Medical Information Technology 10-Q 31 Oct 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information	9 Months Ended
	Sep. 30, 2016shares
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Entity Registrant Name	Medical Information Technology, Inc.
Entity Central Index Key	1,011,452
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding	37,190,854

Balance Sheets

Balance Sheets - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Cash and equivalents	$ 10,321,198	$ 23,565,899
Marketable securities	345,876,098	328,571,476
Trade receivables, net of reserve	37,608,567	40,487,646
Other receivables and prepaid	18,493,483	14,237,964
Current assets	412,299,346	406,862,985
Computer equipment	14,470,936	14,624,946
Furniture and fixtures	73,445,925	73,728,406
Buildings	251,332,428	251,283,833
Land	43,195,108	42,137,323
Accumulated depreciation	(163,925,498)	(157,393,862)
Fixed assets	218,518,899	224,380,646
Other assets	11,150,528	12,226,146
Deferred taxes	8,587,414	9,009,865
Total assets	650,556,187	652,479,642
Accounts payable	417,915	284,460
Taxes payable	1,917,151	3,920,212
Accrued expenses	30,121,368	39,781,123
Deferred revenue	27,712,873	21,544,141
Current liabilities	60,169,307	65,529,936
Deferred taxes	35,808,266	31,495,712
Tax reserves	17,527,397	17,024,936
Total liabilities	113,504,970	114,050,584
Commin stock value	37,190,854	37,190,854
Additional paid-in capital	122,907,959	122,907,959
Retained income	327,868,239	336,362,911
Unrealized after-tax security gains	49,084,165	41,967,334
Shareholder equity	537,051,217	538,429,058
Total liabilities and shareholder equity	$ 650,556,187	$ 652,479,642

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common stock par value	$ 1	$ 1
Common stock shares authorized	40,000,000	40,000,000
Common stock shares issued	37,190,854	37,190,854
Common stock shares outstanding	37,190,854	37,190,854

Statements of Cash Flow

Statements of Cash Flow - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Statement of Cash Flows [Abstract]
Net income	$ 60,680,316	$ 50,620,450
Depreciation and amortization expense	11,442,177	11,436,185
Pre-tax gain on sale of marketable securities	(16,285,173)	(13,821,395)
Pre-tax gain on sale of fixed assets	0	(29,000)
Change in trade receivables, net of reserve	2,879,079	4,005,997
Change in other receivables and prepaid	(4,255,519)	3,929,224
Change in accounts payable	133,455	646,856
Change in taxes payable	(2,003,061)	(1,194,080)
Change in accrued expenses	(9,659,755)	(8,642,933)
Change in deferred revenue	6,168,732	4,551,941
Change in net deferred taxes	(9,549)	1,798,647
Change in tax reserves	502,461	(3,810,375)
Net cash from operations	49,593,163	49,491,517
Purchases of marketable securities	(37,677,167)	(18,781,845)
Sales of marketable securities	48,519,103	54,443,406
Purchases of fixed assets	(4,736,680)	(10,634,507)
Sales of fixed assets	0	124,800
Change in other assets	231,868	425,457
Net cash from investing	6,337,124	25,577,311
Dividends paid	(69,174,988)	(75,818,342)
Net cash used in financing	(69,174,988)	(75,818,342)
Net change in cash and equivalents	(13,244,701)	(749,514)
Cash and equivalents at beginning	23,565,899	21,089,887
Cash and equivalents at end	$ 10,321,198	$ 20,340,373

Statements of Income and Compre

Statements of Income and Comprehensive Income - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income Statement [Abstract]
Product revenue	$ 27,379,774	$ 37,004,099	$ 98,471,410	$ 106,796,235
Service revenue	83,649,722	82,102,999	251,211,112	242,492,267
Total revenue	111,029,496	119,107,098	349,682,522	349,288,502
Operations, development	74,588,859	75,693,989	226,545,572	225,862,867
Selling, G & A	14,133,813	26,548,910	66,707,163	75,357,078
Operating expense	88,722,672	102,242,899	293,252,735	301,219,945
Operating income	22,306,824	16,864,199	56,429,787	48,068,557
Other income	11,087,829	4,986,286	31,162,068	29,623,971
Other expense	1,574,668	1,747,408	4,549,539	5,498,078
Pretax income	31,819,985	20,103,077	83,042,316	72,194,450
State income tax	(3,710,000)	364,000	(38,000)	2,105,000
Federal income tax	10,070,000	6,148,000	22,400,000	19,469,000
Income tax	6,360,000	6,512,000	22,362,000	21,574,000
Net income	25,459,985	13,591,077	60,680,316	50,620,450
Change in unrealized after-tax security gains	(6,254,993)	(3,911,859)	7,116,831	(21,390,867)
Comprehensive income	$ 19,204,992	$ 9,679,218	$ 67,797,147	$ 29,229,583

Available For Sale Securities

Available For Sale Securities	9 Months Ended
	Sep. 30, 2016
Available For Sale Securities [Abstract]
Available For Sale Securities	Note 2. Available For Sale Securities MEDITECH follows the provisions of ASC 320-10, Investments - Debt and Equity Securities, which requires marketable securities be classified as trading, available-for-sale or held-to-maturity. MEDITECH classifies its marketable securities as available-for-sale and records them at fair value with any unrealized after-tax gains or losses reported as a component of shareholder equity. The fair value was determined based on quoted prices in active markets. ASC 320-10 requires that for each individual security classified as available-for-sale, a company shall determine whether a decline in fair value below the cost basis is temporary in nature. If the decline in fair value is not judged as such, the cost basis of the individual security shall be reduced to fair value and the amount of the write-down shall be reflected in earnings. MEDITECH follows the provisions of ASC 320-10-35 Subsequent Measurement, and evaluates its marketable securities for other-than-temporary impairment using an impairment model consistent with a debt security. The factors considered include the severity and duration of the loss, the intent and ability to hold the securities for an extended period of time until recovery, and whether issuers are current on dividend payments and maintain investment grade ratings. Finally, the effect of fluctuating interest rates, current economic and industry conditions, and the issuers' current financial position are also taken into consideration. MEDITECH follows the provisions of ASC 820-10, Fair Value Measurements and Disclosures, which provides for expanded disclosure and guidelines to determine fair market value of assets and liabilities. ASC 820-10 applies whenever other standards require or permit assets and liabilities to be measured at fair value, but does not expand the use of fair value in any new circumstances. MEDITECH's marketable securities, comprised of common and preferred stock, represent assets measured at fair value on a recurring basis, and are considered Level 1 assets as defined by ASC 820-10. The following table indicates the original cost, unrealized pre-tax gains and losses, and fair market value of MEDITECH's marketable securities using specific identification. The unrealized after-tax gains and losses have been accounted for within comprehensive income. There are no pre-tax losses as of September 30, 2016. Dec 31, 2015 Sep 30, 2016 Original cost $258,625,920 $264,069,157 Unrealized pre-tax gains 70,995,011 81,806,941 Unrealized pre-tax losses (1,049,455) 0 Fair market value $328,571,476 $345,876,098

Comprehensive Income Presentati

Comprehensive Income Presentation	9 Months Ended
	Sep. 30, 2016
Comprehensive Income Presentation [Abstract]
Comprehensive Income Presentation	Note 6. Comprehensive Income Presentation Effective January 1, 2012 MEDITECH adopted the provisions of ASU 2011-05, Presentation of Comprehensive Income, which establishes standards for reporting comprehensive income and its components in financial statements. Comprehensive income is the total of net income and all other non-owner changes in equity including items such as unrealized after-tax gains or losses on marketable securities classified as available for sale, foreign currency translation adjustments and minimum pension liability adjustments. In MEDITECH's case net income plus the change in unrealized after-tax security gains is shown as comprehensive income in the income statement. 3 months 3 months 9 months 9 months Sep 30, 2015 Sep 30, 2016 Sep 30, 2015 Sep 30, 2016 Unrealized after-tax gains arising during the period on securities existing at period end (3,911,859) (2,859,983) (13,327,656) 17,671,021 Unrealized after-tax gains arising before the period on securities sold during the period 0 (3,395,010) (8,063,211) (10,554,190) Change in unrealized after-tax security gains (3,911,859) (6,254,993) (21,390,867) 7,116,831

Earnings Per Share

Earnings Per Share	9 Months Ended
	Sep. 30, 2016
Earnings Per Share [Abstract]
Earnings Per Share	Note 5. Earnings Per Share MEDITECH follows the provisions of ASC 260-10, Earnings per Share, which requires reporting both basic and diluted earnings per share. MEDITECH has no common share equivalents such as preferred stock, warrants or stock options which would dilute earnings per share. Thus, earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the applicable period. In general, the average number of shares reflects the annual issuance of shares sold to staff members in February pursuant to the 2004 Stock Purchase Plan and contributed to the MEDITECH Profit Sharing Trust in December. 3 months 3 months 9 months 9 months Sep 30, 2015 Sep 30, 2016 Sep 30, 2015 Sep 30, 2016 Net income $13,591,077 $25,459,985 $50,620,450 $60,680,316 Average number of shares 37,165,854 37,190,854 37,165,854 37,190,854 Earnings per share $0.37 $0.68 $1.36 $1.63

Equity Method Investments

Equity Method Investments	9 Months Ended
	Sep. 30, 2016
Equity Method Investments [Abstract]
Equity Method Investments	Note 3. Equity Method Investments MEDITECH follows the provisions of ASC 323-10, Investments - Equity Method and Joint Ventures, and as such, accounts for the equity investment in Meditech South Africa in accordance with the cost method. Meditech South Africa licenses MEDITECH's software technology and re-licenses it to its respective customers. Meditech South Africa serves a market niche which is part of the overall medical market but is outside of the health care market which MEDITECH serves. MEDITECH holds a fully collateralized mortgage note for a loan to Meditech South Africa to purchase land and a building used as its corporate headquarters. MEDITECH believes the fair value of this investment and loan balance approximates its September 30, 2016 carrying value. During the 2nd quarter 2007 MEDITECH acquired Patient Care Technologies, Inc. (PtCT), a company engaged in the development, manufacture, licensing and support of computer software products for the home health care market. MEDITECH accounted for this acquisition under the purchase method of accounting in accordance with ASC 805-10, Business Combinations. PtCT merged with and into MEDITECH effective December 31, 2009. During the 1st quarter 2011 MEDITECH acquired LSS Data Systems, Inc. (LSS), a company engaged in the development, manufacture, licensing and support of ambulatory information system software for physician practices. MEDITECH accounted for this acquisition under the purchase method of accounting in accordance with ASC 805-10, Business Combinations. LSS merged with and into MEDITECH effective December 31, 2013. MEDITECH follows the provisions of ASC 350-20-35 Intangibles and Goodwill Impairment Evaluation - Qualitative Testing. MEDITECH annually assesses qualitative factors of its goodwill and intangible assets for impairment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The evaluation assesses all relevant economic, industry, regulatory, and legal facts and circumstances as well as overall performance. If, after assessing the totality of such facts and circumstances, MEDITECH determines that it is more likely than not that the fair value of a reporting unit is not less than its carrying amount, then no further goodwill impairment testing is necessary.

Income Tax Accounting

Income Tax Accounting	9 Months Ended
	Sep. 30, 2016
Income Tax Accounting [Abstract]
Income Tax Accounting	Note 4. Income Tax Accounting MEDITECH follows the provisions of ASC 740-10, Accounting for Income Taxes. Deferred taxes relate to the earlier recognition of certain revenue and the later recognition of certain expenses for tax purposes. They also relate to the increase in fair market value over the cost basis of marketable securities. Tax reserves relate to the uncertainty of state nexus. Key judgments are reviewed annually and adjusted to reflect current assessments. The years 2013 through 2015 are subject to examination by the IRS, and various years are subject to examination by state tax authorities. The research tax credit was not utilized during the first 3 quarters of 2015 in determining the federal income tax. Congress permanently restored the research tax credit in the 4th quarter 2015 and MEDITECH has reflected the tax credit in the federal income tax provision thereafter.

Recent Accounting Pronouncement

Recent Accounting Pronouncement	9 Months Ended
	Sep. 30, 2016
Recent Accounting Pronouncement [Abstract]
Recent Accounting Pronouncement	Note 8. Recent Accounting Pronouncement Effective January 1, 2016 MEDITECH adopted ASU 2015-17, Income Taxes, Balance Sheet, Classification of Deferred Taxes. This update provides for a simplified presentation of deferred income tax assets and liabilities to be now classified as noncurrent and adopted retrospectively.

Segment Reporting

Segment Reporting	9 Months Ended
	Sep. 30, 2016
Segment Reporting [Abstract]
Segment Reporting	Note 7. Segment Reporting MEDITECH follows the provisions of ASC 280-10, Segment Reporting. Based on the criteria set forth in ASC 280-10, MEDITECH currently operates in one operating segment, medical software and services. MEDITECH derives most of its operating revenue from the sale and support of one group of similar products and services. All of MEDITECH's assets are located within the United States. The following table indicates the operating revenue percentage based on location of customer. 3 months 3 months 9 months 9 months Sep 30, 2015 Sep 30, 2016 Sep 30, 2015 Sep 30, 2016 United States 86% 88% 87% 88% Canada 10% 10% 11% 10% All others 4% 2% 2% 2%

Significant Accounting Policies

Significant Accounting Policies	9 Months Ended
	Sep. 30, 2016
Significant Accounting Policies (Policies) [Abstract]
Significant Accounting Policies	Note 1. Significant Accounting Policies 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 note 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, 2015 included in MEDITECH's Form 10-K filed on January 29, 2016. The unaudited financial statements presented herein have not been audited by our Independent Registered Public Accounting Firm in accordance with the standards of the Public Company Accounting Oversight Board (United States), but in the opinion of management such financial statements include all normal recurring adjustments necessary to present fairly MEDITECH's financial position, operating results and cash flow.

Significant Accounting Polici14

Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2016
Significant Accounting Policies (Policies) [Abstract]
Significant Accounting Polices	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 note 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, 2015 included in MEDITECH's Form 10-K filed on January 29, 2016. The unaudited financial statements presented herein have not been audited by our Independent Registered Public Accounting Firm in accordance with the standards of the Public Company Accounting Oversight Board (United States), but in the opinion of management such financial statements include all normal recurring adjustments necessary to present fairly MEDITECH's financial position, operating results and cash flow.

Available For Sale Securities (

Available For Sale Securities (Tables) [Abstract]	9 Months Ended
	Sep. 30, 2016
Available For Sale Securities (Tables) [Abstract]
Available For Sale Securities	The following table indicates the original cost, unrealized pre-tax gains and losses, and fair market value of MEDITECH's marketable securities using specific identification. The unrealized after-tax gains and losses have been accounted for within comprehensive income. There are no pre-tax losses as of September 30, 2016. Dec 31, 2015 Sep 30, 2016 Original cost $258,625,920 $264,069,157 Unrealized pre-tax gains 70,995,011 81,806,941 Unrealized pre-tax losses (1,049,455) 0 Fair market value $328,571,476 $345,876,098

Comprehensive Income Presenta16

Comprehensive Income Presentation (Tables) [Abstract]	9 Months Ended
	Sep. 30, 2016
Comprehensive Income Presentation (Tables) [Abstract]
Comprehensive Income Presentation	Effective January 1, 2012 MEDITECH adopted the provisions of ASU 2011-05, Presentation of Comprehensive Income, which establishes standards for reporting comprehensive income and its components in financial statements. Comprehensive income is the total of net income and all other non-owner changes in equity including items such as unrealized after-tax gains or losses on marketable securities classified as available for sale, foreign currency translation adjustments and minimum pension liability adjustments. In MEDITECH's case net income plus the change in unrealized after-tax security gains is shown as comprehensive income in the income statement. 3 months 3 months 9 months 9 months Sep 30, 2015 Sep 30, 2016 Sep 30, 2015 Sep 30, 2016 Unrealized after-tax gains arising during the period on securities existing at period end (3,911,859) (2,859,983) (13,327,656) 17,671,021 Unrealized after-tax gains arising before the period on securities sold during the period 0 (3,395,010) (8,063,211) (10,554,190) Change in unrealized after-tax security gains (3,911,859) (6,254,993) (21,390,867) 7,116,831

Earnings Per Share (Tables) _Ab

Earnings Per Share (Tables) [Abstract]	9 Months Ended
	Sep. 30, 2016
Earnings Per Share (Tables) {Abstract]
Earnings Per Share	MEDITECH follows the provisions of ASC 260-10, Earnings per Share, which requires reporting both basic and diluted earnings per share. MEDITECH has no common share equivalents such as preferred stock, warrants or stock options which would dilute earnings per share. Thus, earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the applicable period. In general, the average number of shares reflects the annual issuance of shares sold to staff members in February pursuant to the 2004 Stock Purchase Plan and contributed to the MEDITECH Profit Sharing Trust in December. 3 months 3 months 9 months 9 months Sep 30, 2015 Sep 30, 2016 Sep 30, 2015 Sep 30, 2016 Net income $13,591,077 $25,459,985 $50,620,450 $60,680,316 Average number of shares 37,165,854 37,190,854 37,165,854 37,190,854 Earnings per share $0.37 $0.68 $1.36 $1.63

Segment Reporting (Tables) _Abs

Segment Reporting (Tables) [Abstract]	9 Months Ended
	Sep. 30, 2016
Segment Reporting (Tables) [Abstract]
Segment Reporting	MEDITECH follows the provisions of ASC 280-10, Segment Reporting. Based on the criteria set forth in ASC 280-10, MEDITECH currently operates in one operating segment, medical software and services. MEDITECH derives most of its operating revenue from the sale and support of one group of similar products and services. All of MEDITECH's assets are located within the United States. The following table indicates the operating revenue percentage based on location of customer. 3 months 3 months 9 months 9 months Sep 30, 2015 Sep 30, 2016 Sep 30, 2015 Sep 30, 2016 United States 86% 88% 87% 88% Canada 10% 10% 11% 10% All others 4% 2% 2% 2%

Available For Sale Securities19

Available For Sale Securities (Details 1) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Available For Sale Securities [Abstract]
Original cost	$ 264,069,157	$ 258,625,920
Unrealized pre-tax gains	81,806,941	70,995,011
Unrealized pre-tax losses	0	(1,049,455)
Fair market value	$ 345,876,098	$ 328,571,476

Comprehensive Income Presenta20

Comprehensive Income Presentation (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Comprehensive Income Presentation (Tables) [Abstract]
Unrealized after-tax gains arising during the period on securities existing at period end	$ (2,859,983)	$ (3,911,859)	$ 17,671,021	$ (13,327,656)
Unrealized after-tax gains arising before the period on securities sold during the period	(3,395,010)	0	(10,554,190)	(8,063,211)
Change in unrealized after-tax security gains	$ (6,254,993)	$ (3,911,859)	$ 7,116,831	$ (21,390,867)

Earnings Per Share (Details 1)

Earnings Per Share (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Earnings Per Share [Abstract]
Net income	$ 25,459,985	$ 13,591,077	$ 60,680,316	$ 50,620,450
Average number of shares	37,190,854	37,165,854	37,190,854	37,165,854
Earnings per share	$ 0.68	$ 0.37	$ 1.63	$ 1.36

Segment Reporting (Details 1)

Segment Reporting (Details 1)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Segment Reporting [Abstract]
United States	88.00%	86.00%	88.00%	87.00%
Canada	10.00%	10.00%	10.00%	11.00%
All others	2.00%	4.00%	2.00%	2.00%