DAOU Systems, Inc. Reports Financial Results For Second Quarter 2000; Company In Acquisition Talks With Perot Systems Corporation.Business Editors and Health/Medical Writers SAN DIEGO--(BW HealthWire)--Aug. 10, 2000 Results Include Restructuring Charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. Related To Consolidation And Resizing Of Company's Operations DAOU Systems, Inc. (Nasdaq: DAOU) today reported financial results for the second quarter and first six months of 2000. The Company also announced that it is considering strategic alternatives designed to maximize shareholder value, and is currently holding discussions with Perot Systems Perot Systems Corporation NYSE: PER is an information technology services provider based in Plano, Texas. Peter Altabef has served as president, chairman, and chief executive officer since 2004. Corporation (NYSE NYSE See: New York Stock Exchange : PER) regarding the possible sale of the Company. Although no definitive agreement has been signed and a price has not been agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy , the price currently being discussed would not be at a substantial premium over the current market price. There can be no assurance that an agreement regarding the sale of the Company will be reached as a result of the current discussions at such a price or any price, or that an agreement will be reached with any other company at all. For the quarter ended June 30, 2000, DAOU reported revenue of $16,127,000 and a net loss to common shareholders of $2,768,000, or $.16 per common share, excluding restructuring charges of $827,000, or $.05 per share, related to recent actions by the Company to further consolidate its operations and reduce operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. primarily through a reduction in headcount. Including the restructuring charge, DAOU reported a net loss of $.20 per common share, for the second quarter of 2000. This compares to a net loss of $4,650,000, or $.26 per common share on revenue of $17,575,000 for the first quarter of 2000, and to net income of $60,000, or breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations per common share, on revenue of $27,051,000 for the second quarter of 1999. Second quarter 1999 included approximately $2 million in revenue from discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: businesses and a contract the Company chose to terminate in early 1999. DAOU's second quarter 2000 revenues reflect a continued lag in the demand for the Company's core health care information technology (IT) services. Gross margin for the second quarter of 2000 improved to 19% from 9% in the first quarter of 2000. Gross margin in the second quarter of 1999 was 29%. Total operating expenses, excluding the restructuring charge, decreased to $5,829,000 for the second quarter of 2000, compared to $6,254,000 in the first quarter of 2000 and from $7,739,000 in the second quarter of 1999. The decrease in operating expenses was due primarily to the consolidation of certain selling, general and administrative functions, as well as further consolidation of operating facilities. As of June 30, 2000, cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments increased slightly to $12,886,000, as compared to $12,701,000 at March 31, 2000, due to improved collection efforts and the realization of contract work in process. Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying decreased to $14,692,000 from $16,857,000 at the end of the first quarter of 2000, and from $21,912,000 at the end of 1999. Days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSOs) declined to 95 days from 101 days at the end of the first quarter of 2000. Contract work in progress decreased to $1,456,000 from $3,743,000 at March 31, 2000 and from $8,606,000 at the end of the second quarter last year. "Second quarter 2000 revenues were impacted by continued weak market demand for our core health care IT services, due primarily to budgets constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by large Y2K See Y2K problem and Y2K compliant. Y2K - Year 2000 expenditures in 1999, managed care cost pressures, the cumulative effect of the Balanced Budget Balanced budget A budget in which the income equals expenditure. See: budget. balanced budget A budget in which the expenditures incurred during a given period are matched by revenues. Act of 1997, slower than expected demand for HIPAA (Health Insurance Portability & Accountability Act of 1996, Public Law 104-191) Also known as the "Kennedy-Kassebaum Act," this U.S. law protects employees' health insurance coverage when they change or lose their jobs (Title I) and provides standards for patient health, (Health Insurance Portability and Accountability Act The Health Insurance Portability and Accountability Act (HIPAA) was enacted by the U.S. Congress in 1996. According to the Centers for Medicare and Medicaid Services (CMS) website, Title I of HIPAA protects health insurance coverage for workers and their families when of 1996) services, and the uncertain future of real integration of health care services," stated Larry D. Grandia, President and Chief Executive Officer of DAOU Systems, Inc. "Given our current level of revenues, we have taken additional steps to further reduce our costs. Among these, we have further consolidated operations and administrative functions in San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. , eliminated additional layers of management, and reduced our headcount. "As a result of the changes we have made to our cost structure, we approached profitability at the end of the quarter, and expect that operating costs operating costs npl → gastos mpl operacionales will continue to be lower in the third quarter as we receive the full benefit of our consolidation efforts in the second half of the year. Among the changes made, we consolidated all subsidiary-level accounting and human resource functions throughout the organization. In addition, the changes made in our management structure have resulted in a leaner cost structure, including a reduction in our management-to-employee ratio. "While our current pace of business and our backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. are soft in our core health care IT business," stated Grandia, "we continue to expect the health care markets to improve and we are responding actively to increased opportunities in the marketplace to build our pipeline of health care IT business. In the e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. area, while we have built a significant pipeline of potential business for our Enosus Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the subsidiary, Enosus is only beginning to convert that pipeline into revenues sufficient to generate a profit. We expect to see that revenue stream grow as Enosus signs additional contracts. "The steps we have taken to consolidate operations and reduce our employee related costs were necessary in light of our current level of business," Grandia said. "While they come with a short-term cost, we believe they will better position DAOU to achieve its objectives of profitability and growth. We have been, and continue to be, aggressive about resizing all facets of our business, and remain committed to generating a profit by keeping our costs in line with our current, sustainable revenue stream. With many of these cost-cutting actions now behind us, we are beginning to see the benefit in our results as compared to the first quarter of this year and we expect to see further improvement in our operating results moving forward as a result of our additional consolidation and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). . "As we continue to execute our business plan," added Grandia, "we also are considering alternative strategic options for maximizing shareholder value. While we are unable at this time to make more specific disclosure on our discussions with Perot Systems, a combination of our companies is among the strategic alternatives currently being discussed by DAOU." DAOU Systems, Inc. is a provider of integrated Information Technology (company) Integrated Information Technology - (IIT) A Santa Clara based company producing a programmable, single chip H.261 and MPEG system. The chip contains a RISC processor, originally based on the MIPS architecture but now called RISCit, and a "Pixel Processor". (IT) solutions and services to the U.S. health care industry. DAOU's capabilities range from up-front strategic consulting to IT system design, implementation and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. tactical support. DAOU's IT offerings include data, voice and video networking, applications consulting and implementation, as well as operational and Internet solutions. DAOU has approximately 500 employees, and has provided services to more than 1,300 health care organizations, including many of the nation's top 100 integrated delivery systems integrated delivery system Integrated provider Medical practice A coordinated health care system formed by physician groups and hospitals which ↑ efficiency and ↓ redundancy in providing health care; IDSs coordinate delivery of a broad range of health . More information about DAOU Systems can be found at www.daou.com on the World Wide Web. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are only predictions and actual events or results may differ materially. Forward-looking statements usually contain the word "estimate," "anticipate," "believe," "expect," "plan" or similar expressions. The forward-looking statements included herein are based on current expectations and certain assumptions and entail entail, in law, restriction of inheritance to a limited class of descendants for at least several generations. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary various risks and uncertainties, including risks and uncertainties relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc : the Company's ability to obtain new customer contracts; the Company's ability to launch and manage successfully its new eCommerce services to health care and non-health care customers, including the hiring, retention and training of professionals dedicated to eCommerce services; the management and integration of the Company's operations as it develops new service offerings and management practices and implements staffing reorganizations; the ability of the Company to complete a strategic transaction with Perot Systems Corporation or execute alternative options for realizing full shareholder value; and the effects of health care industry consolidation and changes in the health care regulatory environment on existing customer contracts and the Company's ability to obtain new customer contracts. These uncertainties and risk factors and the matters set forth in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. under the caption "Risk Factors" and its other SEC filings could cause actual results to differ materially from those indicated by these forward-looking statements.
DAOU SYSTEMS, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three months Three months Six months Six months
ended ended ended ended
6/30/00 6/30/99 6/30/00 6/30/99
Revenues $ 16,127 $ 27,051 $ 33,702 $ 54,373
Cost of Revenues $ 13,045 $ 19,117 $ 29,001 $ 40,936
Gross Profit 3,082 7,934 4,701 13,437
Sales and marketing 1,651 2,414 3,441 5,319
General and
administrative 4,178 5,325 8,642 10,661
Restructuring charges 827 -- 827 --
Total operating
expenses 6,656 7,739 12,910 15,980
Loss from operations (3,574) 195 (8,209) (2,543)
Other income (expenses),
net 164 (95) 333 (181)
Income (loss) before
taxes (3,410) 100 (7,876) (2,724)
Provision (benefit) for
income taxes -- 40 -- (1,116)
Net income (loss) (3,410) 60 (7,876) (1,608)
Dividends on preferred
stock (185) -- (369) --
Net income (loss) available to
common stockholders $(3,595) $ 60 $(8,245) $(1,608)
Net income (loss) per common share:
Basic $ (0.20) $ 0.00 $ (0.47) $ (0.09)
Diluted $ (0.20) $ 0.00 $ (0.47) $ (0.09)
Shares used in computing net
income (loss) per common
share:
Basic 17,713 17,691 17,712 17,691
Diluted 17,713 17,918 17,712 17,691
DAOU SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
June 30 December 31,
2000 1999
Current assets: (unaudited)
Cash and cash equivalents $ 12,822 $ 15,480
Short-term investments 64 68
Accounts receivable, net 14,692 21,912
Contract work in progress 1,456 2,816
Other current assets 1,692 1,048
Total current assets 30,726 41,324
Equipment, furniture and
fixtures, net 4,032 4,319
Other assets 267 417
35,025 46,060
Current liabilities:
Accounts payable and accrued
expenses 2,287 4,698
Accrued salaries and wages 3,505 4,248
Current portion of long-term
debt 210 210
Total current liabilities 6,002 9,156
Long-term liabilities 471 548
Redeemable convertible preferred
stock 11,751 11,382
Stockholders' equity
Common stock 18 18
Additional paid-in capital 37,396 37,395
Deferred compensation (117) (192)
Unrealized gain on securities (47) (43)
Retained deficit (20,449) (12,204)
Total stockholders equity 16,801 24,974
$ 35,025 $ 46,060
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion