1
EXHIBIT 99.5
ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1995 and 1996
Consolidated Statements of Operations for the years ended December 31, 1995 and
1996 and the period from January 1 through January 23, 1997
Consolidated Statements of Shareholder's Deficit for the years ended December
31, 1995 and 1996 and the period from January 1 through January 23, 1997
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and
1996 and the period from January 1 through January 23, 1997
Notes to Consolidated Financial Statements
2
EXHIBIT 99.5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Eclipsys Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in shareholder's
deficit and of cash flows present fairly, in all material respects, the
financial position of ALLTEL Healthcare Information Services, Inc. (the Company)
(a Delaware corporation, wholly-owned by ALLTEL Information Services, Inc., an
Arkansas corporation) and its subsidiaries at December 31, 1995 and 1996, and
the results of their operations and their cash flows for the years then ended
and for the period from January 1, 1997 through January 23, 1997 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 10, effective January 24, 1997, the Company was acquired by
Eclipsys Corporation.
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
June 27, 1997
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
-------------------
1995 1996
-------- --------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,599 $ 2,022
Accounts receivable, net of allowance for doubtful
accounts of $749 and $1,274 at December 31, 1995 and
1996, respectively..................................... 29,435 29,713
Inventory................................................. 2,081 1,576
Deferred tax asset........................................ 3,676 3,682
Other current assets...................................... 678 634
-------- --------
Total current assets................................... 38,469 37,627
Property and equipment, net................................. 10,168 10,739
Purchased software, net of accumulated amortization of
$2,985 and $4,453 at December 31, 1995 and 1996,
respectively.............................................. 4,098 2,882
Capitalized software development costs, net of accumulated
amortization of $4,671 and $11,880 at December 31, 1995
and 1996, respectively.................................... 27,632 35,306
Intangible assets, net of accumulated amortization of $1,129
and $2,101 at December 31, 1995 and 1996, respectively.... 5,670 4,698
Other assets................................................ 2,344 9,191
-------- --------
Total assets........................................... $ 88,381 $100,443
======== ========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Deferred revenue.......................................... $ 24,724 $ 26,807
Other current liabilities................................. 17,668 20,378
-------- --------
Total current liabilities.............................. 42,392 47,185
Deferred revenue............................................ 15,913 10,148
Other long-term liabilities................................. 1,250
Deferred income taxes....................................... 7,002 9,294
Intercompany payable to parent.............................. 46,085 57,953
-------- --------
Total liabilities...................................... 111,392 125,830
Shareholder's deficit:
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding................................. 1 1
Additional paid-in capital................................ 15,678 15,678
Accumulated deficit....................................... (38,236) (40,432)
Cumulative foreign currency translation adjustment........ (454) (634)
-------- --------
Total shareholder's deficit............................ (23,011) (25,387)
-------- --------
Total liabilities and shareholder's deficit....... $ 88,381 $100,443
======== ========
The accompanying notes are an integral part of these financial statements.
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1997
------------------- THROUGH
1995 1996 JANUARY 23, 1997
-------- -------- ----------------
Revenues:
Service and systems..................................... $ 90,737 $ 99,213 $ 6,064
Hardware................................................ 9,377 9,587 122
-------- -------- -------
Total revenues....................................... 100,114 108,800 6,186
-------- -------- -------
Costs and expenses:
Cost of service and systems revenues.................... 53,385 63,572 4,277
Cost of hardware revenues............................... 7,950 7,911 104
Marketing and sales..................................... 11,128 11,091 660
Research and development................................ 8,522 10,271 794
General and administrative.............................. 8,168 7,101 621
Depreciation and amortization........................... 6,735 8,135 568
-------- -------- -------
Total costs and expenses............................. 95,888 108,081 7,024
-------- -------- -------
Income (loss) from operations............................. 4,226 719 (838)
Interest expense, net..................................... (2,733) (3,758) (379)
-------- -------- -------
Income (loss) before income taxes......................... 1,493 (3,039) (1,217)
Income tax benefit (provision)............................ (887) 843 437
-------- -------- -------
Net income (loss)......................................... $ 606 $ (2,196) $ (780)
======== ======== =======
The accompanying notes are an integral part of these financial statements.
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S DEFICIT
(IN THOUSANDS EXCEPT SHARE DATA)
EQUITY
ADJUSTMENT
FROM
COMMON STOCK ADDITIONAL FOREIGN
--------------- PAID-IN ACCUMULATED CURRENCY
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION TOTAL
------ ------ ---------- ----------- ----------- --------
Balance at December 31, 1994........ 1,000 $1 $15,678 $(38,842) $(470) $(23,633)
Net income.......................... 606 606
Foreign translation adjustment...... 16 16
----- -- ------- -------- ----- --------
Balance at December 31, 1995........ 1,000 1 15,678 (38,236) (454) (23,011)
Net loss............................ (2,196) (2,196)
Foreign translation adjustment...... (180) (180)
----- -- ------- -------- ----- --------
Balance at December 31, 1996........ 1,000 1 15,678 (40,432) (634) (25,387)
Net loss............................ (780) (780)
Foreign translation adjustment...... 3 3
----- -- ------- -------- ----- --------
Balance at January 23, 1997......... 1,000 $1 $15,678 $(41,212) $(631) $(26,164)
===== == ======= ======== ===== ========
The accompanying notes are an integral part of these financial statements.
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1997
------------------- THROUGH
1995 1996 JANUARY 23, 1997
-------- -------- ----------------
Operating activities:
Net income (loss)....................................... $ 606 $ (2,196) $ (780)
-------- -------- -------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................ 13,205 15,344 945
Deferred income taxes................................ 6,040 2,286 (52)
Changes in assets and liabilities
Accounts receivable................................ (6,574) (278) 325
Inventory.......................................... 566 505 55
Other current assets............................... (74) 44 10
Deferred revenue................................... 1,090 (3,682) 1,951
Other current liabilities.......................... 906 2,710 2,351
Other long term liabilities........................ -- 1,250 (1,250)
Other assets....................................... 162 (43) (81)
-------- -------- -------
Total adjustments............................... 15,321 18,136 4,254
-------- -------- -------
Net cash provided by operating activities..... 15,927 15,940 3,474
-------- -------- -------
Investing activities:
Purchase of property, equipment and software............ (7,716) (9,231) (323)
Capitalized software development costs.................. (12,905) (12,170) (661)
Changes in other assets................................. 96 (6,804) 27
-------- -------- -------
Net cash used in investing activities................ (20,525) (28,205) (957)
-------- -------- -------
Financing activities:
Net change in intercompany payable to parent............ 5,509 11,868 (1,855)
-------- -------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................. 16 (180) 3
-------- -------- -------
Net (decrease) increase in cash and cash equivalents...... 927 (577) 665
Cash and cash equivalents, beginning of year.............. 1,672 2,599 2,022
-------- -------- -------
Cash and cash equivalents, end of year.................... $ 2,599 $ 2,022 $ 2,687
======== ======== =======
The accompanying notes are an integral part of these financial statements.
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Alltel Healthcare Information Services, Inc. ("AHIS") and its subsidiaries
(collectively, the "Company") are engaged in one business segment primarily
providing enterprise-wide clinical, patient care and financial software
solutions, as well as outsourcing, remote processing, networking technologies
and other services to healthcare organizations throughout the United States and
Western Europe.
The Company is a wholly owned subsidiary of Alltel Information Services,
Inc. ("AIS") which is a wholly owned subsidiary of Alltel Corporation
("Alltel").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of AHIS and its wholly owned
subsidiaries. All significant intercompany transactions have been eliminated in
consolidation.
FINANCIAL STATEMENT PRESENTATION
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and disclosure of contingent assets and liabilities. The
estimates and assumptions used in the accompanying consolidated financial
statements are based upon management's evaluation of the relevant facts and
circumstances as of the date of the financial statements. Actual results could
differ from those estimates.
The consolidated statements of operations include all revenues and costs
directly attributable to the operations of AHIS, including the costs of
facilities, administration, and other various costs. As more fully described in
Notes 8 and 11, certain costs related to interest, benefits, and other costs
were allocated to AHIS based on usage and other defined criteria.
All of the allocations utilized in the consolidated financial statements
are based on assumptions that AHIS management believes are reasonable under the
circumstances. However, these allocations are not necessarily indicative of the
costs which would have resulted had AHIS been a separate entity.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.
REVENUE RECOGNITION
The Company's products are sold to customers based on contractual
agreements. Revenues are derived from the licensing of computer software, the
sale of computer hardware, hardware and software maintenance, remote processing
and outsourcing, training, implementation assistance, custom development, and
consulting.
SERVICE AND SYSTEMS
Revenues from software license fees are recognized using the
percentage-of-completion method for contracts in which the Company is required
to make significant production, modification, or customization changes over the
implementation period of the contracts based on implementation hours incurred.
Other software license fees are generally recognized on a monthly basis over the
term of the licensing and maintenance agreements which are generally five years.
Remote processing and outsourcing services are
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
marketed under long-term agreements generally over periods from five to seven
years and revenues are recognized monthly as the work is performed. Software
maintenance fees are marketed under annual and multiyear agreements and are
recognized ratably over the term of the agreements. Implementation revenues are
recognized as the services are performed or on a percentage-of-completion basis
for fixed fee arrangements. Hardware maintenance revenues are billed and
recognized monthly over the term of the agreements. Revenues related to other
support services, such as training, consulting, and custom development, are
recognized when the services are performed.
The Company warrants its products will perform in accordance with
specifications as outlined in the respective customer contracts. The Company
records a reserve for warranty costs at the time it recognizes revenue.
Historically, warranty costs have been minimal.
The Company accrues for product returns at the time it recognizes revenue,
based on actual experience. Historically, product return costs have been
minimal.
HARDWARE SALES
Hardware sales are recognized upon shipment of the product to the customer.
UNBILLED ACCOUNTS RECEIVABLE
Unbilled accounts receivable represent amounts owed to the Company under
noncancelable agreements for software license fees with extended payment terms
and computer hardware purchases which have been financed over extended payment
terms. The current portion of unbilled accounts receivable of $4,883,000 and
$3,245,000 as of December 31, 1995 and 1996, respectively, is included in
accounts receivable in the accompanying financial statements. The non-current
portion of unbilled accounts receivable of $2,109,000 and $2,151,000 as of
December 31, 1995 and 1996, respectively, is included in other assets in the
accompanying financial statements. The non-current portion of unbilled accounts
receivable provides for payment terms that generally range from three to five
years and carry annual interest rates ranging from 7% to 10%. The Company
recognizes revenue in advance of billings under certain of its non-cancelable
long-term contracts that contain extended payment terms. The Company does not
have any obligation to refund any portion of its fees and has a history of
enforcement and collection of amounts due under such arrangements. Payments owed
under contracts with extended payment terms are due in accordance with the terms
of the respective contract. Historically, the Company has had minimal write-offs
of amounts due under such arrangements.
Additionally, included in unbilled accounts receivable are costs and
earnings in excess of billings related to certain software license fee
arrangements which are being recognized on a percentage-of-completion basis.
These amounts totaled approximately $1,572,000 and $1,240,000 as of December 31,
1995 and 1996, respectively.
INVENTORY
Inventory consists of computer parts and peripherals and is stated at the
lower of cost or market. Cost is determined using the first-in, first-out
method.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of foreign subsidiaries
are measured using the currency of the respective countries as the functional
currency. Assets and liabilities are translated at the foreign exchange rate in
effect at the balance sheet date, while revenues and expenses for the year are
translated at the average exchange rate in effect during the year. Translation
gains and losses are not included in
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
determining net income or loss but are accumulated and reported as a separate
component of shareholder's deficit. The Company has not entered into any hedging
contracts during the two year period ended December 31, 1996.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. For financial reporting
purposes, depreciation and amortization are provided using the straight-line
method over the estimated useful lives, which range from two to ten years.
Computer equipment is depreciated over useful lives which range from two to five
years. Office furniture and equipment is depreciated over two to ten years.
Leasehold improvements are amortized over the shorter of the useful lives of the
assets or the remaining term of the lease. When assets are retired or otherwise
disposed of, the related costs and accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in income. Expenditures for
repairs and maintenance not considered to substantially lengthen the property
lives are charged to expense as incurred.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The Company capitalizes a portion of the internal computer software
development costs incurred. Salaries, overhead, and other related costs incurred
in connection with programming and testing software products are capitalized
subsequent to establishing technological feasibility. Management monitors the
net realizable value of all capitalized software development costs to ensure
that the investment will be recovered through margins from future sales. These
costs are amortized utilizing the straight-line method over periods of 36-60
months. Capitalized costs related to software development were approximately
$12,905,000 and $12,170,000, for the years ended December 31, 1995 and 1996,
respectively and $750,000 for the period from January 1, 1997 through January
23, 1997. Amortization of capitalized software development costs amounted to
approximately $6,470,000 and $7,209,000 for the years ended December 31, 1995
and 1996, respectively, and $377,000 for the period from January 1, 1997 through
January 23, 1997 and is included in operating expenses in the accompanying
statements of operations.
INTANGIBLE ASSETS
The intangible assets arose from the acquisition of Medical Data
Technology, Inc. are stated at cost less accumulated amortization, and consist
of contracts and the excess of cost over fair value of net assets acquired. The
intangible assets are being amortized using the straight-line method over seven
years.
The carrying value of the excess of cost over fair value of net assets
acquired is reviewed if the facts and circumstances suggest that it may be
impaired. This review indicates if the asset will not be recoverable as
determined based on future expected cash flows. Based on its review, the Company
does not believe that an impairment of its excess of cost over fair value of net
assets acquired has occurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, and other current liabilities
approximate fair value. The carrying amount of the intercompany payable to
parent balance approximates fair value based on current rates of interest
available to Alltel, and accordingly, the Company, for loans of similar
maturities.
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996 (in thousands):
1995 1996
-------- --------
Computer equipment.......................................... $ 21,106 $ 25,093
Office furniture and equipment.............................. 2,815 4,198
Leasehold improvements and other............................ 2,407 3,461
-------- --------
26,328 32,752
Less: Accumulated depreciation and amortization............. (16,160) (22,013)
-------- --------
$ 10,168 $ 10,739
======== ========
4. OTHER ASSETS
During 1996, the Company entered into a marketing agreement with Integrated
Medical Networks, Inc. ("IMN") for the marketing rights of certain software
which will provide financial and managed care applications for entities within
the healthcare industry. Under the terms of the agreement, IMN will perform
significant enhancements to existing technology over a three year period. AHIS
will retain worldwide, perpetual marketing rights, as defined, for the resulting
technology. For the year ended December 31, 1996, AHIS made payments totaling
approximately $5,811,000 under this agreement and is included in other assets in
the accompanying financial statements. As discussed in Note 12, this agreement
and related asset was transferred to Alltel in conjunction with the sale of the
Company.
5. OTHER CURRENT LIABILITIES
Included in other current liabilities were the following as of December 31,
1995 and 1996 (in thousands):
1995 1996
------- -------
Accrued compensation and incentives......................... $ 6,434 $ 6,603
Accrued hardware costs...................................... 3,700 3,326
Accrued royalty costs....................................... 1,045 648
Current portion of long-term debt........................... 260 86
Other....................................................... 6,229 9,715
------- -------
$17,668 $20,378
======= =======
6. INCOME TAXES
The Company files its income tax return with AIS which files as part of the
consolidated Alltel group. Income tax expense and related balances shown in the
accompanying financial statements have been determined as if the Company filed
its tax return on a separate company basis.
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)
6. INCOME TAXES (CONTINUED)
The income tax benefit (provision) consists of the following (in
thousands):
PERIOD ENDED
1995 1996 JANUARY 23, 1997
------- ------- ----------------
Current
Federal........................................ $ 4,123 $ 2,503 $ --
State and other................................ 1,030 626 --
------- ------- ----
Deferred......................................... 5,153 3,129 --
------- ------- ----
Federal........................................ (4,833) (1,829) 377
State and other................................ (1,207) (457) 60
------- ------- ----
(6,040) (2,286) 437
------- ------- ----
$ (887) $ 843 $437
======= ======= ====
A reconciliation of the federal statutory rate and the effective income tax
rate follows (in thousands):
PERIOD ENDED
1995 1996 JANUARY 23, 1997
----- ------ ----------------
Statutory federal income tax rate (34%)......... $(508) $1,033 $413
Meals and entertainment....................... (128) (164) (14)
State income taxes............................ (141) 76 46
Non-deductible amortization................... (91) (101) (8)
Other......................................... (19) (1) --
----- ------ ----
Income tax benefit (provision)................ $(887) $ 843 $437
===== ====== ====
The significant components of the Company's net deferred tax liability were
as follows (in thousands):
1995 1996
-------- --------
Deferred tax assets
Deferred revenue.......................................... $ 4,009 $ 3,596
Inventory and accounts receivable allowances.............. 710 846
Compensation related accrued expenses..................... 584 806
Accrued expenses.......................................... 1,627 1,624
Deferred rent............................................. 660 484
Other..................................................... 1,949 844
-------- --------
9,539 8,200
-------- --------
Deferred tax liabilities
Capitalization of software development costs.............. (10,298) (11,475)
Depreciation.............................................. (1,039) (856)
Other..................................................... (1,528) (1,481)
-------- --------
(12,865) (13,812)
-------- --------
Net deferred tax liability.................................. $ (3,326) $ (5,612)
======== ========
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)
7. EMPLOYEE BENEFIT PLANS
Effective January 1, 1995, through Alltel, employees of the Company may
participate in a noncontributory, trusteed profit-sharing plan which covers
substantially all employees who meet certain length-of-service requirements.
Company contributions are determined annually by the Board of Directors of
Alltel. Contributions to the plan approximated $1,516,000 and $1,781,000 for the
years ended December 31, 1995 and 1996, respectively. During 1994, the Company
maintained a defined contribution profit-sharing plan. This plan was merged into
the Alltel trusteed thrift plan, discussed below during 1995.
Also, effective January 1, 1995, through Alltel, substantially all
employees of the Company may participate in the Alltel trusteed thrift plan.
Employees may contribute up to 10% of the employee's salary and the employer's
matching contribution is the lesser of 25% of the employee's contribution or
1.5% of the employee's salary. The trusteed thrift plan is intended to meet all
requirements of qualifications under Section 401(k) of the Internal Revenue
Code. Company contributions to the trusteed thrift plan were approximately
$412,000 and $452,000 for the years ended December 31, 1995 and 1996,
respectively.
During 1995, employees of the Company became eligible to participate in the
AIS Employee Stock Purchase Plan (the "ESPP") which has reserved for issuance
1,000,000 shares of Alltel common stock. The ESPP provides for the purchase of
shares of common stock by employees through payroll deductions which may not
exceed five percent of employee compensation, as defined. The employee
contributes 85% of the prevailing market price of the shares, which are
purchased on the open market. The remaining 15% is expensed by the Company in
the period the contribution is made. Company contributions to the ESPP were
approximately $104,000 and $48,000 for the years ended December 31, 1995 and
1996, respectively. On June 30, 1996, the ESPP was terminated.
During 1995, the employees of the Company became eligible to participate in
various benefit plans which were administered by Alltel. In addition to the
trusteed profit-sharing plan and trusteed thrift plan, employees were also
eligible to participate in certain benefit plans including group medical, dental
and other various plans. Total expenses related to these plans were
approximately $2,196,000 and $2,328,000 for the years ended December 31, 1995
and 1996, respectively and $194,000 for the period from January 1, 1997 through
January 23, 1997.
8. COMMITMENTS AND CONTINGENCIES
NONCANCELABLE OPERATING LEASES
The Company leases offices and certain equipment under noncancelable
operating leases. Rental expense under operating leases was approximately
$7,014,000 and $5,531,000 for the years ended December 31, 1995 and 1996,
respectively, and $461,000 for the period from January 1, 1997 through January
23, 1997. Future minimum rental payments for noncancelable operating leases as
of December 31, 1996 are as follows (in thousands):
YEAR ENDING
DECEMBER 31,
----------------
1997................................................... $ 4,877
1998................................................... 4,818
1999................................................... 3,625
2000................................................... 1,535
2001................................................... 1,414
Thereafter............................................. 1,798
-------
$18,067
=======
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION
The Company is involved in litigation incidental to its business. In the
opinion of management, after consultation with legal counsel, the ultimate
outcome of such litigation will not have a material adverse effect on the
Company's financial position or results of operations or cash flows.
9. RELATED PARTY TRANSACTIONS
The intercompany payable to parent balance represents amounts owed to
Alltel related to cash disbursements and receipts activity and certain other
transactions. All vendor related invoices are charged to this account at the
time an invoice is processed and, consequently, the accompanying financial
statements do not reflect an accounts payable balance. The intercompany balance
is reduced upon the posting of cash receipts. Intercompany interest of
approximately $2,833,000 and $3,858,000 for the years ended December 31, 1995
and 1996, respectively, and $379,000 for the period from January 1, 1997 through
January 23, 1997 was charged to this account at interest rates which ranged from
3.5% to 8.0% which represented the incremental borrowing rates of Alltel. As
more fully discussed in Note 12, the intercompany payable balance was converted
to equity on January 24, 1997 in connection with the sale of the Company.
For the years ended December 31, 1995 and 1996, Alltel charged the Company
approximately $2,277,000 and $2,100,000, respectively, and $175,000 for the
period January 1, 1997 through January 24, 1997 for costs related to providing
certain data center charges in conjunction with an outsourcing contract between
the Company and one of its customers.
During 1995 and 1996, legal services and external fees were provided and
paid by Alltel. These costs were approximately $1,869,000 and $964,000 for the
years ended December 31, 1995 and 1996, respectively, and are reflected in
general and administrative expenses in the accompanying financial statements.
During 1996 certain administrative services were performed by AIS, the cost
of which was estimated to be approximately $585,000 and is reflected in general
and administrative expenses in the accompanying financial statements. Prior to
1996, these functions were performed directly by employees of the Company and,
accordingly, the related costs are reflected in the accompanying financial
statements.
10. SUBSEQUENT EVENT
On January 24, 1997, the Company was purchased by Eclipsys Corporation
(formerly Integrated Healthcare Solutions, Inc.) for cash and other
consideration totaling approximately $201,500,000, including liabilities
assumed. Pursuant to the acquisition agreement, Alltel will retain the rights to
certain assets of the Company. These assets include the IMN marketing rights
(Note 4) with a balance of approximately $5,811,000 as of December 31, 1996 and
one of the Company's software products with related net capitalized software
costs as of December 31, 1996 of approximately $6,543,000.
F-36