for each investment fund on the
statements of net assets available for benefits differ from the ending fund
balances reported on the statement of changes in net assets available for
benefits, but the statements agree in aggregate.
(2) DESCRIPTION OF THE PLAN:
------------------------
ELIGIBILITY
-----------
Employees of the Company, as defined in the Plan, are eligible to
participate in the Plan with respect to before-tax contributions ("base
contributions") and employer matching contributions (both as described
below) on the first day of employment, and with respect to employer profit-
sharing contributions (also described below) on the January 1 coincident
with or following the first day of employment. Approximately 5,844
employees were eligible to participate in the Plan as of December 31, 1997.
PARTICIPATION
-------------
Base Contributions - Eligible employees may contribute, through salary
------------------
reductions, up to 15% of compensation, subject to certain limitations under
the Internal Revenue Code (the "Code"). The percentage of base contributions
by a participant is subject to adjustment by the Company at any time to
maintain the Plan's compliance with the anti-discrimination requirements of
the Code.
Employer Matching Contributions - The Company may match, through
-------------------------------
discretionary employer contributions, a portion of a participant's base
contribution in an amount to be determined annually by the Company's Board
of Directors. For the Plan years ended December 31, 1997 and 1996 the
Company contributed $3,749,000 and $3,457,000 respectively, in matching
contributions.
5
<PAGE>
Profit-sharing Contributions - The Company may make profit-sharing
----------------------------
contributions as determined at the discretion of its Board of Directors.
Such contributions will be allocated in accordance with the Plan document.
For the Plan years ended December 31, 1997 and 1996 there were no profit-
sharing contributions.
Vesting - All participants are fully vested in their base contribution
-------
account balances at all times. A participant becomes 20% vested in his
employer matching and employer profit-sharing contributions after three
years of service. An additional 20% vests each year thereafter, with full
vesting after seven years of service. A year of service is defined as a
calendar year in which the participant completes at least 1,000 hours of
service. Forfeitures are used to reduce employer matching or employer
profit-sharing contributions for the year in which the forfeitures occur.
Investment Directions - Participants may elect to have their base, employer
---------------------
matching, and profit-sharing contributions to the Plan invested in the
following funds, provided that each fund selected must receive a proportion
of not less than 10% of a participant's contribution:
Shared Medical Systems Corporation Common Stock Fund - invests in
----------------------------------------------------
Company common stock.
Vanguard Wellington Fund - provides conservative investors with a
------------------------
prudent investment program that ensures a)conservation of principal;
b)reasonable income return; and, c)profits without undue risks.
Vanguard Windsor Fund - seeks long-term growth of capital and income
---------------------
by investing in a portfolio of common stocks. As a secondary
objective, the Fund also seeks a reasonable level of current income.
Vanguard W.L. Morgan Growth Fund - seeks long-term growth of capital
--------------------------------
by investing in a portfolio of common stocks.
Vanguard Fixed Income Securities Fund Long-Term Corporate Bond
--------------------------------------------------------------
Portfolio - provides a high level of current income, consistent with
---------
maintenance of principal and liquidity, by investing in a diversified
portfolio of long-term, investment-grade bonds.
Vanguard Money Market Reserves Prime Portfolio - seeks maximum current
----------------------------------------------
income, preservation of capital, and liquidity by investing in a
portfolio of money market instruments.
Vanguard Index Trust 500 Portfolio - attempts to provide investment
----------------------------------
results that correspond to the price and yield performance of publicly
traded stocks, in the aggregate, as represented by the Standard &
Poor's 500 Composite Stock Price Index.
Vanguard Primecap Fund - seeks long-term growth of capital by
----------------------
investing principally in a portfolio of common stocks.
Vanguard International Growth Portfolio - seeks long-term capital
---------------------------------------
growth by investing in the common stocks of companies based outside of
the United States.
Vanguard Bond Index Fund - Total Bond Market Portfolio - attempts to
------------------------------------------------------
match the total return of the Lehman Brothers Aggregate Bond Index.
6
<PAGE>
In the absence of any written designation of investment fund preference, the
Trustee shall direct that all base, employer matching or employer profit-
sharing contributions received for any participant be invested in the
Vanguard Money Market Reserves Prime Portfolio.
Participants must maintain a minimum of 10% of their account balance in each
selected fund. Participants may reapportion their account balances once
during each quarter ending March 31, June 30, September 30, and December 31.
The following funds individually represent more than 5% of the net assets
available for benefits of the Plan for the years ended December 31, 1997 and
1996:
- Shared Medical Systems Corporation Common Stock Fund
- Vanguard Windsor Fund
- Vanguard W.L. Morgan Growth Fund
- Vanguard Fixed Income Securities Fund Long-Term Corporate Bond
Portfolio
- Vanguard Index Trust 500 Portfolio
- Vanguard Primecap Fund
Participant Loans - A participant may borrow the lesser of $50,000 or one-
-----------------
half of the vested balance of the participant's base contribution account
and employer matching contribution account, with a minimum loan amount of
$1,000. A participant may not have more than one loan outstanding at any
time. The participant may elect repayment terms of one to five years,
except that a loan used to acquire the participant's principal residence may
have a longer term. The interest rate charged for the term of the loan is
one percentage point above the prime rate at the date of inception. The
interest rates on outstanding loans as of December 31, 1997 range from 7.00%
to 12.50%.
Withdrawals - A participant may elect to make withdrawals of supplemental
-----------
contributions (after-tax contributions made to the Plan prior to January 1,
1989) in accordance with the Plan. After withdrawing all amounts credited
to his/her supplemental contribution account, the participant can withdraw
his/her remaining vested account balance in accordance with Plan provisions
for hardship withdrawals.
Distribution of Benefits - Upon termination of service due to death,
------------------------
disability, retirement, or other reasons, a participant shall be entitled to
benefits based on the net vested amounts in the participant's accounts. The
form of payment of these benefits is a lump sum distribution or installment
payments, in accordance with Plan provisions.
Termination of the Plan - Although it has not expressed any intent to do so,
-----------------------
the Company has the right under the Plan to discontinue its contributions at
any time and to terminate the Plan subject to the provisions of ERISA. In
the event of plan termination, affected participants will become fully
vested in their account balances and receive a complete distribution in
accordance with Plan provisions.
Administration of the Plan - The Plan is administered by an administrative
--------------------------
committee, which is appointed by the Board of Directors.
The Vanguard Group of Investment Companies, is the Plan recordkeeper,
trustee and custodian. All costs with respect to services performed for the
Plan by Vanguard were paid by the Company.
7
<PAGE>
<TABLE>
<CAPTION>
ITEM 27 (a) SCHEDULE I
PLAN NO. 007
EIN 23-1704148
--------------
SMS RETIREMENT SAVINGS PLAN
---------------------------
SCHEDULE OF ASSETS HELD FOR INVESTMENT
--------------------------------------
DECEMBER 31, 1997
-----------------
(dollars in thousands)
FAIR
IDENTITY OF ISSUE DESCRIPTION COST VALUE
- ----------------- ----------- ---------- -----------
<S> <C> <C> <C>
Shared Medical Systems SMS Common Stock $8,785 $18,568
Corporation "SMS" (1) 281,328 shares
Wellington Fund (1) Mutual Fund 9,973 11,769
399,630 shares
Windsor Fund (1) Mutual Fund 67,327 76,851
4,525,994 shares
W.L. Morgan Growth Fund (1) Mutual Fund 26,287 32,931
1,877,493 shares
Vanguard Fixed Income Mutual Fund 17,108 18,756
Securities Fund (1) 2,025,473 shares
Vanguard Money Market Fund (1) Money Market Fund 10,361 10,361
Vanguard Index Trust (1) Mutual Fund 27,361 44,568
494,812 shares
Vanguard Primecap Fund (1) Mutual Fund 11,905 14,249
360,100 shares
Vanguard International Growth Portfolio (1) Mutual Fund 4,900 4,820
294,076 shares
Vanguard Bond Index Fund (1) Mutual Fund 965 986
97,767 shares
Participant Loans (1) Loan Fund 4,696 4,696
----------- -----------
$189,668 $238,555
=========== ===========
(1) Denotes party-in-interest
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
ITEM 27 (d) SCHEDULE II
PLAN NO. 007
EIN 23-1704148
--------------
SMS RETIREMENT SAVINGS PLAN
---------------------------
SCHEDULE OF REPORTABLE TRANSACTIONS
-----------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------
(dollars in thousands)
CURRENT
VALUE OF
ASSETS ON
PURCHASE SELLING COST OF TRANSACTION
IDENTITY OF PARTY DESCRIPTION OF TRANSACTION PRICE PRICE ASSETS DATE NET GAIN
- --------------------------- ------------------------------- ------------ ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shared Medical Systems (88) Purchases of 237,043 shares
Corporation of Common Stock (1) $3,520 $3,520 $3,520 -
Shared Medical Systems (177) Sales and Distributions of
Corporation 321,038 shares of Common Stock (1) $5,285 $3,648 $5,285 $1,637
Vanguard Group of (123) Purchases of 152,143 shares
Investment Companies of Wellington Fund (1) $4,396 $4,396 $4,396 -
Vanguard Group of (119) Sales of 35,936 shares of
Investment Companies Wellington Fund (1) $1,038 $867 $1,038 $171
Vanguard Group of (177) Purchases of 1,272,593
Investment Companies shares of Windsor Fund (1) $22,492 $22,492 $22,492 -
Vanguard Group of (173) Sales of 359,622 shares
Investment Companies of Windsor Fund (1) $6,776 $5,249 $6,776 $1,527
Vanguard Group of (137) Purchases of 524,485 shares
Investment Companies of Morgan Growth Fund (1) $8,974 $8,974 $8,974 -
Vanguard Group of (158) Sales of 174,273 shares of
Investment Companies Morgan Growth Fund (1) $2,961 $2,379 $2,961 $582
Vanguard Group of (190) Purchases of 489,329 shares
Investment Companies of Fixed Income Securities Fund (1) $4,318 $4,318 $4,318 -
Vanguard Group of (179) Sales of 384,345 shares of
Investment Companies Fixed Income Securities Fund (1) $3,387 $3,236 $3,387 $151
(1)This is a party-in-interest transaction.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
ITEM 27 (d) SCHEDULE II
PLAN NO. 007
EIN 23-1704148
--------------
SMS RETIREMENT SAVINGS PLAN
---------------------------
SCHEDULE OF REPORTABLE TRANSACTIONS
-----------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997(continued)
------------------------------------
(dollars in thousands)
CURRENT
VALUE OF
ASSETS ON
PURCHASE SELLING COST OF TRANSACTION
IDENTITY OF PARTY DESCRIPTION OF TRANSACTION PRICE PRICE ASSETS DATE NET GAIN
- --------------------------- ------------------------------- ---------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Vanguard Group of (196) Purchases of 5,132,151
Investment Companies shares of Money Market Fund (1) $5,132 $5,132 $5,132 -
Vanguard Group of (168) Sales of 4,493,156 shares
Investment Companies of Money Market Fund (1) $4,493 $4,493 $4,493 -
Vanguard Group of (173) Purchases of 104,491
Investment Companies shares of Index Trust Fund (1) $8,516 $8,516 $8,516 -
Vanguard Group of (160) Sales of 41,583 shares of
Investment Companies Index Trust Fund (1) $3,347 $2,322 $3,347 $1,025
Vanguard Group of (170) Purchases of 194,191
Investment Companies shares of Primecap Fund (1) $7,413 $7,413 $7,413 -
Vanguard Group of (89) Sales of 25,584 shares of
Investment Companies Primecap Fund (1) $912 $737 $912 $175
Vanguard Group of (112) Purchases of 154,450 shares
Investment Companies of International Growth Fund (1) $2,721 $2,721 $2,721 -
Vanguard Group of (101) Sales of 64,085 shares of
Investment Companies International Growth Fund (1) $1,121 $1,055 $1,121 $66
Vanguard Group of (91) Purchases of 108,850 shares
Investment Companies of Bond Index Fund (1) $1,074 $1,074 $1,074 -
Vanguard Group of (52) Sales of 63,671 shares of
Investment Companies Bond Index Fund (1) $631 $626 $631 $5
</TABLE>
10
<PAGE>
(3) FEDERAL INCOME TAXES APPLICABLE TO THE PLAN:
-------------------------------------------
The Internal Revenue Service has determined and informed the Company by a
letter dated June 4, 1997 that the Plan is in compliance with the applicable
sections of the Internal Revenue Code (IRC). The Administrative Committee
and Legal Counsel believe that the plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
(4) SUBSEQUENT EVENT:
----------------
On February 28, 1997, the Company completed a merger with American
Healthware Systems (AHS). Prior to the merger, AHS operated a 401(k) Plan
(AHS Plan). Effective January 1, 1998, the Plan was amended to provide for
the merger of the AHS Plan funds into the Plan and for the participation in
the Plan of eligible employees of AHS. The asset transfer was completed on
March 17, 1998 and was valued at $952,021.
(5) RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
---------------------------------------------------
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
December 31,
1997 1996
---- ----
Net assets available for plan benefits
per the financial statements $240,275,000 $177,988,000
Amounts allocated to withdrawing
participants. (368,000) (285,000)
------------ ------------
Net assets available for benefits
per the Form 5500. $239,907,000 $177,703,000
============ ============
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for the year ended December 31, 1997:
Benefits paid to participants per the financial
statements $6,512,000
Add: Amounts allocated to withdrawing participants
at December 31, 1997 368,000
Less: Amounts allocated to withdrawing participants
at December 31, 1996 (285,000)
----------
Benefits paid to participants per the Form 5500 $6,595,000
==========
Amounts allocated to withdrawing participants are recorded on the Form 5500
for benefit claims that have been processed and approved for payment prior
to December 31 but not yet paid as of that date.
11
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
SMS Retirement Savings Plan:
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated May 29, 1998, on the SMS Retirement Savings Plan
financial statements as of December 31, 1997 included in this Form 11-K, into
Shared Medical Systems Corporation's previously filed Registration Statement on
Form S-8 (File No. 33-34089).
ARTHUR ANDERSEN LLP
Philadelphia, PA
June 26, 1998
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
SMS RETIREMENT SAVINGS PLAN
Date: June 26, 1998 By: /s/ Paul Yakulis
-------------------------------------
Paul Yakulis
Chairman, Administrative Committee
13
