1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to ___________________
Commission File Number 0-20946
HEALTH MANAGEMENT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New York 13-2770433
State of Incorporation (I.R.S. Employer Identification Number)
401 Park Avenue South, New York, New York 10016
(Address of principal executive offices, zip code)
(212) 685-4545
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed
since last report.)
Indicate by check [root] whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 31, 1997
Common Stock, $.01 Par Value 17,709,793 Shares
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HEALTH MANAGEMENT SYSTEMS, INC.
INDEX TO FORM 10-Q
QUARTER ENDED APRIL 30, 1997
PART I FINANCIAL INFORMATION Page No.
Item 1 Financial Statements
Consolidated Balance Sheets as of April 30, 1997 (unaudited) 1
and October 31, 1996
Consolidated Statements of Operations (unaudited) for the three 2
month and six month periods ended April 30, 1997 and April
30, 1996
Consolidated Statement of Shareholders' Equity (unaudited) for 3
the six month period ended April 30, 1997
Consolidated Statement of Cash Flows (unaudited) for the 4
three month and six month periods ended April 30, 1997 and
April 30, 1996
Notes to Interim Consolidated Financial Statements (unaudited) 5
Item 2 Management's Discussion and Analysis of Results of Operations and 7
Financial Condition
PART II OTHER INFORMATION 11
SIGNATURES 12
EXHIBIT INDEX 13
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HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ In Thousands, Except Per Share Amounts)
April 30, October 31,
1997 1996
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 18,462 22,340
Short-term investments 17,588 17,181
Accounts receivable, net 41,670 42,730
Other current assets 7,008 4,706
-------- -------
Total current assets 84,728 86,957
Property and equipment, net 7,708 7,823
Intangible assets, net 12,336 5,257
Capitalized software costs, net 3,100 1,472
Investments in affiliates 0 6,824
Other assets 2,077 1,310
-------- -------
Total assets $109,949 109,643
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 14,320 19,676
Amounts payable to affiliates 0 585
Deferred revenue 5,291 4,975
Deferred income taxes 6,807 6,968
-------- -------
Total current liabilities 26,418 32,204
Other liabilities 2,010 2,770
Deferred income taxes 0 57
-------- -------
Total liabilities 28,428 35,031
-------- -------
Shareholders' equity:
Preferred stock - $.01 par value; 5,000,000 shares authorized;
none issued and outstanding 0 0
Common stock - $.01 par value; 45,000,000 shares authorized;
17,709,783 shares issued and outstanding at April 30, 1997;
17,520,991 shares issued and outstanding at October 31, 1996 177 175
Capital in excess of par value 67,334 62,541
Retained earnings 13,509 11,425
Unrealized appreciation on short-term investments 501 471
-------- -------
Total shareholders' equity 81,521 74,612
-------- -------
Commitments and contingencies
Total liabilities and shareholders' equity $109,949 109,643
======== =======
See accompanying notes to interim consolidated financial statements.
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HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
($ In Thousands, Except Per Share Amounts)
Three months ended Six months ended
April 3 April 30,
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
Trade $ 19,821 23,491 42,049 46,958
Affiliates 287 2,216 331 4,368
-------- ------ ------ ------
20,108 25,707 42,380 51,326
Cost of services:
Compensation 13,505 11,892 25,164 23,647
Data processing 1,795 2,112 3,588 4,277
Occupancy 2,416 1,775 4,559 3,483
Other 4,603 4,459 7,953 8,751
-------- ------ ------ ------
22,319 20,238 41,264 40,158
-------- ------ ------ ------
Operating (loss) margin before amortization of intangibles (2,211) 5,469 1,116 11,168
Amortization of intangibles 239 55 285 110
-------- ------ ------ ------
Operating (loss) income (2,450) 5,414 831 11,058
Other income:
Net interest income 1,331 228 1,772 479
Merger related costs (37) (489) (537) (489)
Equity in (loss) earnings of affiliate (294) 174 (310) 297
-------- ------ ------ ------
1,000 (87) 925 287
(Loss) income before income taxes (1,450) 5,327 1,756 11,345
Income tax benefit (expense) 1,731 (2,225) 328 (4,633)
-------- ------ ------ ------
Net income $ 281 3,102 2,084 6,712
======== ====== ====== ======
Earnings per share data:
Net income per weighted average share of common stock outstanding $ 0.02 0.17 0.12 0.37
======== ====== ====== ======
Weighted average shares outstanding 17,832 18,477 18,034 18,329
======== ====== ====== ======
See accompanying notes to interim consolidated financial statements
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HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
($ In Thousands)
Common Stock Capital In
----------------- --------------------- Appreciation Total
Par Excess Of Retained on Short-term Shareholders'
Shares Value Par Value Earnings Investments Equity
------ ----- --------- -------- ----------- ------
Balance at October 31, 1996, as originally reported 17,348,841 $174 57,583 18,301 471 76,529
Adjustments for Quality Standards in
Medicine, Inc. ("QSM") pooling of interests 172,150 1 4,958 (6,876) 0 (1,917)
---------- ---- ------- ------- ------- ---------
Balance at October 31, 1996, as restated 17,520,991 175 62,541 11,425 471 74,612
Net income 0 0 0 2,084 0 2,084
Stock option activity 37,913 0 233 0 0 233
Employee Stock Purchase Plan activity 63,029 1 552 0 0 553
Stock issued to retire QSM debt 87,850 1 1,434 0 0 1,435
Disqualifying dispositions 0 0 2,574 0 0 2,574
Appreciation on
short-term investments 0 0 0 0 30 30
---------- ---- ------- ------- ------- ---------
Balance at April 30, 1997 17,709,783 $177 67,334 13,509 501 81,521
========== ==== ======= ======= ======= =========
See accompanying notes to interim consolidated financial statements.
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HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
($ In Thousands)
Three months ended Six months ended
April 30, April 30,
1997 1996 1997 1996
---- ---- ---- ----
Operating activities:
Net income $ 281 3,102 2,084 6,712
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,219 846 1,994 1,630
Software capitalization (477) (272) (782) (551)
Provision for doubtful accounts (109) 14 (126) 297
Deferred tax (benefit) expense (932) 133 (371) 488
Equity in loss (earnings) of affiliate 295 (231) 311 (354)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 4,888 (8,253) 2,652 (13,693)
Decrease (increase) in other current assets 161 406 877 (65)
Increase (decrease) in accounts payable and accrued expenses 569 (1,032) (4,740) (3,275)
Decrease in amounts payable to affiliates (585) 0 (747) 0
Increase (decrease) in deferred revenue 264 (627) (406) 619
Decrease (increase) in other assets and liabilities, net (906) 326 (554) 1,237
-------- ------ ------ -------
Total adjustments 4,387 (8,690) (1,892) (13,667)
-------- ------ ------ -------
Net cash provided by (used in) operating activities 4,668 (5,588) 192 (6,955)
-------- ------ ------ -------
Investing activities:
Capital asset expenditures (458) (1,039) (821) (1,599)
Acquisition of Health Information Services Corporation, net of cash acquired (3,689) 0 (3,689) 0
Proceeds from sale of short-term investments (266) (393) (346) (637)
-------- ------ ------ -------
Net cash used in investing activities (4,413) (1,432) (4,856) (2,236)
-------- ------ ------ -------
Financing activities:
Proceeds from issuance of common stock 122 200 553 1,767
Proceeds from exercise of stock options 77 1,719 233 3,240
Proceeds from issuance of notes payable 0 0 0 148
-------- ------ ------ -------
Net cash provided by financing activities 199 1,919 786 5,155
-------- ------ ------ -------
Net increase (decrease) in cash and cash equivalents 454 (5,101) (3,878) (4,036)
Cash and cash equivalents at beginning of period 18,008 11,890 22,340 10,825
-------- ------ ------ -------
Cash and cash equivalents at end of period $ 18,462 6,789 18,462 6,789
======== ====== ====== =======
See accompanying notes to interim consolidated financial statements.
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HEALTH MANAGEMENT SYSTEMS, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. UNAUDITED INTERIM FINANCIAL INFORMATION
Health Management Systems, Inc. ("HMS" or the "Company") management is
responsible for the accompanying unaudited interim consolidated financial
statements and the related information included in these notes to the
unaudited interim consolidated financial statements. In the opinion of
management, the unaudited interim consolidated financial statements
reflect all adjustments, consisting of normal recurring adjustments,
necessary for the fair presentation of the Company's financial position
and results of operations and cash flows for the periods presented.
Results of operations of interim periods are not necessarily indicative of
the results to be expected for the entire year. The Company completed an
acquisition during the second quarter of fiscal year 1997. The acquisition
transaction was accounted for using the purchase method of accounting. For
further details see Note 2 to the Interim Consolidated Financial
Statements.
These unaudited interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements of the
Company as of and for the year ended October 31, 1996 included in the
Company's Annual Report on Form 10-K for such year as filed with the
Securities and Exchange Commission (the "Commission"). However, the reader
should be aware that the October 31, 1996 financial statements have been
retroactively restated for the acquisition of Quality Standards in
Medicine, Inc. ("QSM") as noted in the Company's Quarterly Report on Form
10-Q for the quarter ended January 31, 1997.
2. ACQUISITION OF HEALTH INFORMATION SYSTEMS, INC. ("HISCo")
In March 1997, the Company, which owned 43% of HISCo's stock, acquired the
remaining 57% of HISCo's stock for $3,689,000, net of cash acquired. HISCo
has been renamed HSA Managed Care Systems, Inc. ("HSA"). HSA provides
automated business and information solutions, including software and
services, to the bearers of risk in the health care industry.
The acquisition was accounted for using the purchase method of accounting
and accordingly the results of operations of HSA from the date of
acquisition through April 30, 1997 are included in the accompanying
unaudited interim financial statements. The $2,309,000 excess of the
purchase price over fair market value of the net assets acquired was
recorded as goodwill and is being amortized over a period not to exceed 20
years.
3. SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for income taxes during the quarters ended April 30, 1997 and
1996 was $50,000 and $2,570,000, respectively. Cash paid for income taxes
during the six months ended April 30, 1997 and 1996 was $179,000 and
$4,444,000, respectively.
The Company recorded significant non-cash transactions during the six
months ended April 30, 1997 and 1996. The non-cash transactions included
the issuance of 87,850 shares of the Company's common stock to settle
$1,435,000 of QSM notes payable plus accrued interest in the six months
ended April 30, 1997. Additionally, the Company recorded $2,574,000 and
$708,000 for the six months ended April 30, 1997 and 1996 as disqualified
dispositions related to certain compensatory stock option exercises, which
has the effect of reducing the Company's tax liability with an offsetting
increase to shareholders' equity.
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4. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), "Earning Per
Share". SFAS 128 establishes standards for computing and presenting
earnings per share. In accordance with the effective date of SFAS 128, the
Company will adopt SFAS 128 as of January 31, 1998. This statement is not
expected to have a material impact on the Company's financial statements.
5. RELATED PARTIES
Effective April 16, 1997, the Company guaranteed all of the obligations of
Robert V. Nagelhout to The Chase Manhattan Bank (the "Bank") arising under
a $1,600,000 loan made by the Bank to Mr. Nagelhout. Mr. Nagelhout is a
director of the Company and the Chief Executive Officer of the Company's
Health Care microsystems, Inc. ("HCm") subsidiary. The loan is payable on a
monthly basis as to interest only, at an interest rate equal to the prime
rate announced from time to time by the Bank. The loan will mature on April
16, 1999, at which time the entire unpaid principal balance of the Loan,
together with accrued and unpaid interest, will become due and payable.
Mr. Nagelhout has granted the Company a first security interest in 500,000
shares of HMS Common Stock owned by him to secure the Company's guaranty of
his loan obligations to the Bank.
6. SUBSEQUENT EVENTS
On May 28, 1997, the Board of Directors authorized the Company to
repurchase such number of shares of its Common Stock that have an aggregate
purchase price not in excess of $10,000,000. The Company would repurchase
these shares from time to time on the open market or in negotiated
transactions at prices deemed appropriate by the Company. Repurchased
shares will be deposited in the Company's treasury and used for general
corporate purposes.
On the same date, the Board of Directors also authorized a stock option
exchange program for employee participants in the Company's Stock Option
and Restricted Stock Purchase Plan. Eligible employees who hold options
("Old Options") with exercise prices in excess of $10.00 per share will be
able to exchange them for options ("New Options") exercisable for a lesser
number of shares with an exercise price equal to the average price of the
Company's Common Stock on the Nasdaq National Market System on June 2,
1997. The exact number of shares of Common Stock underlying each New Option
will depend on the exercise price of the Old Option exchanged.
Approximately 1,600,000 Old Options are eligible to be exchanged for New
Options. If all eligible Old Options are exchanged approximately 900,000
New Options will be issued. Certain executive officers of the Company are
either ineligible to participate, or have limitations on their ability to
participate, in the option exchange.
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ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- THREE MONTH AND SIX MONTH PERIODS ENDED APRIL 30, 1997
AND 1996
OPERATING RESULTS
THREE MONTHS ENDED APRIL 30, 1997
Revenue for the quarter ended April 30, 1997 was $20,108,000, a decrease of
$5,599,000 or 22% from the comparable period in 1996. The Company's Revenue
Enhancement Services, previously referred to as the Company's proprietary
services which included Retroactive Claims Reprocessing ("RCR") Services, Third
Party Liability Recovery ("TPLR") Services and Comprehensive Account Management
Services ("CAMS"), accounted for $10,686,000 or 53% of the Company's
consolidated revenue for the second quarter of 1997, compared to $18,988,000 or
74% of consolidated revenue for the comparable period in 1996. Revenue from
Revenue Enhancement Services decreased 44% from the comparable period
principally due to the non-recurrence in 1997 of one-time projects in 1996 and
the expiration of a major contact. This contract is in the process of being
renewed at a lower rate and with a smaller scope. Revenue from Managed Care
Support ("MCS") services was $6,102,000, an increase of $1,631,000 or 36% over
the comparable period in 1996. Revenue from HSA was $1,794,000 for the second
quarter of 1997. There is no comparable prior period revenue for HSA because HSA
was acquired on March 18, 1997 in a transaction accounted for under the purchase
method of accounting. The Company's Electronic Data Interchange ("EDI") services
revenue was $1,526,000 for the second quarter of 1997, a decrease of $722,000 or
32% from the comparable period in 1996.
Cost of services for the second quarter of 1997 was $22,319,000, an increase of
$2,081,000 or 10% from the comparable period in 1996.
Compensation expense, the Company's largest expense component, totaled
$13,505,000, an increase of $1,613,000 or 14% over the comparable prior period.
Salaries increased by 24% due to the acquisition of HSA, which increased
compensation expense by $1,102,000, and a 17% growth in the average number of
employees in other operations. Increases in the salary component were partially
offset by lower bonus and profit sharing expense accruals.
Data processing expense for the second quarter of 1997 was $1,795,000, a
decrease of $317,000 or 15% from the comparable period in 1996. This decrease
was attributable to lower levels of variable cost associated with a reduction in
revenue from Revenue Enhancement Services and other general cost savings.
Occupancy expense for the second quarter of 1997 was $2,416,000, an increase of
$641,000 or 36% over the comparable period in 1996. This increase reflects the
additional rent and depreciation expense for expansion at the New York corporate
facility and expansion in satellite offices.
Other operating expense for the second quarter of 1997 was $4,603,000, an
increase of $144,000 or 3% from the comparable period in 1996. This increase was
principally attributable to the timing of certain unbilled expenses related to
revenue producing projects, and was offset by lower direct project costs and bad
debt expense.
Operating loss before amortization of intangible assets for the quarter ended
April 30, 1997 was $2,211,000, a decrease of $7,680,000 or 140% from the
$5,469,000 of operating margin before amortization of intangible assets realized
in the comparable period in 1996.
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Net interest income of $1,331,000 in the second quarter of 1997 increased by
$1,103,000 from $228,000 in the comparable period in 1996. The increase in
interest income was primarily attributable to a reversal of interest expense of
$887,000 as a result of a favorable resolution to an Internal Revenue Services
audit ("IRS audit resolution"). The Company reported equity in the loss of
affiliate of $294,000 during the second quarter of 1997 as compared to earnings
of $174,000 for the comparable period in 1996.
The Company's income tax benefit for the second quarter of 1997 was $1,731,000,
of which $1,093,000 resulted from the IRS audit resolution. This compares to
income tax expense of $2,225,000 for the comparable period in 1996. The
Company's effective tax rate, exclusive of the effect of the IRS audit
resolution, for the second quarter 1997 and 1996 were approximately 44.0% and
41.8%, respectively.
Net income for the three month period ended April 30, 1997 was $281,000 a
decrease of $2,821,000, or 91% compared to $3,102,000 reported in the comparable
prior year period.
The Company's earnings per share for the three month period ended April 30, 1997
was $0.02, a decrease of $0.15 or 88% from the $0.17 per share reported in the
comparable period in 1996. Excluding all one-time events, the Company
experienced a loss per share of $0.07 compared to an earnings per share of $0.19
for the comparable prior period.
SIX MONTHS ENDED APRIL 30, 1997
Revenue for the six months ended April 30, 1997 was $42,380,000, a decrease of
$8,946,000 or 17% from the comparable period in 1996. Revenue from Revenue
Enhancement Services was $25,198,000, a decrease of $13,175,000 or 34%,
principally due to the non-recurrence in 1997 of one-time projects in 1996 and
the expiration of a major contract. Revenue from MCS services was $12,018,000,
an increase of $3,310,000 or 38% over the comparable prior year period. Revenue
from HSA was $1,794,000. There are no comparable prior year figures since HSA
was acquired on March 18, 1997 in a transaction accounted for under the purchase
method of accounting. Revenue from EDI services was $3,370,000, a decrease of
$875,000 or 21% from the comparable period in 1996.
Cost of services for the six months ended April 30, 1997 was $41,264,000, an
increase of $1,106,000 or 3% over the comparable period in 1996.
Compensation expense of $25,164,000 increased $1,517,000 or 6% over the
comparable period in 1996. This increase is primarily due to the acquisition of
HSA which increased salary expense by $1,102,000. Increased average headcount in
other operations was partially offset by lower bonus and profit sharing
accruals.
Data processing expense was $3,588,000, a decrease of $689,000 or 16% from the
comparable period in 1996. This decrease was attributable to lower variable
costs associated with a reduction in revenue from Revenue Enhancement Services
and other general cost savings.
Occupancy expense was $4,559,000, an increase of $1,076,000 or 31% over the
comparable period in 1996. This increase reflects the additional rent and
depreciation expense for the expansion of the New York corporate facility and
expansion in satellite offices.
Other operating expense was $7,953,000, a decrease of $798,000 or 9% from the
comparable period in 1996. This decrease was principally attributable to lower
levels of direct project costs and bad debt expense.
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Operating margin before amortization of intangible assets for the six months
ended April 30, 1997 was $1,116,000, a decrease of $10,052,000 or 90% from the
$11,168,000 amount realized in the comparable period in 1996. The Company's
operating margin rate before amortization of intangible assets was 2.6%,
compared to 21.8% in 1996.
Net interest income of $1,772,000 in the six months ended April 30, 1997
increased by $1,293,000 from $479,000 in the comparable period in 1996,
primarily due to a reversal of accrued interest expense resulting from the IRS
audit resolution. Merger related costs of $537,000 were incurred in the six
months ended April 30, 1997 related to the merger with QSM in November 1996 as
compared to $489,000 in the six months ended April 30, 1996 related to the
Company's merger with CDR Associates, Inc. ("CDR") in April 1996.
The Company's income tax benefit for the six months ended April 30, 1997 was
$328,000, resulting primarily from the IRS audit resolution of $1,093,000. The
Company's effective tax rate, exclusive of the effect of the IRS audit
resolution, for the six months ended April 30, 1997 was approximately 43.6%.
This compares to income tax expense of $4,633,000 and an effective tax rate of
approximately 40.8% for the comparable period in 1996. The effective tax rate
has increased from the comparable prior period due to non-taxable income in the
first six months of 1996 resulting from the CDR merger and non-taxable income
from the equity in earnings of an affiliate.
Net income for the six month period ended April 30, 1997 was $2,084,000, a
decrease of $4,628,000 or 69% to from the comparable prior period.
The Company's earnings per share for the six month period ended April 30, 1997
was $0.12, a decrease of $0.25 or 68% compared to $0.37 in the comparable prior
period. Excluding all one-time events, the Company's earnings per share of $0.06
compared to $0.39 for the comparable prior period.
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LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1997, the Company had $58,310,000 in net working capital, an
increase of $3,557,000 over the level at October 31, 1996. The Company's
principal sources of liquidity at April 30, 1997 consisted of cash, cash
equivalents, and short-term investments aggregating $36,050,000, net accounts
receivable of $41,670,000, and an available balance of $38,400,000 under a line
of credit. Accounts receivable at April 30, 1997 reflected a decrease of
$1,060,000 or 2.5% from the October 31, 1996 balance. There has been no
significant change in the nature, age, or composition of the Company's accounts
receivable portfolio.
On May 28, 1997, the Board of Directors authorized the Company to repurchase
such number of shares of its Common Stock that have an aggregate purchase price
not in excess of $10,000,000. The Company would repurchase these shares from
time to time on the open market or in negotiated transactions at prices deemed
appropriate by the Company. Repurchased shares will be deposited in the
Company's treasury and used for general corporate purposes.
* * * * *
This document contains forward-looking statements. Such statements by their
nature entail various risks, reflecting the dynamic, complex, and rapidly
changing nature of the health care industry. Results actually achieved may
differ materially from those currently anticipated. The various risks include
but are not necessarily limited to: (i) the ability of HMS to contain costs, to
grow internally or by acquisition and to integrate acquired businesses into the
HMS group of companies, (ii) the uncertainties of litigation, (iii) changing
conditions in the health care industry which could simplify the reimbursement
process and/or data management requirements associated with the health care
transfer payment process and adversely affect HMS's business, (iv) government
regulatory and political pressures which could reduce the rate of growth of
health care expenditures, (v) competitive actions by other companies, and (vi)
other risks, as noted in HMS's registration statements and periodic reports
filed with the Commission.
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HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
PART II -- OTHER INFORMATION
Item 1 Legal Proceedings -- Four purported class action lawsuits have been filed against the
Company and certain of its present and former officers and directors:
1) Baker v. Health Management Systems. Inc., et al., No. 97-CIV-1865;
2) Zola v. Health Management Systems, Inc., et. al., No. 97-CIV-2112;
3) Ronis v. Health Management Systems, Inc., et. al., No. 97-CIV-2535; and
4) Korsinky v. Health Management Systems, Inc., et. al., No. 97-CIV-3637
The Complaints in these lawsuits, which are pending in the United States Court for
the Southern District of New York, allege violations of the Securities Exchange Act
of 1934 in connection with certain allegedly false and misleading statements and seek
damages in an unspecified amount. The Company intends to vigorously defend these
lawsuits.
Item 2 Changes in Securities -- None
Item 3 Defaults Upon Senior Securities -- Not applicable
Item 4 Submission of Matters to a Vote of Security Holders -- None
Item 5 Other Information -- None
Item 6 Exhibits and Reports on Form 8-K -- None
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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.
Date: June 13, 1997 HEALTH MANAGEMENT SYSTEMS, INC.
-------------------------------
(Registrant)
/s/ Phillip Siegel
------------------------------------------
Phillip Siegel
Vice President and Chief Financial Officer
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HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT
NUMBER
2.1 Agreement and Plan of Merger, dated as of March 18, 1997, by and among
Health Management Systems, Inc., HISCo Acquisition Corp., Health
Information Systems Corporation and HSA Managed Care Systems, Inc.
10.1 Guaranty Agreement, dated as of April 16, 1997, between Health Management
Systems, Inc. and The Chase Manhattan Bank.
10.2 Second Amendment to Credit Agreement and Guaranty, dated as of April 16,
1997, among Health Management Systems, Inc., Accelerated Claims
Processing, Inc., Quality Medical Adjucation, Incorporated, Health Care
microsystems, Inc., CDR Associates, Inc., and The Chase Manhattan Bank.
10.3 Security Agreement, dated as of April 16, 1997, by and between Robert V.
Nagelhout and Health Management Systems, Inc.
10.4 Promissory note, dated as of April 16, 1997, by and between Robert V.
Nagelhout and The Chase Manhattan Bank.
11 Computations of Earnings Per Share
27 Financial Data Schedule (Submitted for informational purposes only and not
deemed to be filed)
13