Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2018USD ($)shares | |
Document and Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Mar. 31, 2018 |
Document Fiscal Year Focus | 2,018 |
Document Fiscal Period Focus | Q1 |
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 Public Float | $ | $ 0 |
Entity Common Stock, Shares Outstanding | shares | 37,190,854 |
Entity Current Reporting Status | Yes |
Balance Sheets
Balance Sheets - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Cash and equivalents | $ 16,206,564 | $ 17,436,627 |
Marketable securities | 277,406,421 | 306,086,429 |
Trade receivables, net of reserve | 45,894,220 | 50,522,946 |
Contract assets, prepaid and other | 12,265,352 | 12,376,569 |
Current assets | 351,772,557 | 386,422,571 |
Computer equipment | 14,612,209 | 14,463,275 |
Furniture and fixtures | 86,851,253 | 83,719,079 |
Buildings | 250,962,956 | 250,962,956 |
Land | 43,163,211 | 43,163,211 |
Accumulated depreciation | (181,650,287) | (178,192,159) |
Fixed assets | 213,939,342 | 214,116,362 |
Other assets | 9,153,489 | 9,466,338 |
Deferred tax assets | 8,793,093 | 9,223,246 |
Total assets | 583,658,481 | 619,228,517 |
Accounts payable | 391,303 | 227,663 |
Taxes payable | 4,307,878 | 3,882,391 |
Accrued expenses | 14,867,576 | 22,831,337 |
Deferred revenue | 54,636,825 | 57,619,181 |
Current liabilities | 74,203,582 | 84,560,572 |
Deferred tax liabilities | 14,586,349 | 19,154,929 |
Tax reserves | 18,176,409 | 18,584,766 |
Total liabilities | 106,966,340 | 122,300,267 |
Common stock value | 37,190,854 | 37,190,854 |
Additional paid-in capital | 122,907,959 | 122,907,959 |
Retained income | 316,593,328 | 289,634,133 |
Unrealized after-tax security gains | 47,195,304 | |
Shareholder equity | 476,692,141 | 496,928,250 |
Total liabilities and shareholder equity | $ 583,658,481 | $ 619,228,517 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
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 | 37,165,854 | 37,165,854 |
Common stock shares outstanding | 37,165,854 | 37,165,854 |
Statements of Income
Statements of Income - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Product revenue | $ 41,917,820 | $ 34,778,441 |
Service revenue | 80,450,783 | 82,374,527 |
Total revenue | 122,368,603 | 117,152,968 |
Operations, development | 83,968,521 | 81,539,132 |
Selling, G & A | 22,626,387 | 22,363,899 |
Operating expense | 106,594,908 | 103,903,031 |
Operating income | 15,773,695 | 13,249,937 |
Other income | 5,134,340 | 8,442,937 |
Unrealized marketable securities change | (17,648,899) | |
Other expense | 1,872,916 | 1,537,520 |
Pre-tax income | 1,386,220 | 20,155,354 |
State income tax | (241,000) | 1,031,000 |
Federal income tax | (1,195,000) | 4,617,000 |
Income tax | (1,436,000) | 5,648,000 |
Net income | $ 2,822,220 | 14,507,354 |
Change in unrealized after-tax securities gains | (83,518) | |
Comprehensive income | $ 14,423,836 |
Statements of Cash Flow
Statements of Cash Flow - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Cash Flows [Abstract] | ||
Net income | $ 2,822,220 | $ 14,507,354 |
Depreciation and amortization expense | 3,739,378 | 3,666,589 |
Reduction in unrealized marketable securities gains | 17,648,899 | |
(Gain) loss on sale of marketable securities | 158,091 | (3,562,168) |
Change in trade receivables, net of reserve | 4,628,726 | 2,540,232 |
Change in contract assets, prepaid and other | 111,217 | (3,129,461) |
Change in deferred tax assets | 430,153 | 0 |
Change in accounts payable | 163,640 | 163,606 |
Change in taxes payable | 425,487 | 2,196,799 |
Change in accrued expenses | (7,963,761) | (7,875,300) |
Change in deferred revenue | (2,982,356) | 4,165,921 |
Change in deferred tax liabilities | (4,568,580) | 1,551,734 |
Change in tax reserves | (408,357) | 289,204 |
Net cash from operations | 14,204,757 | 14,514,510 |
Purchases of marketable securities | (4,976,750) | 0 |
Sales of marketable securities | 15,849,768 | 13,814,668 |
Purchases of fixed assets | (3,281,108) | (2,374,375) |
Change in other assets | 31,599 | (372,754) |
Net cash from investing | 7,623,509 | 11,067,539 |
Dividends paid | (23,058,329) | (23,058,329) |
Net cash used in financing | (23,058,329) | (23,058,329) |
Net change in cash and equivalents | (1,230,063) | 2,523,720 |
Cash and equivalents at beginning | 17,436,627 | 14,089,951 |
Cash and equivalents at end | 16,206,564 | 16,613,671 |
Supplemental Non-Cash Disclosure: | ||
Net Adjustment for Revenue Recognition Standard | $ 12,580,916 | |
Net Adjustment for Financial Instruments Standard | $ 47,195,304 |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Significant Accounting 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, 2017 included in MEDITECH's Form 10-K filed on January 31, 2018. 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. |
Marketable Securities
Marketable Securities | 3 Months Ended |
Mar. 31, 2018 | |
Marketable Securities [Abstract] | |
Marketable Securities | Note 2. Marketable 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. Effective January 1, 2018 MEDITECH adopted ASU 2016-01 Financial Instruments - Overall, which requires MEDITECH record any reductions in unrealized marketable securities gains within Other Income and Expense. 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 securities. 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 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 gains and losses, and fair market value of MEDITECH's securities. MEDITECH evaluated the unrealized losses as of March 31, 2018 and concluded these were temporary in nature. Dec 31, 2017 Mar 31, 2018 Original cost $227,405,667 $217,583,281 Unrealized gains 78,907,615 62,532,320 Unrealized losses (226,853) (2,709,180) Fair market value $306,086,429 $277,406,421 |
Equity Method Investments
Equity Method Investments | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 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, Goodwill and Other 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. |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2018 | |
Revenue Recognition [Abstract] | |
Revenue Recognition | Note 4. Revenue Recognition MEDITECH follows the provisions of ASC 606, Revenue from Contracts with Customers. MEDITECH enters into perpetual software license contracts which provide for a customer deposit upon contract execution, milestone billings during the implementation phase and fixed monthly support fees thereafter. MEDITECH considers software fees and related implementation fees together as a single performance obligation and classifies as product revenue in the statement of income. Such revenue is recognized over time with the transfer of promised goods and services to the customer. MEDITECH considers post-implementation support fees as a separate performance obligation and classifies as service revenue in the statement of income. These fees are recognized as revenue over time as the related services are rendered. MEDITECH identifies the performance obligations for each contract, determines the transaction price, allocates the transaction price to the performance obligations, and recognizes revenue when (or as) a performance obligation is satisfied on the percent completion method based on completion of specific events. The primary factors taken into consideration involve tracking and measuring the progress of events needed to complete software delivery, training on software usage, interfacing the software with other vendor software, and bringing the software operational at the customer's site. Events identified are estimated at the outset of a contract and the transaction price is allocated equally over said events. Annual studies are conducted on the events required to complete contracted performance obligations and to verify the validity of total events required. Variable consideration is reviewed at the outset of a contract and if present, included in the percentage completion allocation. At March 31, 2018, outstanding performance obligations amounted to $168.2 million, with revenue to be recognized over the next 12-36 months as MEDITECH works with respective customers to schedule the corresponding software delivery and implementation events. MEDITECH's invoices are issued as per contract terms and are typically paid by customers within one month of invoice date. Differences between timing of MEDITECH's invoicing and timing of completed performance obligations are categorized as Deferred Revenues and Contract Assets. Deferred Revenues represent invoices rendered in advance of revenue recognition. Contract Assets represent revenue recognized for which invoices have not yet been rendered. Deferred Revenues were $47,913,292 and $46,204,307 at December 31, 2017 and March 31, 2018 respectively. During the quarter a total of $14,435,414 was removed from December 31, 2017 deferred revenue and revenue recognized as specific events were completed. Also, during the quarter Contract Assets decreased $1,530,977. Contract Assets, were $9,295,458 and $7,764,481 at December 31, 2017 and March 31, 2018. |
Comprehensive Income Presentati
Comprehensive Income Presentation | 3 Months Ended |
Mar. 31, 2018 | |
Comprehensive Income Presentation [Abstract] | |
Comprehensive Income Presentation | Note 5. Comprehensive Income Presentation Prior to January 1, 2018, MEDITECH followed the provisions of ASU 2011-05, Comprehensive Income, with respect to marketable securities which establishes standards for reporting comprehensive income and its components in financial statements. MEDITECH's Comprehensive income, prior to the adoption of ASU 2016-01, is the total of net income and unrealized after-tax gains or losses on marketable securities classified as available for sale. Results for the three months ended March 31, 2017 are as follows: Three months ended on Mar 31, 2017 Unrealized after-tax gains arising during the period on securities existing at period end 2,052,782 Unrealized after-tax gains arising before the period on securities sold during the period (2,136,300) Change in unrealized after-tax securities gains (83,518) With the adoption of ASU 2016-01 on January 1, 2018, MEDITECH has no elements of other comprehensive income. The reduction in unrealized marketable securities gains will now be recorded between Other Income and Other Expense, a presentation change in the Income Statements. The primary effect will be the inclusion of such reductions in the period's earnings per share calculation presented in Note 7. Additionally, there is a change in presentation within Shareholder Equity in the Balance Sheets. Lastly the Statements of Cash Flows will separately report such reductions. At December 31, 2017, net unrealized marketable securities gains amounted to $78,680,762. The after-tax portion originally recorded within equity of $47,195,304 was transferred to retained earnings on January 1, 2018 upon adoption of ASU 2016-01. During the first quarter of 2018, the reduction in unrealized marketable securities gains of $18,857,622 from the December 31, 2017 value of $78,680,762 has been reported within the Income Statement, as follows: Three months ended on Mar 31, 2018 Reduction in unrealized marketable securities gains during the period $18,857,622 Realized losses on marketable securities sold during the period (158,091) Reduction in unrealized marketable securities gains on securities held at end of the period $18,699,531 |
Income Tax Accounting
Income Tax Accounting | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Accounting [Abstract] | |
Income Tax Accounting | Note 6. 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 2015 through 2017 are subject to examination by the IRS, and various years are subject to examination by state tax authorities. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 7. 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. 3 months 3 months Mar 31, 2017 Mar 31, 2018 Net income $14,507,354 $2,822,220 Average number of shares 37,190,854 37,190,854 Earnings per share $0.39 $0.08 |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting | Note 8. 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 Mar 31, 2017 Mar 31, 2018 United States 87% 88% Canada 12% 10% All others 1% 2% |