SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, par value $1.00 per share
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer as defined
in Rule 12b-2 of the Exchange Act. Yes [X] No [ ]
The market value of Common Stock, $1.00 par value, held by non-affiliates at
June 30, 2002, was approximately $300 million.
There were 34,141,323 shares of Common Stock, $1.00 par value, outstanding at
February 28, 2003.
Page 2
Index to Form 10-K
Part I
Item 1 - Business Page 3
Item 2 - Properties Page 5
Item 3 - Legal Proceedings Page 5
Item 4 - Submission of Matters to a Vote of Security Holders Page 5
Part II
Item 5 - Market for Registrant's Common Equity and Related
Shareholder Matters Page 5
Item 6 - Selected Financial Data Page 6
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations Page 6
Item 8 - Financial Statements and Supplementary Data Page 7
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure Page 7
Part III
Item 10 - Directors and Executive Officers of the Registrant Page 8
Item 11 - Executive Compensation Page 10
Item 12 - Security Ownership of Certain Beneficial Owners
and Management Page 11
Item 13 - Certain Relationships and Related Transactions Page 11
Item 14 - Disclosure Controls and Procedures Page 12
Item 15 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K Page 12
Signatures Page 12
CFO Certifications Page 13
CEO Certifications Page 14
Page 3
Part I
Item 1 - Business
COMPANY OVERVIEW
Medical Information Technology, Inc. (MEDITECH) was founded in 1969 to develop
and market information system software for the hospital industry. During 2002
combined product and service revenue was $256 million. By the year's end
MEDITECH had more than 2,000 employees, and over 1,700 active hospital customers
throughout the U.S., Canada and the U.K., as well as a backlog of hospitals
waiting implementation.
HOSPITAL SOFTWARE
Initially MEDITECH developed a software product to automate one of the main
hospital departments, the clinical laboratory which performs various diagnostic
tests on blood and urine specimens. Within a few years, this product became
standardized, thereby requiring minimal adaptation to meet the individual needs
of a typical customer. MEDITECH extended the concept and developed additional
software products for the rest of a hospital's clinical departments. Eventually,
it moved into the financial area by developing a hospital billing and accounts
receivable product as well as various general accounting products.
Although the individual products could be operated in a stand alone fashion, a
hospital achieved maximum effectiveness when they were used in an integrated
mode, sharing access to the common clinical and financial records of the
hospital. This concept ultimately led to MEDITECH developing the so-called
hospital information system, a cohesive set of software products designed from
the onset to work in conjunction with the overall operation of the hospital and
to minimize the need for specialized interfaces.
COMPUTER HARDWARE
Software requires extensive computer and communication equipment to function. In
spite of this, MEDITECH continues to be a pure software company, limiting itself
to specifying the aggregate components needed as well as suggesting typical
configurations from certain hardware vendors. The responsibility is left to the
hospital to purchase the requisite hardware and secure a continuing source of
maintenance service for it.
The hardware components traditionally consist of a small set of central medium-
sized computers and a large set of display terminals and printers distributed
throughout the hospital. All of these elements are interconnected by means of a
standard high speed communication network. The computers execute the software
and include large disk subsystems containing the permanent and common clinical
and financial records of the hospital.
Hardware technology evolves rapidly, and the current trend is to replace the
display terminals with desktop and handheld computers, thereby forming a client
server network. In this mode of operation, the central computers become the file
servers while software is executed locally on the client computer which makes
file requests to the servers.
LICENSED SOFTWARE
MEDITECH requires a customer to sign a standard software license agreement prior
to product delivery, implementation and subsequent service of the software. This
agreement specifies a front end product fee and a front end implementation fee
both of which are payable over the implementation process, and a monthly service
fee after the site goes live. In addition to precluding ownership and
restricting transfer, the license mandates the hospital hold MEDITECH harmless
from any liability arising from incorrect operation of the software.
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MEDITECH bases its product fee on the total number of hospital beds a customer
operates at all of its sites, and sets its implementation fee on the total
number of sites. Large hospitals pay more than small hospitals, but incremental
fees continue to diminish. The monthly service fees are always 1% of the product
fees. A typical 250 bed acute care hospital might incur a $500,000 product fee,
$100,000 implementation fee and a $5,000 monthly service fee. An order is booked
and goes into the backlog when a signed software license and 10% of both front
end fees are received.
STAFF ORGANIZATION
MEDITECH is organized into functional units grouped around product development,
sales and marketing, implementation, customer service, accounting and facility
operations. All MEDITECH staff work in five company owned facilities in the
greater Boston area.
From its inception, MEDITECH utilized communication technology which allowed
much of its business activities to be performed by remote access. MEDITECH staff
sitting at their desks may access client hospitals, both personnel and
computers. The need for remote offices is thereby negated. Although most
customer contact is through the phone or e-mail, certain of the sales and
implementation staff travel to customer sites.
PRODUCT DEVELOPMENT
Most of the product development staff is working on the incremental evolution of
the current product line, as well as creating a few more new products each year.
The rest of the staff is developing a set of replacement products utilizing a
new technology. Approximately every ten years, MEDITECH introduces the next
generation of products based on the new technology and gradually updates
existing customers.
SALES AND MARKETING
Most of the direct sales staff, organized into regions, concentrate on new
prospects. In addition, some of the sales staff monitor existing customers to
expose them to MEDITECH's entire product line. Marketing activities and
promotion are low key because hospitals are easily identified, finite in number
and generally send a request for proposal to vendors when they contemplate the
purchase of a hospital information system.
During the sales process, prospects generally visit MEDITECH to talk to product
specialists and to view product demonstrations. Thereafter they are encouraged
to visit various MEDITECH customer sites to observe first hand the software in
actual operation and to discuss issues of concern with hospital personnel.
IMPLEMENTATION PROCESS
To ensure a successful implementation, the staff must properly train a core
group of hospital personnel about the operation of the software and how to use
it in their daily activity. To preclude interruptions from normal hospital
activities, MEDITECH mandates the hospital personnel come to the Boston area for
intensive training sessions.
As training proceeds, the implementation staff will customize certain
dictionaries to fit the specific need of the hospital's environment, provide
interfaces to non-MEDITECH systems and to assist the hospital in converting data
from legacy systems. In addition, the licensed software will be delivered,
installed and tested on the customer's hardware. MEDITECH will utilize remote
access communication technology to minimize or eliminate the need to travel.
Page 5
CUSTOMER SERVICE
Once a hospital goes live, the responsibility of maintaining the customer is
transferred to the service staff. MEDITECH provides 24 hour a day service
coverage to these customers in order to respond to problem calls. In addition,
the staff updates customers with new releases of the software products as they
become available. To ensure the continuing education of the hospital staff,
MEDITECH runs seminars on the use of its products.
HCA-THE HEALTHCARE COMPANY
HCA-The Healthcare Company owns or operates over 300 hospitals in the U.S.,
Canada, and the U.K. and has been MEDITECH's largest customer for some time. All
of their hospitals operate with MEDITECH's clinical systems. They represented
12% of MEDITECH revenues in 2000, 11% in 2001 and 10% in 2002.
ACCESS TO SEC FILINGS
"www.meditech.com" is the Company's website address which provides access to
its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current
reports on Form 8-K, and all amendments thereof just as soon as such reports
are filed with the SEC. The reports so listed link to copies of the reports
stored on Meditech's website.
"http://www.sec.gov/cgi-bin/browse-edgar?CIK=1011452&action=getcompany" may be
used to access all of the Company's filings stored on the SEC's website instead.
In addition the Company will provide paper copies of these filings free of
charge to its shareholders upon request.
ITEM 2 - Properties
As of December 31, 2002 the Company owned five facilities containing about 1.1
million square feet of space, all being well maintained Class A properties in
the greater Boston area. The Company occupies 60% of the space and the remaining
40% is leased to various tenants. The Company has adequate space for its
reasonable needs over the near future.
ITEM 3 - Legal Proceedings
There are no material pending legal proceedings against the Company.
ITEM 4 - Submission of Matters to a Vote of Security Holders
None.
PART II
ITEM 5 - Market for Registrant's Common Equity and Related
Shareholder Matters
No trading market exists for the Company's Common Stock, and accordingly no
high and low bid information or quotations are available with respect to the
Company's Common Stock.
The sale, assignment, transfer, pledge or other disposition of any of the
Company's Common Stock is subject to right of first refusal restrictions.
There no shareholder agreements of any kind with the Company.
In February 2003, the Company sold a total of 263,884 shares of its common
stock to certain employees for an aggregate consideration of $5,805,448.
At February 28, 2003, there were 1,221 shareholders of record of the Company's
Common Stock and 34,141,323 shares outstanding.
The Company has paid quarterly cash dividends continuously since 1980.
Dividends paid per share in the last five years are set forth within the
table below.
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ITEM 6 - Selected Financial Data
For the Five Years Ended December 31, 2002 (in thousands where applicable)
1998 1999 2000 2001 2002
Full Year Operations:
Total revenue $203,813 $225,630 $216,873 $223,831 $256,197
Operating income 79,583 91,553 79,193 81,565 94,907
Net income 53,281 59,956 55,146 56,841 63,871
Average shares 32,405 32,784 33,132 33,460 33,760
Earnings per share $1.64 $1.83 $1.66 $1.70 $1.89
Year End Position:
Total assets $266,600 $288,278 $306,093 $331,284 $354,809
Total liabilities 49,328 41,583 32,315 35,758 36,813
Shareholders' equity 217,272 246,695 273,778 295,526 317,996
Shares outstanding 32,531 32,915 33,255 33,576 33,877
Book value per share $6.68 $7.49 $8.23 $8.80 $9.39
Other Financial Data:
Working capital $59,032 $92,130 $121,950 $145,778 $165,613
Cash flow from operations 59,788 74,158 59,333 66,253 81,967
Depreciation 10,078 7,900 7,987 8,257 8,634
Cash dividends per share $.94 $1.00 $1.16 $1.24 $1.36
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations:
Comparison of Fiscal Years ended December 31, 2001 and 2002:
Total revenue increased 14.5% from $223.8 million in 2001 to $256.2 million in
2002 as a result of increased products and services provided to both existing
and new customers.
Operating expenses increased 13.4% from $142.3 million in 2001 to $161.3 million
in 2002 due primarily to an increase in staff size and an increase in
associated costs. The resultant operating income increased 16.4% from $81.6
million in 2001 to $94.9 million in 2002.
Other income, net of other expense, decreased from $11.2 million in 2001 to
$7.6 million in 2002 due primarily to a $5.8 million write-down of certain
marketable securities to their fair value, as they were deemed to be other than
temporarily impaired during the fourth quarter ended December 31, 2002. The
write-down was partially offset by a $2.3 million increase in rental and
dividend income earnings. The Company's effective tax rate decreased from
39% in 2001 to 38% in 2002 primarily as a result of higher tax credit benefits.
Comparison of Fiscal Years ended December 31, 2000 and 2001:
Total revenue increased 3% from $216.9 million in 2000 to $223.8 million in
2001. Product revenues were down a nominal $1.1 million. Orders for products
increased at an unusually high rate during 1999 as customers expedited their
normal buying decisions to ensure Y2K compliance. Order levels dropped
significantly during 2000 as a result. New orders for products to be delivered
returned to normal, pre-Y2K, levels in 2001. Services provided to customers
increased by $8.4 million and more than offset the decreased product revenues
for the year.
Operating expenses increased 3% from $137.7 million in 2000 to $142.3 million
in 2001 due primarily to an increase in staff size and an increase in
associated costs. The resultant operating income increased 3% from $79.2
million in 2000 to $81.6 million in 2001.
Other income, net of other expense, decreased from $11.5 million in 2000 to
$11.2 million in 2001 due primarily to decreased rental and interest income
earnings. The Company's effective tax rate remained the same at 39% in 2001.
Page 7
Liquidity and Capital Resources:
At December 31, 2002, the Company's cash, cash equivalents and marketable
securities totaled $171 million. The marketable securities consisted primarily
of preferred and common equities which can quickly be converted to cash. Cash
flows from operations were $82 million in fiscal 2002, an increase of $16
million from the prior year. The increase was primarily attributable to the
growth in revenue and other changes in working capital. The primary use in
fiscal 2002 of cash generated by operating activities was the payment of $46
million in dividends, with the majority of the remaining $36 million invested
in marketable securities.
MEDITECH has no long-term debt. Shareholders' equity at December 31, 2002 was
$318 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 operating
requirements.
Critical Accounting Policies:
All of our significant accounting policies are described in the accompanying
notes to the financial statements included in Exhibit 99 of this report. We
believe four of these constitute our most critical policies requiring estimates
and judgements by management. Reference note 1(a) for revenue recognition, note
1(e) for allowance for doubtful accounts, note 2 for marketable securities and
note 8 for income taxes.
ITEM 8 - Financial Statements and Supplementary Data
The audited Financial Statements are appended to this document as Exhibit 99.
OPERATING RESULTS BY QUARTER (Unaudited):
For the Two Years Ended December 31, 2002 (in thousands where applicable)
1st Q 2nd Q 3rd Q 4th Q
Results for 2001:
Total revenue $49,000 $52,676 $56,035 $60,231
Operating income 16,868 19,808 21,334 23,555
Net income 11,645 13,499 15,005 16,692
Earnings per share $.35 $.40 $.45 $.50
Results for 2002:
Total revenue $61,130 $65,103 $64,567 $65,397
Operating income 22,833 24,569 24,126 23,379
Net income 15,725 16,915 16,545 14,686
Earnings per share $.47 $.50 $.49 $.43
Net income for the 4th quarter of 2002 was impacted by a $5.8 million write-down
of certain marketable securities to their fair value.
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Medical Information Technology, Inc. (the Company) had engaged Arthur Andersen
LLP (AA), as the Company's independent certifying accountants since 1971.
AA ceased their auditing practice during the year 2002. The reports of AA with
respect to the Company for fiscal years ended December 31, 2001 and 2000 did not
contain any adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles. During fiscal
years 2001 and 2000 and through October 23, 2002, there were no disagreements
between the Company and AA on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of AA, would have caused AA
to make reference to the subject matter of the disagreements in its report on
the Company's financial statements for such years.
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Pursuant to Item 304(a)(3) of Regulation S-K, AA would normally furnish us with
a letter addressed to the SEC stating whether or not AA agrees with the above
statements. The Company has attempted to obtain such letter. However, given the
timing and circumstances surrounding AA's cessation of their audit practices
out of their Boston office, none has been obtained.
On October 17, 2002, the Company engaged Ernst & Young, LLP as its independent
certifying accountants for the year ending December 31, 2002. The appointment
of Ernst & Young, LLP was approved by the Audit Committee of the Company's
Board of Directors. During fiscal years ended December 31, 2001 and 2000 and
the subsequent interim period commencing January 1, 2002, the Company did not
consult with Ernst & Young, LLP regarding either the application of accounting
principles to a specified transaction, the type of audit opinion that might be
rendered on the Company's financial statements or any matter that was the
subject of a disagreement or reportable event with AA.
PART III
ITEM 10 - Directors and Executive Officers of the Registrant
All Directors are elected each year at the annual meeting of shareholders. All
Officers are elected at the first meeting of the Board following the annual
meeting of shareholders and hold office for one year. The positions held by each
Director and Officer of the Company on February 28, 2003, are shown below. There
are no family relationships among the following persons.
Director or Officer Age Position with the Company
A. Neil Pappalardo 60 Chairman, Chief Executive Officer and Director
Lawrence A. Polimeno 61 Vice Chairman and Director
Roland L. Driscoll 74 Director
Edward B. Roberts 67 Director
Morton E. Ruderman 66 Director
L. P. Dan Valente 72 Director
Howard Messing 50 President and Chief Operating Officer
Barbara A. Manzolillo 50 Treasurer, Chief Financial Officer and Clerk
Edward G. Pisinski 59 Senior Vice President
Christopher Anschuetz 50 Vice President
Robert S. Gale 56 Vice President
Steven B. Koretz 50 Vice President
Stuart N. Lefthes 49 Vice President
Joanne Wood 49 Vice President
The following is a description of the business experience during the past five
years of each Director and Officer.
A. Neil Pappalardo, founder of the Company, is the Chairman and Chief Executive
Officer, and has been a Director since 1969. He is also a Director of Palomar
Medical Technologies, Inc.
Lawrence A. Polimeno has been the Vice Chairman since 2002, was President and
Chief Operating Officer prior to that, has been a Director since 1985, and has
been with the Company since 1969.
Roland L. Driscoll, retired Chief Financial Officer of the Company, has been a
Director since 1985.
Edward B. Roberts, co-founder of the Company, is a Sloan School Professor at the
Massachusetts Institute of Technology, and has been a Director since 1969. He is
also a Director of Advanced Magnetics Inc., Pegasystems Inc. and Sohu.com Inc.
Morton E. Ruderman, co-founder of the Company, is Chief Executive Officer of
CRES Development, a real estate developer, and has been a Director since 1969.
L. P. Dan Valente is Chairman of Palomar Medical Technologies, Inc., and has
been a Director since 1972. He is also a Director of MKS Instruments and
SurgiLight Inc.
Page 9
Howard Messing has been President and Chief Operating Officer since 2002, was
the Executive Vice President prior to that, and has been with the Company
since 1974.
Barbara A. Manzolillo has been the Treasurer, Chief Financial Officer and Clerk
since 1996, was the Treasurer prior to that, and has been with the Company
since 1975.
Edward G. Pisinski has been a Senior Vice President since 1997, was a Vice
President prior to that, and has been with the Company since 1973.
Christopher Anschuetz has been a Vice President since 1995, was a Senior
Manager prior to that, and has been with the Company since 1975.
Robert S. Gale has been a Vice President since 1995, was a Senior Manager prior
to that, and has been with the Company since 1976.
Steven B. Koretz has been a Vice President since 1997, was a Senior Manager
prior to that, and has been with the company since 1982.
Stuart N. Lefthes has been a Vice President since 1997, was a Senior Manager
prior to that, and has been with the company since 1983.
Joanne Wood has been a Vice President since 1995, was a Senior Manager prior to
that, and has been with the Company since 1983.
The address of all Officers and Directors is in care of the Company, MEDITECH
Circle, Westwood, MA 02090.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors oversees the Company's business affairs and monitors the
performance of management, but is not involved in the day-to-day operations. The
Directors meet regularly with the CEO, the COO, the CFO, other officers and
our independent auditors; read reports and other materials; and participate in
Board and committee meetings. The Board currently consists of six (6) members.
The Board held 4 meetings during the fiscal year ended December 31, 2002 and
each of the Directors attended all meetings of the Board of Directors.
The Board of Directors has an Audit Committee, an Executive Compensation
Committee and a Charitable Contribution Committee. During 2002 each committee
member attended all committee meetings. The following is a description of the
committees.
The Audit Committee consists of Roland L. Driscoll and L. P. Dan Valente. Both
members are CPA's and are "independent" as defined by the rules which govern
the NYSE and NASDAQ. This committee meets at least six times a year to review
accounting practices and advise the Company's CFO. In addition, the committee
meets and consults with the Company's outside auditors with respect to the
Company's business operations, industry, financial performance, business and
financial risks, processes and controls, key policies, legal and regulatory
requirements, code of ethical conduct and new or unusual transactions. The
Committee does not have a written charter. The Committee submits its annual
report to the Board of Directors each April.
The Executive Compensation Committee consists of Morton E. Ruderman and Edward
B. Roberts. This committee meets twice a year to set the Chairman and Chief
Executive Officer's annual salary, the growth criteria and amount for his
individual bonus, and a ceiling on his participation in the company's annual
stock purchase program.
The Charitable Contribution Committee consists of Morton E. Ruderman, A. Neil
Pappalardo and Howard Messing. This committee meets at least six times a year
to review the criteria for the year's charitable contribution program, meet and
evaluate each organization under consideration and determine the amount to be
contributed to each organization for the year.
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ITEM 11 - Executive Compensation
The following table sets forth the compensation received by the Company's Chief
Executive Officer and the four most highly compensated other Officers for the
three fiscal years ended December 31, 2000, 2001 and 2002.
Name and Position Year Salary Bonus Deferred
A. Neil Pappalardo 2002 $360,000 $724,251 0
Chairman and Chief 2001 360,000 721,736 0
Executive Officer 2000 360,000 722,475 0
Lawrence A. Polimeno 2002 $240,000 $624,251 $4,847
Vice Chairman 2001 240,000 621,736 4,615
2000 240,000 622,475 5,017
Howard Messing 2002 $240,000 $474,251 $4,847
President and Chief 2001 216,000 371,736 4,615
Operating Officer 2000 216,000 375,475 5,017
Edward G. Pisinski 2002 $204,000 $324,251 $4,847
Senior Vice President 2001 192,000 271,736 4,615
Sales and Marketing 2000 192,000 272,475 5,017
Barbara A. Manzolillo 2002 $204,000 $274,251 $4,847
Treasurer and Chief 2001 180,000 221,736 4,615
Financial Officer 2000 180,000 222,475 5,017
Profit Sharing Plan: The Company maintains a qualified defined contribution
plan for all employees known as the Medical Information Technology, Inc. Profit
Sharing Plan. All employees of the Company who have completed one year of
service participate in the Plan. The Board of Directors sets the annual
contribution which is allocated in proportion to total compensation (capped at
$100,000) of all eligible members for the Plan year. No allocation is allowable
under this Plan to owners of 10% or more of the Company's common stock.
Contributions by members are not permitted. Benefits under the Plan are
considered deferred compensation and become fully vested after five years of
continuous service with the Company. Members who have at least 20 years of
service or who have incurred financial hardship may make in service withdrawals.
Lump sum cash payment is made upon retirement, death, disability or termination
of employment.
Compensation of Directors: The members of the Board of Directors who are not
Officers of the Company currently receive a fee of $7,000 for each quarterly
meeting attended, with such fee being deemed to also cover any incidental
expenses and conference or committee time expended by such directors on behalf
of the Company during the year.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
January 27, 2003
To the Board of Directors of Medical Information Technology, Inc.:
There are no employment agreements in effect for any officer of the Company. In
2002 the Board of Directors set the total amount to be allocated in the General
Bonus Program instituted for the recognition of services rendered by all
officers and employees. Also in 2002, the Board of Directors set the total
amount to be allocated in the Officer Bonus Program instituted for the
recognition of services rendered exclusively by the officers. Finally in 2002,
the Executive Compensation Committee set Mr. Pappalardo's annual salary, the
growth criteria and amount for his individual bonus, and a ceiling on his
participation in the company's annual stock purchase program.
Morton E. Ruderman and Edward B. Roberts
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ITEM 12 - Security Ownership of Certain Beneficial Owners and Management
The following table provides information as of February 28, 2003 with respect to
the shares of common stock beneficially owned by each person known by the
Company to own more than 5% of the Company's outstanding common stock, each
Director of the Company, each Executive Officer named in the Compensation Table
and by all Directors and Officers of the Company as a group. The number of
shares beneficially owned is determined according to rules of the Securities and
Exchange Commission. Under such rules, a person's beneficial ownership includes
any shares as to which such person has sole or shared voting power or investment
power.
Number of Shares Percentage
Name of Shareholder, of Common Stock of Shares of
Director or Officer Beneficially Owned Common Stock
A. Neil Pappalardo* 8,900,000 26.07%
Morton E. Ruderman 4,473,447 13.10%
MEDITECH Profit Sharing Trust 3,800,697 11.13%
Curtis W. Marble 3,500,000 10.25%
Grossman Group** 2,061,144 6.04%
Edward B. Roberts 1,162,154 3.40%
Lawrence A. Polimeno 993,436 2.91%
Roland L. Driscoll 528,000 1.55%
Edward G. Pisinski 297,000 0.87%
Howard Messing 285,000 0.83%
Barbara A. Manzolillo 200,000 0.59%
L. P. Dan Valente 85,000 0.25%
14 Directors and Officers as a Group 17,255,687 50.54%
*Mr. Pappalardo is the sole Trustee of the MEDITECH Profit Sharing Trust and
therefore is entitled to vote its 3,800,697 shares of Company stock as well
as his own 8,900,000 shares of Company stock. Likewise the number of shares
indicated for the 14 Directors and Officers as a Group does not include the
shares of the MEDITECH Profit Sharing Trust.
**Based on a Schedule 13D filed by Jerome Grossman and other individuals on
February 27, 2002.
ITEM 13 - Certain Relationships and Related Transactions
A. Neil Pappalardo, Chairman, Chief Executive Officer and Director of the
Company, purchased for cash 50,000 shares of Company stock from the Company
at $19 per share in February 2002 and 50,000 shares of Company stock at $22
per share in February 2003.
Barbara A. Manzolillo, Treasurer, Chief Financial Officer and Clerk of the
Company, purchased for cash 6,000 shares of Company stock from the Company
at $19 per share in February 2002 and 4,000 shares of Company stock at $22
per share in February 2003.
On December 31, 2002, the Company contributed 80,000 shares of Company stock
to the MEDITECH Profit Sharing Trust.
Philip Polimeno, a son of a Director, is employed as a senior manager of the
Company and received W-2 compensation of $78,198 in 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on a review of the reports given to the
Company, all Section 16(a) filing requirements applicable to its executive
officers, Directors and greater-than-10% shareholders were satisfied in 2002.
Page 12
ITEM 14 - Disclosure Controls and Procedures
Based on their evaluation of the Company's disclosure controls and procedures
as of February 28, 2003 the Chief Executive Officer and Chief Financial Officer
have concluded such controls and procedures are effective.
There were no significant changes in the Company's internal controls or in
other factors which could significantly affect such controls subsequent to the
date of their evaluation.
ITEM 15 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The audited Financial Statements are appended to this document as Exhibit 99.
A Form 8-K indicating a change in auditors was filed on October 28, 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)
February 28, 2003
(Date)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on February 28, 2003.
Barbara A. Manzolillo, Chief Financial Officer and Treasurer
(Signature)
A. Neil Pappalardo, Chief Executive Officer, Chairman and Director
(Signature)
Lawrence A. Polimeno, Vice Chairman and Director
(Signature)
Roland L. Driscoll, Director
(Signature)
Edward B. Roberts, Director
(Signature)
Morton E. Ruderman, Director
(Signature)
L. P. Dan Valente, Director
(Signature)
Page 13
CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Barbara A. Manzolillo, Chief Financial Officer and Treasurer, certify that:
1. I have reviewed this annual report on Form 10-K of Medical Information
Technology, Inc. (the Company) for the period ended December 31, 2002;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officer 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
the registrant, particularly during the period in which this annual 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
annual report (the "Evaluation Date"); and
c) presented in this annual 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 officer 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 officer and I have indicated in this
annual 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.
February 28, 2003
(Date)
Barbara A. Manzolillo, Chief Financial Officer and Treasurer
(Signature)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Barbara A. Manzolillo, Chief Financial Officer and Treasurer, certify this
annual report on Form 10-K of Medical Information Technology, Inc. for the
period ended December 31, 2002, fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the
information contained in this report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
February 28, 2003
(Date)
Barbara A. Manzolillo, Chief Financial Officer and Treasurer
(Signature)
Page 14
CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, A. Neil Pappalardo, Chief Executive Officer and Chairman, certify that:
1. I have reviewed this annual report on Form 10-K of Medical Information
Technology, Inc. (the Company) for the period ended December 31, 2002;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officer 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
the registrant, particularly during the period in which this annual 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
annual report (the "Evaluation Date"); and
c) presented in this annual 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 officer 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 officer and I have indicated in this
annual 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.
February 28, 2003
(Date)
A. Neil Pappalardo, Chief Executive Officer and Chairman
(Signature)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, A. Neil Pappalardo, Chief Executive Officer and Chairman, certify this
annual report on Form 10-K of Medical Information Technology, Inc. for the
period ended December 31, 2002, fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the
information contained in this report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
February 28, 2003
(Date)
A. Neil Pappalardo, Chief Executive Officer and Chairman
(Signature)