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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
 
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 0-27501
 
THE TRIZETTO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
DELAWARE
    
33-010761159
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
    
(I.R.S. EMPLOYER IDENTIFICATION
NUMBER)
 
567 SAN NICOLAS DRIVE, SUITE 360
NEWPORT BEACH, CALIFORNIA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
 
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 719-2200
 

 
Indicate by check mark 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 July 31, 2002, 45,742,866 shares, $0.001 par value per share, of the registrant’s common stock were outstanding.
 


Table of Contents
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
 
INDEX
 
        
PAGE

   
PART I—FINANCIAL INFORMATION
    
Item 1–
 
Financial Statements:
    
      
3
      
4
      
5
      
6
Item 2–
    
9
Item 3–
    
14
          
   
PART II—OTHER INFORMATION
    
Item 1–
    
15
Item 2–
    
15
Item 4–
    
15
Item 6–
    
15
  
16
 

2


Table of Contents
 
PART I—FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
THE TRIZETTO GROUP, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
 
    
JUNE 30,
2002

    
DECEMBER 31,
2001

 
    
(unaudited)
        
ASSETS
Current assets:
                 
Cash and cash equivalents
  
$
59,179
 
  
$
67,341
 
Short-term investments
  
 
31,293
 
  
 
15,059
 
Restricted cash
  
 
2,177
 
  
 
2,233
 
Accounts receivable, net
  
 
31,825
 
  
 
32,223
 
Current portion of notes receivable
  
 
78
 
  
 
113
 
Notes receivable from related parties
  
 
99
 
  
 
124
 
Prepaid expenses and other current assets
  
 
7,166
 
  
 
5,626
 
Income tax receivable
  
 
538
 
  
 
75
 
Deferred tax asset
  
 
6,738
 
  
 
6,738
 
    


  


Total current assets
  
 
139,093
 
  
 
129,532
 
Property and equipment, net
  
 
39,165
 
  
 
34,867
 
Long term portion of notes receivable
  
 
118
 
  
 
141
 
Other assets
  
 
21,849
 
  
 
14,479
 
Goodwill and other intangible assets, net
  
 
204,901
 
  
 
211,702
 
    


  


Total assets
  
$
405,126
 
  
$
390,721
 
    


  


                   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
                 
Short-term notes payable and lines of credit
  
$
17,385
 
  
$
16,808
 
Capital lease obligations
  
 
3,475
 
  
 
2,799
 
Accounts payable
  
 
9,951
 
  
 
8,109
 
Accrued liabilities
  
 
28,037
 
  
 
23,414
 
Income taxes payable
  
 
108
 
  
 
1,049
 
Deferred revenue
  
 
46,499
 
  
 
31,208
 
    


  


Total current liabilities
  
 
105,455
 
  
 
83,387
 
Long-term notes payable and lines of credit
  
 
4,517
 
  
 
6,094
 
Deferred taxes
  
 
11,275
 
  
 
13,751
 
Capital lease obligations
  
 
3,681
 
  
 
3,605
 
Deferred revenue
  
 
4,115
 
  
 
1,889
 
Other long-term liabilities
  
 
1,038
 
  
 
1,040
 
    


  


Total liabilities
  
 
130,081
 
  
 
109,766
 
    


  


Stockholders’ equity:
                 
Common stock
  
 
46
 
  
 
45
 
Additional paid-in capital
  
 
399,405
 
  
 
397,740
 
Notes receivable from stockholders
  
 
(41
)
  
 
(41
)
Deferred stock compensation
  
 
(3,557
)
  
 
(4,265
)
Accumulated deficit
  
 
(120,808
)
  
 
(112,524
)
    


  


Total stockholders’ equity
  
 
275,045
 
  
 
280,955
 
    


  


Total liabilities and stockholders’ equity
  
$
405,126
 
  
$
390,721
 
    


  


 
See Notes to Unaudited Condensed Consolidated Financial Statements

3


Table of Contents
 
THE TRIZETTO GROUP, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
 
    
THREE MONTHS ENDED JUNE 30,

    
SIX MONTHS ENDED
JUNE 30,

 
    
2002

    
2001

    
2002

    
2001

 
REVENUE:
                                   
Recurring revenue
  
$
40,844
 
  
$
33,333
 
  
$
80,628
 
  
$
63,656
 
Non-recurring revenue
  
 
25,937
 
  
 
19,986
 
  
 
45,847
 
  
 
35,702
 
    


  


  


  


Total revenue
  
 
66,781
 
  
 
53,319
 
  
 
126,475
 
  
 
99,358
 
    


  


  


  


COST OF REVENUE:
                                   
Recurring revenue (1)
  
 
29,047
 
  
 
24,734
 
  
 
57,252
 
  
 
49,005
 
Non-recurring revenue (2)
  
 
15,814
 
  
 
11,473
 
  
 
28,008
 
  
 
21,129
 
    


  


  


  


Total cost of revenue
  
 
44,861
 
  
 
36,207
 
  
 
85,260
 
  
 
70,134
 
    


  


  


  


GROSS PROFIT
  
 
21,920
 
  
 
17,112
 
  
 
41,215
 
  
 
29,224
 
    


  


  


  


OPERATING EXPENSES:
                                   
Research and development (3)
  
 
5,577
 
  
 
4,720
 
  
 
11,008
 
  
 
9,564
 
Selling, general and administrative (4)
  
 
14,252
 
  
 
13,574
 
  
 
27,516
 
  
 
26,584
 
Amortization of intangibles
  
 
6,997
 
  
 
16,985
 
  
 
13,479
 
  
 
34,269
 
Restructuring and related impairment charges
  
 
165
 
  
 
—  
 
  
 
244
 
  
 
—  
 
    


  


  


  


Total operating expenses
  
 
26,991
 
  
 
35,279
 
  
 
52,247
 
  
 
70,417
 
    


  


  


  


LOSS FROM OPERATIONS
  
 
(5,071
)
  
 
(18,167
)
  
 
(11,032
)
  
 
(41,193
)
Interest income
  
 
351
 
  
 
450
 
  
 
676
 
  
 
858
 
Interest expense
  
 
(340
)
  
 
(364
)
  
 
(708
)
  
 
(698
)
    


  


  


  


LOSS BEFORE BENEFIT FROM INCOME TAXES
  
 
(5,060
)
  
 
(18,081
)
  
 
(11,064
)
  
 
(41,033
)
Benefit from income taxes
  
 
1,390
 
  
 
3,100
 
  
 
2,780
 
  
 
8,118
 
    


  


  


  


NET LOSS
  
$
(3,670
)
  
$
(14,981
)
  
$
(8,284
)
  
$
(32,915
)
    


  


  


  


Net loss per share:
                                   
Basic and diluted
  
$
(0.08
)
  
$
(0.40
)
  
$
(0.18
)
  
$
(0.90
)
    


  


  


  


Shares used in computing net loss per share:
                                   
Basic and diluted
  
 
45,094
 
  
 
37,298
 
  
 
45,007
 
  
 
36,535
 
    


  


  


  



(1)
 
Cost of recurring revenue for the three months ended June 30, 2002 and 2001, includes $104 and $216 of amortization of deferred stock compensation, respectively. Cost of recurring revenue for the six months ended June 30, 2002 and 2001, includes $271 and $431 of amortization of deferred stock compensation, respectively.
 
(2)
 
Cost of non-recurring revenue for the three months ended June 30, 2002 and 2001, includes $150 and $190 of amortization of deferred stock compensation, respectively. Cost of non-recurring revenue for the six months ended June 30, 2002 and 2001, includes $333 and $272 of amortization of deferred stock compensation, respectively.
 
(3)
 
Research and development for the three months ended June 30, 2002 and 2001, includes $51 and $64 of amortization of deferred stock compensation, respectively. Research and development for the six months ended June 30, 2002 and 2001, includes $106 and $127 of amortization of deferred stock compensation, respectively.
 
(4)
 
Selling, general and administrative for the three months ended June 30, 2002 and 2001, includes $271 and $442 of amortization of deferred stock compensation, respectively. Selling, general and administrative for the six months ended June 30, 2002 and 2001, includes $703 and $951 of amortization of deferred stock compensation, respectively.
 
See Notes to Unaudited Condensed Consolidated Financial Statements

4


Table of Contents
 
THE TRIZETTO GROUP, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
 
    
SIX MONTHS ENDED JUNE 30,

 
    
2002