COMPUTER PROGRAMS & SYSTEMS INC - 10-Q Quarterly Report

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 March 31, 2004.

¨	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: 000-49796

COMPUTER PROGRAMS AND SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		74-3032373
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

6600 Wall Street, Mobile, Alabama		36695
(Address of Principal Executive Offices)		(Zip Code)

(251) 639-8100

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 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 ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

As of April 22, 2004, there were 10,489,849 shares of the issuer’s common stock outstanding.

COMPUTER PROGRAMS AND SYSTEMS, INC.

Form 10-Q

(For the period ended March 31, 2004)

INDEX


		Page
PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements	1

	Condensed Balance Sheets (unaudited) – March 31, 2004 and December 31, 2003	1

	Condensed Statements of Income (unaudited) – Three Months Ended March 31, 2004 and 2003	2

	Condensed Statements of Cash Flows (unaudited) – Three Months Ended March 31, 2004 and 2003	3

	Notes to Condensed Financial Statements (unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	11

Item 4.	Controls and Procedures	11

PART II.	OTHER INFORMATION	11

Item 1.	Legal Proceedings	11

Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	11

Item 3.	Defaults upon Senior Securities	12

Item 4.	Submission of Matters to a Vote of Security Holders	12

Item 5.	Other Information	12

Item 6.	Exhibits and Reports on Form 8-K	12

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

COMPUTER PROGRAMS AND SYSTEMS, INC.

CONDENSED BALANCE SHEETS (Unaudited)


	March 31, 2004			December 31, 2003
Assets
Current assets:
Cash and cash equivalents	$	11,181,075		$	9,472,743
Accounts receivable, net of allowance for doubtful accounts of $914,000 and $904,000, respectively		9,667,651			11,916,414
Financing receivables, current portion		1,589,157			1,112,773
Inventories		1,091,213			1,102,061
Deferred tax assets		993,834			973,173
Prepaid income taxes		—			120,025
Prepaid expenses		168,898			364,384

Total current assets		24,691,828			25,061,573

Property and equipment
Land		936,026			936,026
Maintenance equipment		3,357,427			3,172,303
Computer equipment		4,504,447			4,320,011
Office furniture and equipment		1,402,149			1,391,110
Automobiles		89,934			89,934

		10,289,983			9,909,384
Less accumulated depreciation		(4,965,413	)		(4,561,080	)

Net property and equipment		5,324,570			5,348,304
Financing receivables		794,502			793,870

Total assets	$	30,810,900		$	31,203,747

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,459,255		$	1,126,334
Deferred revenue		1,438,481			1,633,887
Accrued vacation		1,592,911			1,561,577
Other accrued liabilities		745,607			1,129,976
Income taxes payable		313,780			—

Total current liabilities		5,550,034			5,451,774

Stockholders’ equity:
Common stock, par value $0.001 per share; 30,000,000 shares authorized; 10,489,849 issued and outstanding		10,490			10,490
Additional paid-in capital		17,289,910			17,289,910
Deferred compensation		(161,624	)		(174,385	)
Retained earnings		8,122,090			8,625,958

Total stockholders’ equity		25,260,866			25,751,973

Total liabilities and stockholders’ equity	$	30,810,900		$	31,203,747

See accompanying notes.

COMPUTER PROGRAMS AND SYSTEMS, INC.

CONDENSED STATEMENTS OF INCOME (Unaudited)


	Three months ended March 31,
	2004		2003
Sales revenues:
System sales	$	7,103,937	$	10,102,604
Support and maintenance		9,254,338		8,298,132
Outsourcing		1,853,935		1,674,188

Total sales revenues		18,212,210		20,074,924

Costs of sales:
System sales		6,433,277		7,132,707
Support and maintenance		4,144,403		3,911,234
Outsourcing		1,138,792		994,307

Total costs of sales		11,716,472		12,038,248

Gross profit		6,495,738		8,036,676

Operating expenses:
Sales and marketing		1,284,335		1,368,212
General and administrative		4,072,526		3,444,196

Total operating expenses		5,356,861		4,812,408

Operating income		1,138,877		3,224,268

Other income (expense):
Interest income		62,068		45,137
Miscellaneous income		9,282		39,880

Total other income		71,350		85,017

Income before taxes		1,210,227		3,309,285
Income taxes		455,312		1,238,048

Net income	$	754,915	$	2,071,237

Net income per share - basic	$	0.07	$	0.20

Net income per share - diluted	$	0.07	$	0.20

Weighted average shares outstanding
Basic		10,489,849		10,488,000
Diluted		10,527,101		10,569,223

Dividends declared per share	$	0.12	$	—

See accompanying notes.

COMPUTER PROGRAMS AND SYSTEMS, INC.

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)


	Three months ended March 31,
	2004			2003
Operating Activities
Net income	$	754,915		$	2,071,237
Adjustments to net income:
Provision for bad debt		143,500			24,500
Deferred taxes		(20,661	)		(41,693	)
Deferred compensation		12,761			12,760
Depreciation		404,333			309,000
Changes in operating assets and liabilities:
Accounts receivable		2,105,263			83,544
Financing receivables		(477,016	)		334,002
Inventories		10,848			181,226
Prepaid expenses		195,486			127,663
Accounts payable		332,921			(821,346	)
Deferred revenue		(195,406	)		(797,099	)
Other liabilities		(353,035	)		(719,318	)
Income taxes payable		433,805			815,295

Net cash provided by operating activities		3,347,714			1,579,771

Investing Activities
Purchases of property and equipment		(380,599	)		(585,128	)

Net cash used in investing activities		(380,599	)		(585,128	)

Financing Activities
Dividends paid		(1,258,783	)		—

Net cash used in financing activities		(1,258,783	)		—

Increase in cash and cash equivalents		1,708,332			994,643

Cash and cash equivalents at beginning of period		9,472,743			6,352,452

Cash and cash equivalents at end of period	$	11,181,075		$	7,347,095

See accompanying notes.

COMPUTER PROGRAMS AND SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the periods presented. All such adjustments are considered of a normal recurring nature. Quarterly results of operations are not necessarily indicative of annual results.

Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2003 and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2003.

2. NET INCOME PER SHARE

The Company presents both basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the periods presented. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period presented. The difference between basic and diluted EPS is solely attributable to stock options. The Company uses the treasury stock method to calculate the impact of outstanding stock options. For the three month period ended March 31, 2004, these dilutive shares were 37,252. For the three month period ended March 31, 2003, these dilutive shares were 81,223.

3. INCOME TAXES

The Company provides for income taxes using the liability method in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred income taxes arise from the temporary differences in the recognition of income and expenses for tax purposes. Deferred tax assets and liabilities are comprised of the following:


	March 31, 2004			December 31, 2003
Deferred tax assets:
Accounts receivable	$	336,916		$	328,253
Sales, income and use tax receivables		10,391			15,149
Accrued liabilities		707,944			696,037

		1,055,251			1,039,439

Deferred tax liabilities:
Deferred compensation		(61,417	)		(66,266	)

Net deferred tax assets	$	993,834		$	973,173

COMPUTER PROGRAMS AND SYSTEMS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (continued)

Significant components of the Company’s income tax provision for the three months ended March 31 are as follows:


	2004			2003
Current provision:
Federal	$	411,811		$	1,107,230
State		64,162			172,511
Deferred provision:
Federal		(18,486	)		(37,304	)
State		(2,175	)		(4,389	)

Total income tax provision	$	455,312		$	1,238,048

The difference between income taxes at the U. S. federal statutory income tax rate of 34% and those reported in the condensed statements of income for the three months ended March 31 are as follows:


		2004			2003

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