UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2002
OR
Commission file Number: 000-32085
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.(Exact name of registrant as specified in its charter)
2401 Commerce Drive Libertyville, Illinois 60048(Address of Principal Executive Offices)
(847) 680-3515(Registrant's telephone number, including area code)
Indicate by check (X) whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO___
As of April 30, 2002, there were 38,422,943 shares of the Registrant's $0.01 par value common stock outstanding.
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC. FORM 10-Q INDEX
Effective January 8, 2001, Allscripts, Inc. acquired Channelhealth Incorporated, and each became a wholly owned subsidiary of a new holding company, Allscripts Healthcare Solutions, Inc., which was originally incorporated in Delaware as Allscripts Holding, Inc. on July 11, 2000. As a result of the merger transaction, each outstanding share of Allscripts, Inc. common stock was converted into one share of Allscripts Healthcare Solutions, Inc. common stock. Allscripts, Inc. no longer files reports with the Securities and Exchange Commission, and its common stock is no longer listed on the Nasdaq National Market; however, Allscripts Healthcare Solutions, Inc. does file reports with the Securities and Exchange Commission, and its common stock is listed on the Nasdaq National Market under the symbol "MDRX". In this report, "we", "us", "our" and "Allscripts", when referring to events prior to January 8, 2001, refer to our wholly owned subsidiary and predecessor, Allscripts, Inc., and, when referring to su bsequent time periods, refer to Allscripts Healthcare Solutions, Inc. and its wholly owned subsidiaries, including Allscripts, Inc. and Channelhealth Incorporated, unless the context indicates otherwise.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying notes are an integral part of these consolidated financial statements
1
2
The accompanying notes are an integral part of these consolidated financial statements.
3
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
1. Basis of Presentation The quarterly financial information presented herein should be read in conjunction with Allscripts' audited consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K. The unaudited interim consolidated financial statements have been prepared on a basis consistent with those consolidated financial statements and reflect all adjustments (all of which are of a normal recurring nature) that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. The consolidated financial statements include the accounts of Allscripts Healthcare Solutions, Inc. and its wholly owned subsidiaries (collectively referred to as "Allscripts"). All significant intercompany accounts and transactions have been eliminated in consolidation. The results for the interim periods are not necessarily indicative of the results to be expected for the year. Certain reclassifications have been made in the prior period financial statements to conform to the current period presentation.
2. Revenue Recognition
Allscripts' revenue is, in part, derived from the sale of medications for dispensing at the point of care. Allscripts offers the right of return on pharmaceutical products under various policies and estimates and maintains reserves for product returns based on historical experience following the guidelines of Statement of Financial Accounting Standards (SFAS) No. 48, "Revenue Recognition When Right of Return Exists." Revenue from the sale of medications, net of provisions for estimated returns, is recognized upon shipment of the pharmaceutical products when no performance obligations remain and collection of the receivable is probable.
Revenue is also generated from sales of software licenses and related consulting services as well as from subscriptions for software and hardware.
Revenue from software licensing arrangements requiring significant installation and configuration is accounted for under American Institute of Certified Public Accountants Statement of Position (SOP) 81-1 "Accounting for Performance of Construction-Type Contracts and Certain Production-Type Contracts." Revenue is recognized on an output basis as contract milestones are reached provided that the fee is fixed and determinable and collection of the resulting receivable is considered probable. Maintenance and support revenue from these agreements is recognized over the term of the support agreement based on the fair value of the maintenance revenue, which is generally based on contracted renewal rates. For agreements whose payment terms extend beyond twelve months, revenue is recognized as amounts become due and payable upon invoicing, not to exceed the amount of revenue supported by milestones reached.
As of March 31, 2002, there was $785,000 of revenue earned on contracts in excess of billings and $1,255,000 of billings in excess of revenue earned on contracts in progress. Billings on contracts where revenue has been earned in excess of billings are expected to occur according to the contract terms.
Revenue from software licensing arrangements not requiring significant installation and configuration is accounted for under SOP 97-2, "Software Revenue Recognition," as amended by SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions." Revenue is recognized upon shipment of the software or as services are performed, provided persuasive evidence of an arrangement exists, fees are considered fixed and determinable, and collection of the resulting receivable is considered probable. The revenue to be recognized for each separate element of a multiple-element software contract is based upon vendor-specific objective evidence of fair value, which is based upon the price the customer is required to pay when the element is sold separately. For agreements where payment terms extend beyond twelve months, revenue is recognized as the customer is billed over the term of the agreement to the extent of the percentage complete.
Revenue from stand-alone service contracts is recognized as services are performed.
Revenue from physician education products is recognized as physician participation occurs.
In November 2001, the Emerging Issues Task Force (EITF) reached a consensus codified as Topic D-103, "Income Statement Characterization of Reimbursements for 'Out-of-Pocket' Expenses Incurred." The consensus requires that reimbursements for out-of-pocket expenses be classified as revenue in the statement of operations. The consensus is effective for fiscal years beginning after December 15, 2001. Allscripts has adopted EITF Topic D-103 and reimbursements are now being recorded as revenue. Out-of-pocket expenses reimbursed by customers that were classified as revenue for the three months ended March 31, 2002 and 2001 were $91,000 and $0, respectively. This classification had the effect of reducing gross margin percentage by 0.1% for the three months ended March 31, 2002.
3. Comprehensive Loss Comprehensive loss includes all changes in stockholders' equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive loss for the three months ended March 31, 2002 and 2001 consisted of the following (in thousands):
4. Restructuring and Other Charges
In July 2001, Allscripts announced and began implementation of a restructuring plan to realign its organization; prioritize its initiatives around high-growth areas of its business; focus on profitability; reduce operating expenses; improve efficiencies in light of recent acquisitions; and focus sales and service efforts on larger physician practices, academic medical centers, and integrated delivery networks. The restructuring plan included workforce and overhead reduction and the termination of certain unprofitable strategic agreements and customer relationships. As a result of the restructuring plan, Allscripts recorded restructuring and other charges of $4,370,000 and $4,266,000, respectively, in fiscal 2001, of which $6,435,000 was classified as operating expenses and $2,201,000 was classified as cost of revenue in the statement of operations.
Restructuring
Workforce reduction
The restructuring plan will result in the reduction of approximately 190 employees across all business functions, of which 183 were terminated as of March 31, 2002. The workforce reductions started in the third quarter of 2001 and were substantially completed by the end of the first quarter of 2002. As part of the restructuring charge, Allscripts recorded a workforce reduction charge in fiscal 2001 of $3,317,000 consisting primarily of severance and related benefits.
Termination of agreements
Allscripts recorded a charge of $1,053,000 in fiscal 2001 related to the termination of certain agreements and non-cancelable leases that were originally expected to increase product distribution and enhance product offerings. The charge includes estimated payments for the early termination of these agreements, which are expected to be terminated by June 30, 2002, except the lease agreements, which will expire through January 2006.
Other Charges
Termination of unprofitable customer contracts
Allscripts recorded a charge in fiscal 2001 of $4,266,000 related to the termination of unprofitable customer contracts. The termination of unprofitable customer contracts occurred in client sites where system utilization was low. The charge relates to the reduction of the carrying value of receivables to their expected realizable value and the costs for disposition of assets relating to these sites resulting from terminating the customer relationship.
5
A summary of the activity and balances of the restructuring and other charges reserve accounts is outlined as follows (in thousands):
Balance atDecember 31, 2001
Write-offs
CashPayments
Balance atMarch 31, 2002
$1,693
$ -
$543
$1,150
658
-
323
335
2,351
866
1,485
Other charges
640
$2,991
$866
$2,125
5. Net Loss Per Share
Allscripts accounts for net loss per share in accordance with SFAS No. 128, "Earnings per Share," which requires the presentation of basic and diluted earnings per share. Basic loss per share is computed by dividing the net loss by the weighted average shares of outstanding common stock (including additional shares that may be issued pursuant to business combinations). For purposes of calculating diluted loss per share, the denominator includes both the weighted average shares of common stock outstanding (including shares to be issued pursuant to business combinations) and dilutive common stock equivalents.
In accordance with SFAS No. 128, basic and diluted net loss per share have been computed using the weighted average number of shares of common stock outstanding during the period. Allscripts has excluded the impact of all outstanding warrants and options to purchase shares of common stock because all such securities are antidilutive for all periods presented. Antidilutive potential common stock securities excluded from the diluted loss per share computation consisted of 8,397,940 and 6,689,453 options and 3,333 and 18,450 warrants at March 31, 2002 and 2001, respectively.
6. Sale of Common Stock
On March 21, 2002, Allscripts sold a strategic partner 378,501 shares of Allscripts common stock at an average fair market value for the 15 days preceding the transaction date for a purchase price of $1,992,000, net of related expenses of $8,000.
7. Business Segments
SFAS No. 131, "Disclosures about Segments of a Business Enterprise and Related Information," establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
Allscripts currently organizes its business around groups of similar products and operates in three segments: prepackaged medications; software and related services; and information services. The prepackaged medications segment derives its revenues from the repackaging, sale, and distribution of medications. The software and related services segment derives its revenues from the sale and installation of software that provides point-of-care decision support solutions. The information services segment derives its revenues from the sale of interactive physician education sessions. All corporate operating expenses are allocated to each operating segment, using a reasonable basis for each expense. Allscripts does not allocate interest income, interest expense, other income or income tax benefit to its operating segments.
Allscripts does not report its assets by segment or allocate its assets to its segments. Allscripts allocates depreciation and amortization to each segment, but does not allocate the related assets.
6
7. Goodwill Amortization
As of January 1, 2002, Allscripts has adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 eliminates the requirement to amortize goodwill. The phase-in test for impairment required within the first six months of the adoption of SFAS No. 142 has not been performed yet. Management plans to perform this test on or before June 30, 2002 and does not expect there to be any impairment that would have a material impact. If any impairment was found, the impairment charge would be required to be recorded as of the adoption date. The following table is a reconciliation of reported net loss and basic and diluted loss per share to adjusted net loss and basic and diluted loss per share reflecting the impact if SFAS No. 142 had been effective for the three months ended March 31, 2001 (in thousands, except per-share data):
Amortization of intangible assets for the three months ended March 31, 2002 totaled $192,000. The following table reflects the carrying amounts and accumulated amortization for each type of intangible asset (in thousands):
Allscripts estimates that the amortization expense will be $427,000 for the remainder of 2002 and $520,000 per year for the next five fiscal years.
7
8. Contingencies
The pharmaceutical repackaging industry is subject to stringent federal and state regulations. Allscripts' repackaging operations are regulated by the Food and Drug Administration as if Allscripts were a manufacturer. Allscripts is also subject to regulation by the Drug Enforcement Administration in connection with the packaging and distribution of controlled substances.
Allscripts is a defendant in over 2,000 multi-defendant lawsuits brought by over 3,000 claimants involving the manufacture and sale of dexfenfluramine, fenfluramine and phentermine. The majority of these suits were filed in state courts in Texas beginning in August 1999. The plaintiffs in these cases claim injury as a result of ingesting a combination of these weight-loss drugs. In each of these suits, Allscripts is one of many defendants, including manufacturers and other distributors of these drugs. Allscripts does not believe it has any significant liability incident to the distribution or repackaging of these drugs, and it has tendered defense of these lawsuits to its insurance carrier for handling. In addition, Allscripts has been indemnified by the primary manufacturer of the drugs at issue in these cases. In addition, while Allscripts has not yet conducted a review of all of the Texas suits, since physician dispensing is generally prohibited in Texas and Allscripts has never distributed these drugs in Texas, Allscripts believes that it is unlikely that it is responsible for the distribution of the drugs at issue in many of these cases. The lawsuits are in various stages of litigation, and it is too early to determine what, if any, liability Allscripts will have with respect to the claims made in these lawsuits. If Allscripts' insurance coverage in the amount of $16,000,000 per occurrence and $17,000,000 per year in the aggregate and its indemnity from the drug manufacturer is inadequate to satisfy any resulting liability, Allscripts will have to defend these lawsuits and be responsible for the damages, if any, that Allscripts suffers as a result of these lawsuits. Allscripts does not believe that the outcome of these lawsuits will have a material adverse effect on its consolidated financial position, results of operations or cash flows.
In addition, Allscripts is from time to time subject to legal proceedings and claims that arise in the normal course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not have a material adverse effect on Allscripts' consolidated financial position, results of operations or cash flows.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
We provide point-of-care medication management and physician decision support solutions that focus on addressing the needs of physicians, managed care payers and plans.
From our inception in 1986 through 1996, we focused almost exclusively on the sale of prepackaged medications to physicians, in particular those with a high percentage of fee-for-service patients. The advent of managed prescription benefit programs required providers to obtain reimbursement for medications dispensed from managed care organizations rather than directly from their patients. This new reimbursement methodology made it more difficult for our physician customers to dispense medications to their patient base.
In 1997, under the direction of our new executive management team, we focused our efforts on the information aspects of medication management, including the development of technology tools necessary for electronic prescribing, routing of prescription information and submission of medication claims for managed care reimbursement. In January 1998, we introduced the first version of our TouchWorks software that fully incorporated these features. At the same time, we redirected our sales and marketing efforts away from our traditional fee-for-service customer base to physicians who have a large percentage of managed care patients. We recognized that there is a larger market opportunity among physicians whose patients are covered by managed care plans because the portion of prescriptions covered by managed care plans is increasing relative to the portion of fee-for-service prescriptions. Further, we believe that our technology can give us a competitive advantage where more patients' prescriptions are covered b y managed care plans because our products streamline the process by which physicians, managed care organizations and patients interact. In addition, we believe that the managed care market provides us with the opportunity to realize higher margins on our software products.
We believe that managed care prescription programs will continue to cover an increasing percentage of patients in the foreseeable future. This trend will have the effect of reducing the dispensing opportunities of our traditional dispensing customers because of their inability to submit claims electronically for reimbursement by managed care payers. This reduction in dispensing opportunities will reduce the revenue that we have historically recognized from these customers. Additionally, managed care programs impose reduced reimbursement rates for the medications dispensed to their plan participants, thus providing us with a dollar margin per prescription dispensed that is lower than we have historically experienced. Because TouchWorks enables physicians to submit claims electronically for reimbursement by managed care payers, a large portion of the medications dispensed by our TouchWorks customers is dispensed to managed care patients. Accordingly, we expect that the fastest growing portion of our busines s will provide margins with respect to the sale of prepackaged medications that are lower than we have historically experienced. In addition, we expect that seasonal variances in demand for our products and services will continue. Historically, all other factors aside, our sales of prepackaged medications have been highest in the fall and winter months.
In addition to medication management, there are other aspects of the physician's daily work flow that we believe can be effectively addressed through technology-focused solutions. We have enhanced and intend to continue to enhance our current offerings by integrating new products and services that address these needs. In furtherance of this strategy, in May 2000, we acquired MasterChart, Inc., a software developer providing dictation, integration and patient record technology, and Medifor, Inc., a provider of electronic patient education. In addition, on January 8, 2001, we acquired Channelhealth Incorporated, a software developer providing modular software for physicians to access medical information and manage clinical workflow.
In July 2001, we announced and began implementation of a restructuring plan to realign our organization; prioritize our initiatives around high-growth areas of our business; focus on profitability; reduce operating expenses; improve efficiencies in light of the aforementioned acquisitions; and focus sales and service efforts on larger physician practices, academic medical centers, and integrated delivery networks. The restructuring plan includes workforce and overhead reduction, and the termination of certain strategic agreements and unprofitable customer contracts. As a result of the restructuring plan, we recorded restructuring and other charges of $4,370,000 and $4,266,000, respectively, during the third quarter of 2001, of which $6,435,000 was classified as operating expenses and $2,201,000 was classified as cost of revenue. In addition, certain events and changes in circumstances caused us to conduct a review of the carrying value of our goodwill and purchased intangible assets. These events inc lude the restructuring plan, the business climate, which has generated valuation declines of enterprises in our industry, and the failure of certain assets to generate the cash flows that were projected at the time of acquisition. As a result of this review, we recorded an asset impairment charge of $354,984,000 during 2001.
We currently operate in three business segments: prepackaged medications; software and related services; and information services. Software and related services include revenue from software licenses, computer hardware, and related services. Information services includes physician education and information products.
9
The following table illustrates the quarterly revenue trend for the three segments (unaudited in thousands):
Quarter Ended
2002
2001
March 31,
Dec. 31,
Sept. 30,
June 30,
Prepackaged medications
$12,479
$12,777
$11,613
$12,719
$12,563
Software and related services
4,439
4,455
3,937
5,379
3,322
Information services
1,855
1,459
904
1,075
714
Total revenue
$18,773
$18,691
$16,454
$19,173
$16,599
Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001
Prepackaged Medications
Prepackaged medication revenue decreased by 0.7% or $84,000 from $12,563,000 in the first quarter of 2001 to $12,479,000 in the first quarter of 2002. The decrease in prepackaged medication revenue reflects a decrease in the volume of prepackaged medications sold resulting from the termination of unprofitable customer arrangements, including outsourcing, offset by an increase in the average selling prices of medications sold, caused primarily by general price inflation.
Cost of revenue for prepackaged medications for the three months ended March 31, 2002 decreased by 0.8% or $85,000 from $10,313,000 in 2001 to $10,228,000 in 2002. The decrease in cost of revenue for prepackaged medications was primarily due to decreased revenue from prepackaged medications.
Operating expenses for prepackaged medications for the three months ended March 31, 2002 decreased by 20.0%, or $438,000 from $2,195,000 in 2001 to $1,757,000 in 2002. The decrease was primarily due to lower intangible amortization expense resulting from an intangible asset impairment charge taken during 2001, and the elimination of the requirement to amortize goodwill pursuant to Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets."
Software and Related Services
Software and related service revenue for the three months ended March 31, 2002 increased by 33.6% or $1,117,000 from $3,322,000 in 2001 to $4,439,000 in 2002. The increase reflects an increase in sales of our integrated content and clinical workflow products.
Cost of revenue for software and related services decreased by 19.2% or $927,000 from $4,831,000 in the first quarter of 2001 to $3,904,000 in the first quarter of 2002. The decrease was primarily due to decreased amortization expense of acquired software and lower depreciation expense due to the decision to exit unprofitable customer contracts, offset by increased cost of implementation, training, and support.
Operating expenses for software and related services for the three months ended March 31, 2002 decreased by 75.7%, or $24,221,000 from $32,008,000 in 2001 to $7,787,000 in 2002. The decrease was primarily due to lower intangible amortization expense resulting from an intangible asset impairment charge taken during 2001, and the elimination of the requirement to amortize goodwill pursuant to SFAS No. 142. In addition, operating expenses were lower resulting from workforce reductions that were aimed at improving efficiencies in light of acquisitions made during 2001 and 2000 and the decision to focus sales and service efforts on larger physician practices. During the three months ended March 31, 2001, we recorded a write-off of acquired in-process research and development of $3,000,000 related to an acquisition.
Information Services
Information services revenue increased by 159.8% or $1,141,000 from $714,000 in the first quarter of 2001 to $1,855,000 in 2002. The increase in information services revenue reflects an increase in the number of interactive physician education sessions completed as compared to the same period in 2001.
Cost of revenue for information services for the three months ended March 31, 2002 increased 84.5% or $375,000 from $444,000 in 2001 to $819,000 in 2002. The increase in cost of revenue for information services was due to increased costs related to a higher number of physician education sessions completed.
10
Operating expenses for information services for the three months ended March 31, 2002 decreased by 31.7%, or $473,000 from $1,492,000 in 2001 to $1,019,000 in 2002. The decrease was primarily due to lower intangible amortization expense as the related intangible asset balance was fully amortized during 2001.
Interest Income and Income Taxes
Interest income for the three months ended March 31, 2002 was $746,000 as compared to $1,779,000 for the prior year period. The decrease related to a lower average cash and marketable securities balance and a decrease in the average interest rates earned on our investments as compared to the prior year period.
We recorded a benefit for income taxes during the three months ended March 31, 2001 of $2,099,000 from the scheduled reversal of deferred tax liabilities related to the amortization of non-goodwill intangible assets. No other provision or tax benefit for income taxes was recorded in either period because we currently anticipate that annual income taxes payable will be minimal or zero, and we have provided a valuation allowance for our net deferred tax assets.
Liquidity and Capital Resources
At March 31, 2002, our principal sources of liquidity consisted of $22,117,000 of cash and cash equivalents and $49,562,000 of marketable securities. At March 31, 2002, we had net working capital of $49,308,000 and an accumulated deficit of $544,330,000.
Net cash used in operating activities was $7,902,000 for the three months ended March 31, 2002. Cash used in operating activities resulted primarily from a loss from operations of $6,024,000, partially offset by depreciation and amortization of $1,550,000. Accounts receivable increased by $2,175,000 in the three months ended March 31, 2002, primarily due to an increase as the quarter progressed in an average day's sales for prepackaged medications and the timing of billings in our software and related services and information services segments. Accrued compensation decreased by $1,044,000 primarily due to the payment of employee compensation obligations during the three months ended March 31, 2002. Inventories decreased by $939,000 during the three months ended March 31, 2002 due to the sale of advance purchases of certain medications where shortages were expected. Accrued restructuring and other charges decreased by $866,000 during the three months ended March 31, 2002 primarily due to cash payments made for employee severance arrangements.
Net cash used in investing activities was $6,046,000 for the three months ended March 31, 2002. Cash used in investing activities resulted primarily from net purchases of marketable securities of $5,650,000. In addition, capital expenditures were $290,000 for the three months ended March 31, 2002 as a result of capital outlays to support the future growth of our business. We also capitalized software development costs of $106,000 during the three months ended March 31, 2002. Currently, we have no material commitments for capital expenditures, although we anticipate ongoing capital expenditures in the ordinary course of business.
Net cash provided by financing activities was $1,941,000 for the three months ended March 31, 2002, primarily as a result of the net proceeds from the issuance of common stock to a strategic partner.
The following summarizes our contractual obligations at March 31, 2002, and the effect such obligations are expected to have on our liquidity and cash in future periods (in thousands).
Total
Remainderof 2002
2003-2004
2005+
Contractual obligations:
Non-cancelable capital leases
$ 387
$ 202
$ 185
2,636
770
1,635
231
1,838
919
$4,861
$1,891
$2,739
$231
We believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet the anticipated cash needs of our current business for at least the next twelve months. However, any projections of future cash needs and cash flows are subject to substantial uncertainty. We will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, which might impact our liquidity requirements or cause us to issue additional equity or debt securities. There can be no assurance that financing will be available in the amounts or on terms acceptable to us, if at all.
11
Safe Harbor For Forward-Looking Statements
This report, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Notes to Consolidated Financial Statements," and statements we or our representatives make may contain forward-looking statements that involve risks and uncertainties. We develop forward-looking statements by combining currently available information with our beliefs and assumptions. These statements often contain words like believe, expect, anticipate, intend, contemplate, seek, plan, estimate or similar expressions. Forward-looking statements do not guarantee future performance. Recognize these statements for what they are and do not rely upon them as facts.
Forward-looking statements involve risks, uncertainties and assumptions, including, but not limited to, those discussed in this report. We make these statements under the protection afforded them by Section 21E of the Securities Exchange Act of 1934. Because we cannot predict all of the risks and uncertainties that may affect us, or control the ones we do predict, our actual results may be materially different from the results we express in our forward-looking statements. Unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
For a more complete discussion of the risks, uncertainties and assumptions that may affect us, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2002, we did not own any derivative instruments but we were exposed to market risks, primarily changes in U.S. interest rates. As of March 31, 2002, we had cash, cash equivalents and marketable securities in financial instruments of $71,679,000. Maturities range from less than one month to approximately 18 years. Declines in interest rates over time will reduce our interest income from our investments. Based upon our balance of cash, cash equivalents and marketable securities as of March 31, 2002, a decrease in interest rates of 1.0% would cause a corresponding decrease in our annual interest income of approximately $717,000.
12
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
On January 5, 2002, Allscripts issued an aggregate of 4,404 shares of unregistered common stock upon the exercise of outstanding warrants for an aggregate purchase price of $264. Exemption from registration is claimed under Sections 3(a)(9) and 4(2) of the Securities Act.
On March 21, 2002, Allscripts sold 378,501 shares of unregistered common stock to a strategic partner for a purchase price of $2,000,000 in cash. Exemption from registration is claimed under Section 4(2) of the Securities Act, no public sale having been involved.
ITEM 6. Exhibits and Reports on Form 8-K
(A) Exhibits -- See Index to Exhibits.
(B) Reports on Form 8-K -- None.
13
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.
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC. (Registrant)
By: /s David B. Mullen David B. Mullen Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)
Date: May 15, 2002
14
INDEX TO EXHIBITS
* Portions of this exhibit have been omitted pending the Commission's review of a request for confidential treatment.
15