Allscripts Healthcare Solutions Inc. terminated its chairman, a move that prompted the resignation of three board members in protest and triggered a 36% plunge Friday in its stock.
The Chicago company, a provider of electronic health-care records, also said its chief financial officer was leaving. The news came as Allscripts reported a 54% drop in quarterly profit and lowered its guidance for the year.
Allscripts shares fell $5.72 on Friday to $10.30, erasing more than $1 billion in market value. The stock was off 23% over the past year through Thursday's close on Nasdaq.
The company didn't say why Philip Pead was ousted as chairman, but it noted that he will get the severance package "for a termination without cause" under his contract. In a filing with the Securities and Exchange Commission, Allscripts said the package includes a payment of two times the sum of salary and current target bonus, medical benefits for 12 months and accelerated vesting of outstanding equity awards.
The ouster came after "extensive deliberations," the company said. Following those talks, directors Catherine M. Burzik, Eugene V. Fife and Edward A. Kangas chose to leave the board because they disagreed with the majority's decision.
In a late February filing, the company disclosed it had received a subpoena in connection with a grand jury investigation. The subpoena requested documents regarding the company's "interactions with several health care and educational organizations," and the company was cooperating with the investigation, the filing said.
An Allscripts spokeswoman said there is no connection between the subpoena and the resignation of directors.
CEO Glen Tullman parried dozens of questions about the board departures on a call Thursday with analysts. Tullman, though, did hint that the roots of the disagreement may stretch back to Allscripts's $1.3 billion purchase of Eclipsys, another software company, in 2010.
"If you look at the history of mergers, sometimes those companies' directors have a different view of the future and who should take the company into that future," Tullman told analysts on the call. Mr. Tullman said he couldn't comment on board deliberations.
Fife, Kangas and Pead joined the Allscripts board in 2010, after the Eclipsys, according to securities filings deal.
Fife, a former Goldman Sachs investment banker, had served on the Eclipsys board from 2003 to 2010 and as interim CEO of Eclipsys in 2005. Kangas, a Deloitte & Touche managing partner, was an Eclipsys board member from 2004 to 2010. Pead was chairman and CEO of Eclipsys in 2009 and 2010.
Burzik joined the Allscripts board in 2011. At the time, she was CEO of Kinetic Concepts Inc., a medical technology company, according to a securities filing.
Neither Fife nor Burzik responded to requests for comment. Pead and Kangas couldn't be reached.
Allscripts paid $1.3 billion in stock for Eclipsys, forming a company designed to offer technology that would make it easier for hospitals, nursing homes and doctors' offices to share patients' health information electronically.
Allscripts said it would appoint several new directors and a chairman soon.
Meanwhile, Allscripts said Chief Financial Officer Bill Davis will depart, effective May 18, to pursue an opportunity with a private company outside the health care industry. Allscripts said Davis played a key role in "leading several strategic transactions over the past nine years." Davis said on the analysts call that he would certify first quarter financial filings before leaving the company.
Dave Morgan, the company's senior vice president of finance, will replace him while Allscripts searches for a successor.
"These actions leave the company in nothing less than a state of crisis," said Sean Wieland, analyst at Piper Jaffray.
For the first quarter, Allscripts said earnings fell to $5.8 million, or 3 cents a share, from $12.6 million, or 7 cents a share. Revenue rose 8.8% to $364.7 million.
Tullman said several current and potential customers delayed their commitments in the latest quarter to wait for Allscripts to provide new releases and demonstrate a "more robust integration."
"This dynamic, combined with the recent reorganization of our sales and service teams, were the primary factors that caused sales to be lower than our expectations," Tullman said. The company also blamed an unfavorable sales mix and higher-than-expected software development costs for the earnings miss.
This story first appeared on WSJ.com
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