Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2019shares | |
Document and Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Mar. 31, 2019 |
Document Fiscal Year Focus | 2019 |
Document Fiscal Period Focus | Q1 |
Entity Registrant Name | Medical Information Technology, Inc. |
Entity Central Index Key | 0001011452 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Non-accelerated Filer |
Entity Common Stock, Shares Outstanding | 37,190,854 |
Entity Current Reporting Status | Yes |
Balance Sheets
Balance Sheets - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Cash and equivalents | $ 14,445,056 | $ 23,095,977 |
Marketable securities | 298,640,141 | 268,638,359 |
Trade receivables, net of reserve | 36,400,889 | 36,760,812 |
Contract assets, prepaid and other | 13,735,437 | 12,077,935 |
Current assets | 363,221,523 | 340,573,083 |
Computer equipment | 14,023,988 | 13,979,609 |
Furniture and fixtures | 94,938,216 | 92,804,040 |
Buildings | 240,230,574 | 240,288,774 |
Land | 33,717,577 | 40,959,230 |
Accumulated depreciation | (179,177,967) | (175,832,443) |
Fixed assets | 203,732,388 | 212,199,210 |
Other assets | 8,046,693 | 8,430,515 |
Deferred tax assets | 8,760,285 | 8,257,144 |
Total assets | 583,760,889 | 569,459,952 |
Accounts payable | 360,637 | 701,524 |
Taxes payable | 3,016,164 | 1,825,528 |
Accrued expenses | 17,154,115 | 23,916,832 |
Deferred revenue | 52,930,106 | 52,666,651 |
Current liabilities | 73,461,022 | 79,110,535 |
Deferred tax liabilities | 18,272,990 | 12,409,407 |
Tax reserves | 15,805,125 | 17,039,282 |
Total liabilities | 107,539,137 | 108,559,224 |
Common stock value | 37,190,854 | 37,190,854 |
Additional paid-in capital | 122,907,959 | 122,907,959 |
Retained income | 316,122,939 | 300,801,915 |
Shareholder equity | 476,221,752 | 460,900,728 |
Total liabilities and shareholder equity | $ 583,760,889 | $ 569,459,952 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Common stock par value | $ 1 | $ 1 |
Common stock shares authorized | 40,000,000 | 40,000,000 |
Common stock shares issued | 37,165,854 | 37,165,854 |
Common stock shares outstanding | 37,165,854 | 37,165,854 |
Statements of Income
Statements of Income - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Product revenue | $ 32,905,479 | $ 41,917,820 |
Service revenue | 82,454,232 | 80,450,783 |
Total revenue | 115,359,711 | 122,368,603 |
Operations, development | 84,571,394 | 83,968,521 |
Selling, G & A | 20,181,359 | 22,626,387 |
Operating expense | 104,752,753 | 106,594,908 |
Operating income | 10,606,958 | 15,773,695 |
Other income | 5,545,873 | 5,134,340 |
Change in unrealized marketable securities gains | 28,573,418 | (17,648,899) |
Other expense | 1,801,347 | 1,872,916 |
Pre-tax income | 42,924,902 | 1,386,220 |
State income tax | (360,000) | (241,000) |
Federal income tax | 7,137,000 | (1,195,000) |
Income tax | 6,777,000 | (1,436,000) |
Net income | $ 36,147,902 | $ 2,822,220 |
Statements of Cash Flow
Statements of Cash Flow - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Statement of Cash Flows [Abstract] | ||
Net income | $ 36,147,902 | $ 2,822,220 |
Depreciation and amortization expense | 3,682,434 | 3,739,378 |
Loss (gain) on sale of marketable securities | (1,059,617) | 158,091 |
Loss on sale of fixed assets | 532,297 | 0 |
Change in unrealized marketable securities gains | (28,573,418) | 17,648,899 |
Change in trade receivables, net of reserve | 359,923 | 4,628,726 |
Change in contract assets, prepaid and other | (1,657,502) | 111,217 |
Change in deferred tax assets | (503,141) | 430,153 |
Change in accounts payable | (340,887) | 163,640 |
Change in taxes payable | 1,190,636 | 425,487 |
Change in accrued expenses | (6,762,717) | (7,963,761) |
Change in deferred revenue | 263,454 | (2,982,356) |
Change in deferred tax liabilities | 5,863,584 | (4,568,580) |
Change in tax reserves | (1,234,157) | (408,357) |
Net cash from operations | 7,908,791 | 14,204,757 |
Purchases of marketable securities | (9,674,364) | (4,976,750) |
Sales of marketable securities | 9,305,617 | 15,849,768 |
Purchases of fixed assets | (2,178,555) | (3,281,108) |
Sales of fixed assets | 6,711,896 | 0 |
Change in other assets | 102,572 | 31,599 |
Net cash from investing | 4,267,166 | 7,623,509 |
Dividends paid | (20,826,878) | (23,058,329) |
Net cash used in financing | (20,826,878) | (23,058,329) |
Net change in cash and equivalents | (8,650,921) | (1,230,063) |
Cash and equivalents at beginning | 23,095,977 | 17,436,627 |
Cash and equivalents at end | $ 14,445,056 | $ 16,206,564 |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2019 | |
Significant Accounting Policies [Abstract] | |
Significant Accounting Policies | Note 1. Significant Accounting Policies The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2018 included in MEDITECH's Form 10-K filed on January 31, 2019. The unaudited financial statements presented herein have not been audited by our Independent Registered Public Accounting Firm in accordance with the standards of the Public Company Accounting Oversight Board (United States), but in the opinion of management such financial statements include all normal recurring adjustments necessary to present fairly MEDITECH's financial position, operating results and cash flow. |
Marketable Securities
Marketable Securities | 3 Months Ended |
Mar. 31, 2019 | |
Marketable Securities [Abstract] | |
Marketable Securities | Note 2. Marketable Securities MEDITECH follows the provisions of ASC 321, Investments - Equity Securities, which requires marketable securities to be recorded at fair value with changes in fair value recorded through the Income Statement. MEDITECH follows the provisions of ASC 820-10, Fair Value Measurements and Disclosures, which provides for expanded disclosure and guidelines to determine fair value of assets and liabilities. ASC 820-10 applies whenever other standards require or permit assets and liabilities to be measured at fair value, but does not expand the use of fair value in any new circumstances. MEDITECH's marketable securities represent assets measured at fair value on a recurring basis, and are considered Level 1 assets as defined by ASC 820-10. MEDITECH has no elements of other comprehensive income and records the unrealized change in marketable securities gains within the Income Statement. During the first quarter of 2019, said change increased by $24,423,027 from the December 31, 2018 value of $51,469,005 to the March 31, 2019 value of $75,892,032. The following table indicates the original cost, unrealized pretax gains and losses, and fair market value of MEDITECH's securities. MEDITECH evaluated the unrealized losses as of March 31, 2019 and concluded these were temporary in nature. Dec 31, 2018 Mar 31, 2019 Original cost $217,169,354 $222,748,109 Unrealized pretax gains 62,156,967 78,801,043 Unrealized pretax losses (10,687,962) (2,909,011) Fair market value $268,638,359 $298,640,141 |
Equity Method Investments
Equity Method Investments | 3 Months Ended |
Mar. 31, 2019 | |
Equity Method Investments [Abstract] | |
Equity Method Investments | Note 3. Equity Method Investments MEDITECH follows the provisions of ASC 323-10, Investments - Equity Method and Joint Ventures, and as such, accounts for the equity investment in Meditech South Africa in accordance with the cost method. Meditech South Africa licenses MEDITECH's software technology and re-licenses it to its respective customers. Meditech South Africa serves a market niche which is part of the overall medical market but is outside of the health care market which MEDITECH serves. MEDITECH believes the fair value of this investment approximates its March 31, 2019 carrying value. During the 2nd quarter 2007 MEDITECH acquired Patient Care Technologies, Inc. (PtCT), a company engaged in the development, manufacture, licensing and support of computer software products for the home health care market. MEDITECH accounted for this acquisition under the purchase method of accounting in accordance with ASC 805-10, Business Combinations. PtCT merged with and into MEDITECH effective December 31, 2009. During the 1st quarter 2011 MEDITECH acquired LSS Data Systems, Inc. (LSS), a company engaged in the development, manufacture, licensing and support of ambulatory information system software for physician practices. MEDITECH accounted for this acquisition under the purchase method of accounting in accordance with ASC 805-10, Business Combinations. LSS merged with and into MEDITECH effective December 31, 2013. MEDITECH follows the provisions of ASC 350-20-35 Intangibles, Goodwill and Other Qualitative Testing. MEDITECH annually assesses qualitative factors of its goodwill and intangible assets for impairment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The evaluation assesses all relevant economic, industry, regulatory, and legal facts and circumstances as well as overall performance. If, after assessing the totality of such facts and circumstances, MEDITECH determines that it is more likely than not that the fair value of a reporting unit is not less than its carrying amount, then no further goodwill impairment testing is necessary. |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2019 | |
Revenue Recognition [Abstract] | |
Revenue Recognition | Note 4. Revenue Recognition MEDITECH follows the provisions of ASC 606, Revenue from Contracts with Customers. MEDITECH enters into perpetual software license contracts which provide for a customer deposit upon contract execution, milestone billings during the implementation phase and fixed monthly support fees thereafter. MEDITECH considers software fees and related implementation fees together as a single performance obligation and classifies it as product revenue in the statement of income. Such revenue is recognized over time with the transfer of promised goods and services to the customer. MEDITECH considers post-implementation support fees as a separate performance obligation and classifies it as service revenue in the statement of income. Such revenue is recognized over time as the related services are rendered. MEDITECH identifies the performance obligations for each contract, determines the transaction price, allocates the price to the performance obligations, and recognizes revenue when (or as) a performance obligation is satisfied on the percent completion method based on completion of specific events. The primary factors taken into consideration involve tracking and measuring the progress of events needed to complete software delivery, training on software usage, interfacing the software with other vendor software, and bringing the software operational at the customer's site. Events identified are estimated at the outset of a contract and the transaction price is allocated equally over said events. Annual studies are conducted on the events required to complete contracted performance obligations and to verify the validity of total events required. Variable consideration is reviewed at the outset of a contract and if present, included in the percentage completion allocation. At March 31, 2019, outstanding performance obligations amounted to $133.4 million, with revenue to be recognized over the next 12-36 months as MEDITECH works with respective customers to schedule the corresponding software delivery and implementation events. MEDITECH's invoices are issued as per contract terms and are typically paid by customers within one month of invoice date. Differences between timing of MEDITECH's invoicing and timing of completed performance obligations are categorized as Deferred Revenues and Contract Assets. Deferred Revenues represent invoices rendered in advance of revenue recognition. Contract Assets represent revenue recognized for which invoices have not yet been rendered. Deferred product revenue was $42.9 million and $45.1 million at December 31, 2018 and March 31, 2019 respectively. During the quarter a total of $10.9 million was removed and recognized as revenue when specific events were completed. Also, Contract Assets were $5.9 million and $7.4 million at December 31, 2018 and March 31, 2019 respectively. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Leases | Note 5. Leases MEDITECH follows the provisions of ASC 842, Leases, which requires improved disclosure on timing and uncertainties of cash flow arising from leases. MEDITECH owns all 9 facilities it occupies, containing 1.6 million square feet of office space. MEDITECH occupies 78% of the space and the remainder is leased to various tenants. All are operating leases. Related operating expenses are allocated based on square footage ratio of leased to MEDITECH space. The length of MEDITECH's lease agreements vary and may include a rent-free period, extension options, or escalated lease payment. There are no agreements with termination options or variable payments dependent on outside variables. MEDITECH recognizes lease income and related brokerage fees on a straight-line basis for all agreements. MEDITECH will not consider a lease extended until an amendment is signed by both parties, at which point it is accounted for as a new lease. When a lease agreement is entered into between MEDITECH (lessor) and another party (lessee), the agreement may include non-lease components, being services such as cleaning, utilities, security and grounds maintenance. The company does not separate the lease and non-lease components and treats all as a single lease component. In all cases there is a provision that requires the lessee to pay a proportional share of real estate taxes on a quarterly basis over and above the base year of the lease. Such costs are considered variable and a reimbursement of costs MEDITECH has paid, which are expensed as incurred. MEDITECH does not lease space for it's own use, nor does it lease other property and equipment in its operations. All contracts the company has with vendors are reviewed annually for identification of lease components and none exist. Quarterly lease income was $2,105,204 and $1,978,839 for the 3 months ended on March 31, 2018 and March 31, 2019 respectively. Such income is included within Other Income for financial reporting purpose. Cash Flow projections through the end of all outstanding lease terms for properties currently under lease commitment at March 31, 2019 is as follows: Year Cash Flow 2019 8,370,000 2020 7,652,000 2021 4,658,000 2022 3,152,000 2023 1,499,000 After 336,000 Investments in Operating leases are as follows at March 31, 2019: Building and Office Space, at cost $54,657,762 Lease Origination Costs 1,018,770 Accumulated Depreciation (22,406,436) Allowance for credit loss 0 Net Investment in Operating Leases $33,270,096 Lease disclosure will be impacted by the pending sale of one building that represents 59% of cash flows and 37% of net investment. Reference Note 9. |
Income Tax Accounting
Income Tax Accounting | 3 Months Ended |
Mar. 31, 2019 | |
Income Tax Accounting [Abstract] | |
Income Tax Accounting | Note 6. Income Tax Accounting MEDITECH follows the provisions of ASC 740-10, Accounting for Income Taxes. Deferred taxes relate to the earlier recognition of certain revenue and the later recognition of certain expenses for tax purposes. They also relate to the increase in fair market value over the cost basis of marketable securities. Tax reserves relate to the uncertainty of state nexus. Key judgments are reviewed annually and adjusted to reflect current assessments. The years 2016 through 2018 are subject to examination by the IRS, and various years are subject to examination by state tax authorities. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 7. Earnings Per Share MEDITECH follows the provisions of ASC 260-10, Earnings per Share, which requires reporting both basic and diluted earnings per share. MEDITECH has no common share equivalents such as preferred stock, warrants or stock options which would dilute earnings per share. Thus, earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the applicable period. 3 months 3 months Mar 31, 2018 Mar 31, 2019 Net income $2,822,220 $36,147,902 Average number of shares 37,190,854 37,190,854 Earnings per share $0.08 $0.97 |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
Segment Reporting | Note 8. Segment Reporting MEDITECH follows the provisions of ASC 280-10, Segment Reporting. Based on the criteria set forth in ASC 280-10, MEDITECH currently operates in one operating segment, medical software and services. MEDITECH derives most of its operating revenue from the sale and support of one group of similar products and services. All of MEDITECH's assets are located within the United States. The following table indicates the operating revenue percentage based on location of customer. 3 months 3 months Mar 31, 2018 Mar 31, 2019 United States 88% 88% Canada 10% 10% All others 2% 2% |
Subsequent Event
Subsequent Event | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Event [Abstract] | |
Subsequent Event | Note 9. Subsequent Event On April 17, 2019 MEDITECH executed an agreement to sell one of its nine facilities for $120 million with an after-tax gain of $88 million expected. The proceeds will be invested. |