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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
Commission file number 0-28092
Medical Information Technology, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Massachusetts
(State or Other Jurisdiction of Incorporation or Organization)
04-2455639
(I.R.S. Employer Identification No.)
Meditech Circle, Westwood, MA
(Address of Principal Executive Offices)
02090
(Zip Code)
781-821-3000
(Registrant's Telephone Number)
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 [ ]
The number of shares of Common Stock, $1.00 par value, outstanding at September
30, 2002 was 33,797,439.
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Index to Form 10-Q
Part I - Financial Information
Item 1 - Financial Statements
Balance Sheet as of December 31, 2001 and September 30, 2002 Page 3
Statement of Income for the Three Months and Nine Months
ended September 30, 2001 and 2002 Page 4
Statement of Shareholders' Equity for the Nine Months
ended September 30, 2001 and 2002 Page 4
Statement of Cash Flow for the Nine Months
ended September 30, 2001 and 2002 Page 5
Notes To Financial Statements (Unaudited) Page 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Operating Results Page 7
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K Page 8
Signatures Page 8
CFO Certification Page 9
CEO Certification Page 10
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Part I - Financial Information
Item 1 - Financial Statements
Balance Sheet (000 omitted)
Dec 31, 2001 Sep 30, 2002
Cash and equivalents 18,161 7,651
Marketable securities 129,027 164,204
Accounts receivable less reserve 29,648 26,493
------- -------
Current assets 176,836 198,348
Computer equipment 9,606 9,262
Furniture and fixtures 31,910 32,525
Buildings 139,670 139,670
Land 26,604 26,604
Accumulated depreciation (57,357) (61,048)
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Net property, plant and equipment 150,433 147,013
Investments 4,015 4,015
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Total assets 331,284 349,376
======= =======
Accounts payable 114 2,519
Accrued taxes 2,488 1,422
Accrued expenses 18,092 20,227
Customer deposits 10,364 10,644
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Current liabilities 31,058 34,812
Deferred income taxes 4,700 5,800
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Total liabilities 35,758 40,612
Common stock, $1.00 par value,
authorized 35,000,000 shares
Issued and outstanding 33,575,556
in 2001 and 33,797,439 in 2002 33,575 33,797
Additional paid-in capital 3,483 7,477
Unrealized gain (loss) on securities 2,140 (3,625)
Retained earnings 256,328 271,115
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Shareholders' equity 295,526 308,764
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Total liabilities and
shareholders' equity 331,284 349,376
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Statement Of Income (000 omitted)
3 Months Ended Sep 30 9 Months Ended Sep 30
2001 2002 2001 2002
Software products 32,202 37,115 87,831 109,752
Software services 25,306 27,452 74,298 81,048
------- ------- ------- -------
Total revenues 57,508 64,567 162,129 190,800
Operating, Development 24,425 27,370 71,344 80,503
Selling, G & A 11,749 13,071 32,775 38,769
------- ------- ------- -------
Total expenses 36,174 40,441 104,119 119,272
------- ------- ------- -------
Operating income 21,334 24,126 58,010 71,528
Other income 4,435 4,894 13,226 14,850
Other expense 1,724 1,746 5,017 4,970
------- ------- ------- -------
Pretax income 24,045 27,274 66,219 81,408
State taxes 1,827 2,499 5,847 7,507
Federal taxes 7,213 8,230 20,223 24,715
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Net income 15,005 16,545 40,149 49,186
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Statement Of Shareholders' Equity (000 omitted)
9 Months Ended Sep 30
2001 2002
Shareholders' equity at beginning 273,778 295,526
Net income 40,149 49,186
Sale of common stock 4,172 4,216
Dividends paid (31,079) (34,398)
Unrealized loss on securities (221) (5,766)
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Shareholders' equity at end 286,799 308,764
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Statement Of Cash Flow (000 omitted)
9 Months Ended Sep 30
2001 2002
Net income 40,149 49,186
Depreciation 6,015 6,650
Gain on marketable securities (73) --
Gain on Investment (17) --
Change in accounts receivable (5,940) 3,155
Change in accounts payable 2,780 2,405
Change in accrued expenses 5,339 1,069
Change in customer deposits 1,121 280
Change in deferred taxes 900 1,100
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Net cash from operations 50,274 63,845
Purchase of property, plant
and equipment (5,062) (3,231)
Purchase of marketable securities (28,764) (40,942)
Sales of marketable securities 9,375 --
Increase in investments (1,490) --
Proceeds from investment liquidation 37 --
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Net cash used in investing (25,904) (44,173)
Proceeds from sale of stock 4,172 4,216
Dividends paid (31,079) (34,398)
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Net cash used in financing (26,907) (30,182)
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Net decrease in cash and equivalents (2,537) (10,510)
Cash and equivalents at beginning 15,949 18,161
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Cash and equivalents at end 13,412 7,651
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Notes To Financial Statements (Unaudited)
1. The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 2001 included in
the Company's Form 10K filed on March 31, 2002. In the opinion of management
the accompanying financial statements include all adjustments necessary to
summarize fairly the Company's financial position and results of operation.
2. The Company follows the provisions of Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings per Share. SFAS 128 requires reporting
both basic and diluted earnings per share (EPS). The Company has no common share
equivalents such as preferred stock, warrents or stock options which would
dilute EPS. Thus EPS is computed by dividing net income by the weighted average
number of common shares outstanding during the year.
Earnings per Share Calculation (in thousands where applicable)
3 Months Ended Sep 30 9 Months Ended Sep 30
2001 2002 2001 2002
Net income 15,005 16,545 40,149 49,186
Average number of shares 33,501 33,797 33,446 33,748
Earnings per share $0.45 $0.49 $1.20 $1.46
The average number of shares outstanding during the period reflects the
issuance of 245,424 shares in February 2001 and 221,883 shares in February 2002.
3. The Company follows the provisions of Statement of Financial Accounting
Standards No. 130 (SFAS 130), Reporting Comprehensive Income. SFAS 130
establishes standards for reporting and display of comprehensive income and
its components in financial statements. Comprehensive income is the total of
net income and all other nonowner changes in equity including items such as
unrealized gains/losses on securities classified as available for sale, foreign
currency translation adjustments and minimum pension liability adjustments.
The Company had an unrealized holding loss on marketable securities totaling
$221 thousand for the nine months ended September 30, 2001 and an unrealized
holding loss of $5,766 thousand for the nine months ended September 30, 2002.
4. The Company follows the provisions of Statement of Financial Accounting
Standards No. 131 (SFAS 131), Disclosure About Segments of an Enterprise and
Related Information. Based on the criteria set forth in SFAS 131 the
Company currently operates in one operating segment, medical software and
services. The Company derives substantially all of its operating revenue from
the sale and support of one group of similar products and services. All of the
Company's assets are located within the United States. During the first nine
months of 2002, 89% of our operating revenue was derived from the United States,
10% from Canada and 1% from other countries.
5. The Company follows the provisions of Emerging Issues Task Force's No. 01-14
(EITF 01-14), which requires reimbursements received for out-of-pocket expenses
to be characterized as revenue with offsetting expenses in the income statement.
Comparative financial statements for prior periods are reclassified to comply
with this announcement. For the first nine months of 2001 $4,417 thousand in
reimbursed expenses are included as Revenue in the accompanying income
statement. For the first nine months of 2002 $4,010 thousand in reimbursed
expenses are included as Revenue in the accompanying income statement.
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Item 2 - Management's Discussion and Analysis of Financial
Condition and Operating Results
Comparison of 3rd Quarter 2001 with 2002 (in thousands where applicable)
3 Months Ended Sep 30 Change
2001 2002
Revenues 57,508 64,567 12.3%
Operating income 21,334 24,126 13.1%
Net income 15,005 16,545 10.3%
Average number of shares 33,501 33,797 0.9%
Earnings per share $0.45 $0.49 8.9%
Cash dividends per common share $0.31 $0.34 9.7%
Revenues increased by $7.1 million or 12.3% due to increased products and
services provided to both new and existing customers.
Expenses increased by $4.3 million or 11.8% due primarily to an increase in
staff size and associated costs. The higher growth rate of revenues over
expenses resulted in a $2.8 million or 13.1% increase in operating income.
Other income, net of other expenses, increased by $437 thousand or 16.1%. As
a result, net income increased by $1.5 million or 10.3%.
Comparison of 1st Nine Months of 2001 with 2002 (in thousands where applicable)
9 Months Ended Sep 30 Change
2001 2002
Revenues 162,129 190,800 17.7%
Operating income 58,010 71,528 23.3%
Net income 40,149 49,186 22.5%
Average number of shares 33,446 33,748 0.9%
Earnings per share $1.20 $1.46 21.4%
Cash dividends per share $0.93 $1.02 9.7%
Revenues increased by $28.7 million or 17.7% due to increased products and
services provided to both new and existing customers.
Expenses increased by $15.2 million or 14.6% due primarily to an increase in
staff size and associated costs. The higher growth rate of revenues over
expenses resulted in a $13.5 million or 23.3% increase in operating income.
Other income, net of other expenses, increased by $1.7 million or 20.4%. As
a result, net income increased by $9.0 million or 22.5%.
Liquidity And Capital Resources (in thousands where applicable)
Dec 31, 2001 Sep 30, 2002
Cash and cash equivalents 18,161 7,651
Total assets 331,284 349,376
Total liabilities 35,758 40,612
Shareholders' equity 295,526 308,764
Outstanding number of shares 33,576 33,797
Book value per share $8.80 $9.14
As presented in the accompanying Statement of Cash Flow, net cash provided by
operating activities was $63.8 million during the first nine months of 2002.
Net cash used in investing activities was $44.2 million. The payment of $34.4
million in dividends to shareholders constituted the most significant use of
cash during the first nine months of 2002. The resultant net decrease in cash
and cash equivalents was $10.5 million for the nine months ended September 30,
2002.
At September 30, 2002, the Company's cash, cash equivalents and marketable
securities totaled $171.9 million. The marketable securities consist primarily
of preferred and common equities which can quickly be converted to cash.
The Company has no long-term debt. Shareholders' equity at September 30, 2000
was $308.8 million. Additions to property, plant and equipment will continue,
including new facilities and computer systems for product development, sales
and marketing, implementation, service and administrative staff. Management
believes existing cash, cash equivalents and marketable securities together
with funds generated from operations will be sufficient to meet future
operating requirements.
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Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter ended September 30,
2002.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Medical Information Technology, Inc.
(Registrant)
November 5, 2002
(Date)
Barbara A. Manzolillo, Chief Financial Officer and Treasurer
(Signature)
A. Neil Pappalardo, Chief Executive Officer and Chairman
(Signature)
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CFO CERTIFICATION
I, Barbara A. Manzolillo, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Medical Information
Technology, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us by others within
those entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 5, 2002
(Date)
Barbara A. Manzolillo, Chief Financial Officer and Treasurer
(Signature)
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CEO CERTIFICATION
I, A. Neil Pappalardo, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Medical Information
Technology, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us by others within
those entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 5, 2002
(Date)
A. Neil Pappalardo, Chief Executive Officer and Chairman
(Signature)