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Article by DailyStocks_admin    (10-31-08 03:07 AM)

Allscripts Healthcare Solutions Inc. CEO GLEN TULLMAN bought 100000 shares on 10-27-2008 at $5.11

BUSINESS OVERVIEW

Company Overview

Allscripts Healthcare Solutions, Inc. is a leading provider of clinical software, connectivity and information solutions that physicians use to improve the quality of healthcare. Our businesses provide innovative solutions that inform physicians with just right, just in time information, connect physicians to each other and to the entire community of care, and transform healthcare, improving both the quality and efficiency of care. The software and related services segment of our business provides clinical software solutions, including electronic health record (“EHR”), electronic prescribing (“e-prescribing”), practice management, emergency department information system (“EDIS”), hospital care management solutions, and document imaging solutions. Our information services segment, through our Physicians Interactive business unit, provides clinical education and information solutions for physicians and patients. The prepackaged medications segment of our business provides prepackaged medication fulfillment solutions, which includes both medications and software for dispensing and inventory control.

On December 31, 2007, we acquired Extended Care Information Network, Inc. (“ECIN”), a privately held company and leading provider of hospital care management and discharge planning software. The ECIN acquisition combines two industry leaders in care management and enables Allscripts to connect another key component of the healthcare delivery system—the exchange of patient information between hospital case managers, physicians outside the hospital, and the growing number of post-acute care facilities nationwide. ECIN’s web-based “software as a service” solutions automate and streamline the entire care management process in hospitals, from admission through discharge, resulting in increased productivity, improved patient throughput and better outcomes. ECIN has a client base of more than 500 hospitals and nearly 5,500 post-acute care facilities—nursing homes, assisted living and other facilities to whom hospitals refer patients in need of long-term care or short-term residential-based rehabilitation. Along with Allscripts existing Canopy care management solution, the acquisition gives us one of the largest installed bases of care management clients in the nation, with nearly 700 combined hospitals, as well as one of the largest networks of post-acute care facilities. Both care management solutions are deployed using an application service provider (ASP) model designed for rapid implementation with minimal use of hospital IT support staff.

Clinical Solutions

EHR/Practice Management Physician Practice Solutions. EHR solutions automate the collection and management of clinical data, allowing physician practice groups to enter, organize, and effectively utilize secure patient chart information at the point of care. EHR solutions also streamline practice-wide clinical workflow and communication and help physicians manage lab orders, results and other data. EHR solutions can improve healthcare quality and reduce costs by preventing medical errors, reducing paperwork and reducing administrative inefficiencies. Practice management systems automate administrative workflow, including scheduling, patient billing and collection and claims management. Practice management systems improve the efficiency of operations within a physician practice, particularly the financial aspects of the practice related to billing and reimbursement.

Hospital Emergency Department Solutions. Hospital emergency department information systems automate emergency room processes, including patient registration, triage, tracking and reporting. Hospital emergency department information systems enable hospitals to better manage patient flow and emergency department activity.

Hospital Care Management Solutions. Hospital care management programs automate processes related to case management, quality management and utilization management. Care management programs help hospitals manage length of stay, billing and claims processing, and patient care resources. The benefits of these solutions

to hospitals include enhanced financial performance and improved patient outcomes. We believe there is relatively low penetration of care management solutions in the hospital market, and that there is a significant opportunity for us to penetrate this market. Another key element of the care management process is arranging for the transfer of patients to post-acute facilities. We believe that there is a significant opportunity for our ECIN clinical information solutions within this market, in part because the federal government and other stakeholders are moving towards requiring the automation of Medicare patient information exchanged between hospitals and the providers to whom they refer discharged patients.

Physicians Interactive

Clinical education and information solutions programs link physicians with pharmaceutical companies, medical product suppliers and health plans through e-mail, surveys, and online interactive programs. These web-based programs, often referred to as e-Detailing, use interactive sessions to provide product information and clinical education to physicians. Pharmaceutical companies leverage e-Detailing to assist in the marketing and sales efforts for their products. We believe that there is a significant opportunity for our clinical education and information solutions within this market. We believe that one of the drivers in this market is the growing need for pharmaceutical companies to communicate with physicians in more efficient and cost-effective ways. As more physicians access online resources, we believe that pharmaceutical companies are increasingly seeking to communicate with physicians directly through this highly effective channel. Our physicians interactive business unit offers electronic marketing and educational programs to pharmaceutical companies, and delivers these programs to a network of physicians nationwide through an interactive web-based platform.

Medication Solutions

The market for the sale of prepackaged medications to physicians for on-site dispensing includes medications distributed for occupational health, workers compensation, urgent care and bariatric facilities. On-site dispensing offers provider organizations an opportunity to improve financial performance by adding an incremental source of revenue and reducing expenses related to prescription transmission, billing and processing. From a patient perspective, the dispensing of medications at the point of care provide an increased level of convenience, privacy and treatment compliance, whether in the physician’s office, at a clinic or at the patient’s place of employment.

Our Competitive Strengths

We believe that the following competitive strengths are the keys to our success:

First-Class Technologies That Enable Industry-Leading Solutions

We have been an innovator in the development and adoption of clinical solutions. We believe our clinical solutions provide the following advantages:




Accessibility. Physicians can instantly access our web-based clinical solutions from a variety of locations, including the exam room, hospital, office or home. With our EHR solutions, physicians can easily perform such important tasks as dictation and charge capturing in an offline mode and immediately transfer those files once reconnected to the network. Our solutions run on personal digital assistants, tablet PCs, desktop workstations and other wireless devices.




Connectivity. Our clinical solutions connect physicians to the valuable, objective information they need prior to, during and after the care process, enabling physicians to provide higher quality care and do so more cost effectively. We also provide efficiency to other participants in the care continuum by linking them to the physician.




Paperless Innovation. Our document imaging and scanning solutions allow even the largest organizations to manage information and documentation in a paperless environment and provide optical character recognition technology to rapidly retrieve information within the EHR.



Wireless Leadership. Using wireless handheld devices or desktop workstations, we believe that we have accelerated the use in healthcare of a wireless platform, automating all of the most common physician activities, including prescribing, capturing charges, dictating, ordering lab tests, viewing lab results, providing patient education and taking clinical notes.




Interoperability. Our products are designed to operate with existing installed systems, in both ambulatory and acute settings.




Modularity. The ability to implement individual modules of certain of our solutions enables physicians to start with the tools that solve their most pressing needs and provides an opportunity for a rapid return on investment.







Award-Winning and Certified Solutions. Our clinical software solutions have garnered numerous industry accolades and honors. In 2007, the prestigious KLAS Top 20: Year-End 2007 Report , a closely watched industry measure of product and service performance, ranked Allscripts TouchWorks Electronic Health Record (EHR) first among EHR applications for practices with between 26 and 100 physicians. Allscripts HealthMatics ED emergency department information system (EDIS) and HealthMatics EHR also ranked highly, placing Allscripts in the top three in the major segments in which it competes. Our TouchWorks and HealthMatics EHRs are certified by the Certification Commission for Healthcare Information Technology (“CCHIT”) and our e-prescribing solutions have attained SureScripts advanced certification for pharmacy interoperability. Also, in 2007, Fortune Magazine named Allscripts 23 rd among the fastest growing companies in the nation, one of only seven companies in the healthcare sector. Likewise, in 2007, one Allscripts customer was recognized as HIMSS Physician of the Year and two customers received Malcolm Baldridge Quality Award, America’s highest honor for performance excellence.

Significant Installed Base

Over 40,000 physicians and thousands more healthcare professionals in over 4,000 clinics and 700 hospitals nationwide have selected our EHR and hospital-based solutions. Our significant installed base, including some of the country’s most prestigious medical groups and hospitals in the nation, serves as a reference source for our prospective clients who are interested in purchasing an EHR or hospital solution.

Breadth of Product and Service Offering

We are a leading provider of clinical software, connectivity and information solutions that physicians use to improve the delivery and quality of healthcare. Our suite of clinical software solutions includes electronic health records, e-prescribing, and personal health records, encompassing virtually all of the most common functions performed by a physician at the point of care. Our product offerings also include an integrated practice management solution for physician groups, as well as EDIS for hospital emergency departments, and care management solutions for hospitals.

Sales and Marketing

We have experienced sales executives with extensive industry expertise. In the clinical solutions business unit, we primarily sell directly to our customers through our sales force. We also have targeted direct sales forces for our physicians interactive and our medication services business units. As of December 31, 2007, we employed 146 full-time sales and marketing employees.

Products and Services

Clinical Solutions

Our clinical solutions business units provide the following clinical software solutions:




TouchWorks Electronic Health Record is an award-winning EHR solution designed to enhance physician productivity using Tablet PCs, wireless handheld devices, or a desktop workstation for the



purpose of automating the most common physician activities, including prescribing, dictating, ordering lab tests and viewing results, documenting clinical encounters and capturing charges, among others. TouchWorks has the functionality to handle the complexities of large physician practices, while also addressing the needs of mid-sized physician practice groups. Our Touchworks EHR is certified by CCHIT.




TouchWorks PM is a practice management system that streamlines administrative aspects of physician practices, including patient scheduling, electronic remittances, electronic claims submission and electronic statement production. This system also provides multiple resource scheduling, instant reporting and referral tracking. Our electronic data interchange solution facilitates statement management processing, claims management processing, electronic remittances and appointment reminders.




HealthMatics EHR is an electronic health record solution targeted at small to mid-sized physician practice groups. Like our TouchWorks EHR, this solution automates the most common physician activities, such as prescribing, clinical reporting, ordering lab tests and viewing results, and capturing charges. We also offer a disaster recovery solution that safeguards data and provides remote application access in the event of a failure at the primary system site. Our HealthMatics EHR is also certified by CCHIT.




HealthMatics Ntierprise is a practice management system that streamlines administrative aspects of physician practices, including patient scheduling, electronic remittances, electronic claims submission and electronic statement production. This system, which provides the engine for TouchWorks Practice Management, also provides multiple resource scheduling, instant reporting and referral tracking. Our electronic data interchange solution facilitates statement management processing, claims management processing, electronic remittances and appointment reminders.




TouchScript is an e-prescribing solution that physicians can access via the Internet to quickly, safely and securely prescribe medications, check for drug interactions, access medication histories, review drug reference information and send prescriptions directly to a pharmacy or mail order facility. TouchScript can be a starting point for medical groups to seamlessly transition over time to a complete EHR.




eRx NOW is an easy-to-use, web-based e-prescribing solution that is safe, secure, requires no downloading and no new hardware. The eRx NOW solution offers all of the functionality of TouchScript in an Application Service Provider (“ASP”) model that is accessible by the Internet on computers, handheld devices and cell phones. The software is being offered free of charge to every prescriber in America in furtherance of the National ePrescribing Patient Safety Initiative, a collaborative initiative introduced and led by us to enhance patient safety and reduce preventable medication errors. Like TouchScript, eRx NOW can be a starting point for medical groups to seamlessly transition over time to a complete EHR.




Impact.MD provides an electronic repository for all patient record information including patient charts, office notes, lab results, explanation of benefits and referral letters among other paper based documents. As with TouchScript and eRx NOW, Impact.MD can be a starting point for medical groups seeking to seamlessly transition over time to a complete EHR.




HealthMatics ED and EmSTAT are emergency department information systems designed to manage patient flow through the emergency department by tracking patient location, activity and outstanding orders and procedures. These solutions guide emergency clinicians in entering consistent, complete and efficient documentation on patients and provide shareable, real-time, mobile access to patient information from registration to discharge.




Canopy is a web-based software solution that streamlines the patient care management process. Canopy automates utilization, case, discharge and quality management processes relating to patient hospital visits. These systems are based on an ASP model designed to provide ease of use and minimal IT staff involvement at the hospital.



ECIN , like Canopy, automates the patient utilization and case management processes for hospitals while generating an immediate return on investment by improving length of stay and revenue recovery. ECIN also improves hospital throughput by automating patient referrals to post acute-care facilities, eliminating costly, manual communications. Additionally, extended-care providers benefit from ECIN by electronically receiving referrals from hospitals, and electronically communicating their ability to accept the patient. We intend to combine the best elements of Canopy and ECIN in a new Allscripts Care Management product.

Physicians Interactive

Our physicians interactive business unit provides the following key solutions:




Physicians Interactive is a web-based solution that connects physicians with pharmaceutical companies, medical device manufacturers and biotech companies. One element of this solution, often referred to as e-Detailing, uses interactive sessions to provide clinical education and information to physicians about medical products and disease states. This promotes more informed decision-making, increased efficiency and ultimately higher quality patient care. Other elements of the Physicians Interactive offerings include e-surveys, clinical updates, resource centers, key opinion leader materials and other physician relationship management services.




Physician Relationship Management Platform (“PRMP”) provides pharmaceutical companies with a turnkey system to build an electronic dialogue and manage ongoing relationships with physicians. The PRMP incorporates a full suite of online tools, including campaign management, physician communication and education and sample and sales representative requests, as well as e-Detailing opportunities. All of these tools are driven through a sophisticated physician-centric database that dynamically delivers customized information according to physician preferences.

Medication Services

Our medication services business unit provides point-of-care medication management and medical supply solutions for physicians and other healthcare providers. With approximately 9,000 physician customers nationwide, our solutions enable physician groups, including occupational health, workers compensation, urgent care and bariatric facilities, to dispense medications at the point of care. Our medication repackaging solutions offer provider organizations an opportunity to improve financial performance by adding an incremental source of revenue and reducing expenses related to prescription transmission, billing and processing. From a patient perspective, our medication repackaging solutions provide an increased level of convenience, privacy and treatment compliance.

Research and Development

As of December 31, 2007, we had 209 employees in research and development. In addition, we engage the services of approximately 67 dedicated development professionals in India. The primary purposes of our research and development groups are to develop new features and enhancements to our respective solutions, ensure that our solutions comply with continually evolving regulatory requirements and create additional opportunities to connect our systems to the healthcare community.

For the year ended December 31, 2007, we spent approximately 12% of our software and services revenue on related research and product development. Our clinical solutions business unit capitalizes software development costs incurred from the time technological feasibility of the software is established until the software is available for general release. Non-capitalizable research and development costs and other computer software maintenance costs related to software development are expensed as incurred.

Competition

The market for our products and services is fragmented, intensely competitive and is characterized by rapidly evolving industry standards, technology and user needs and the frequent introduction of new products and services. Some of our competitors may be more established, benefit from greater name recognition and have substantially greater financial, technical, and marketing resources than us. We compete on the basis of several factors, including:




breadth and depth of services;




reputation;




reliability, accuracy and security;




client service;




price; and




industry expertise and experience.

Clinical Solutions

Our industry is intensely competitive and rapidly evolving in terms of both technology and product standards. There are numerous companies that offer EHR and practice management products and the marketplace remains fragmented. We face competition from several types of organizations

CEO BACKGROUND

Robert A. Compton , 51, was elected to our Board of Directors in August 2003. In 2005, Mr. Compton founded Vontoo Corporation, an on-demand, permission-based voice messaging company and currently serves as its Chief Executive Officer. Previously, he was Founder and Chief Executive Officer of NoInk Communications, a provider of handheld and web-based software solutions for pharmaceutical and medical device sales professionals, from 2002 until the company’s sale in 2004. From 1999 to January 2000, Mr. Compton was President of the Neurologic Technologies Division of Medtronic, Inc., a medical technology company. From 1997 until 1999, Mr. Compton was President and Chief Operating Officer of Sofamor Danek Group, Inc., a medical device manufacturer, which was acquired by Medtronic, Inc. in January 1999. From 1988 until 1997, Mr. Compton served as general partner of CID Equity Partners, a venture capital firm. Mr. Compton currently serves as the Chairman of the Board on the board of directors of Exact Target.

Michael J. Kluger , 50, was elected to our Board of Directors in 1994. Since 1992, Mr. Kluger has served as a Managing Director of Liberty Capital Partners, Inc., a New York investment management firm and the general partner of Liberty Partners, L.P. Since November 2001, Mr. Kluger is a Managing Director of AIG Altaris Health Partners, L.P., a private equity healthcare firm, and from June 2001 to March 2005, Mr. Kluger served on the board of directors of ConnectiCare, Inc.

John P. McConnell , 56, was appointed to our Board of Directors on March 7, 2006, in connection with Allscripts’ acquisition of A4 Health Systems, Inc. (“A4”), where he served as A4’s Chief Executive Officer and Chairman from 1998 until the completion of the sale to Allscripts. From 1982 until 1998, Mr. McConnell served as the Chief Executive Officer and Chairman of Medic Computer Systems, a company co-founded by Mr. McConnell and sold to Misys Healthcare Systems in 1998. Since 1998, Mr. McConnell has been a manager of McConnell Venture Partners Fund, LLC, which provided venture funding to A4 prior to Mr. McConnell’s appointment as Chief Executive Officer and Chairman. Mr. McConnell is currently a member of the board of directors of Blackbaud, Inc., Med3000, Inc. and the 2004 WakeMed Foundation in North Carolina.

M. Fazle Husain , 43, was elected to our Board of Directors in April 1998. Mr. Husain is a Managing Director of Morgan Stanley and Managing Member of Morgan Stanley Venture Partners III, L.L.C. and its affiliated entities, a late stage venture capital fund, investing primarily in companies in the medical technology and information technology sectors. Mr. Husain joined Morgan Stanley in 1987, and since 1991 has focused on investing in healthcare and software companies. He currently serves on the board of directors of several privately held medical and software companies and has served on the board of directors of Cross Country Healthcare, Inc.

Glen E. Tullman , 47, joined Allscripts as Chief Executive Officer in August 1997 to lead our transition into the Healthcare Information Sector. In May 1999, Mr. Tullman became our Chairman of the Board. Prior to joining Allscripts from October 1994 to July 1997, Mr. Tullman was Chief Executive Officer of Enterprise Systems, Inc., a healthcare information services company providing resource management solutions to large integrated healthcare networks. From 1983 to 1994, Mr. Tullman served in a number of management roles, including President and Chief Operating Officer, of CCC Information Services, Inc., a provider of information systems to property and casualty insurers. Mr. Tullman currently serves on the board of directors of Extended Care Information Network, Inc. and the Juvenile Diabetes Research Foundation, Illinois Chapter.

Marcel L. “Gus” Gamache , 64, was elected to our Board of Directors in August 2003. From 1994 to 2005, Mr. Gamache was President and Chief Executive Officer of ConnectiCare, a Farmington, Connecticut-based managed care company serving more than 270,000 members in Connecticut and western Massachusetts. Prior to his work at ConnectiCare, Mr. Gamache was employed for 19 years at Blue Cross and Blue Shield of Massachusetts where he served as internal auditor, Controller and Senior Vice President for Information Services.

Bernard Goldstein , 76, was elected to our Board of Directors in 2001. From 1979 to 1996, Mr. Goldstein was a Managing Director of Broadview International, LLC, a financial services firm specializing in merger and acquisition transactions for communications, IT, and media companies. Thereafter, he served as a director of Broadview until 2002. He is a past President of the Information Technology Association of America, the industry trade association of the computer service industry, and past Chairman of the Information Technology Foundation. Mr. Goldstein was a director of Apple Computer Inc. until August 1997, and a director of Sungard Data Systems, Inc. until 2005.

Philip D. Green , 56, was elected to our Board of Directors in 1992. Mr. Green is President, Strategic Business Initiatives (SBI), of the University of Pittsburgh Medical Center (UPMC). Mr. Green also is Of Counsel in the Washington, D.C. office of Drinker Biddle & Reath LLP. Before joining UPMC in July 2006, Mr. Green was a partner with the law firm of Gardner Carton & Douglas, LLP since June 2004. From June 2000 until June 2004, Mr. Green was a partner with Akin, Gump, Strauss, Hauer & Feld, L.L.P. From 1989 until June 2000, Mr. Green was a partner with the law firm of Green, Stewart, Farber & Anderson, P.C., of which Mr. Green was a founding partner. From 1978 through 1989, Mr. Green was a partner in the Washington, D.C. based law firm of Schwalb, Donnenfeld, Bray & Silbert, P.C. Mr. Green serves on the board of directors of I-trax, Inc.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

Allscripts Healthcare Solutions, Inc. is a leading provider of clinical software, connectivity and information solutions that physicians use to improve the quality of healthcare. Our businesses provide innovative solutions that inform physicians with just right, just in time information, connect physicians to each other and to the entire community of care, and transform healthcare, improving both the quality and efficiency of care. We provide clinical software applications, including Electronic Health Record (EHR), practice management, electronic prescribing, Emergency Department Information System (EDIS), hospital care management and document imaging solutions through our clinical solutions businesses. Additionally, we provide clinical education and information solutions for physicians and patients through our physicians interactive business unit, along with physician-patient connectivity solutions through our partnership with Medem. We also provide prepackaged medication fulfillment services through our medication services business unit.

We report our financial results utilizing three business segments: software and related services segment; information services segment; and prepackaged medications segment. The software and related services segment consists of clinical software solutions offered by our clinical solutions and hospital solutions businesses, such as HealthMatics, TouchWorks, TouchScript, Canopy, EmStat, Healthmatics ED and ECIN offerings. TouchWorks Electronic Health Record is an award-winning EHR solution designed to enhance physician productivity using Tablet PCs, wireless handheld devices or desktop workstations for the purpose of automating the most common physician activities, including prescribing, dictating, ordering lab tests and viewing results, documenting clinical encounters and capturing charges, among others. TouchWorks Practice Management combines scheduling and financial management tools in a single package with functionality including rules-based appointment scheduling, multi-resource and recurring appointment features, referral and eligibility indicators, and appointment and claims management. TouchWorks EHR and TouchWorks PM, which are both offered individually and as a combined solution, have the functionality to handle the complexities of large physician practice groups with 25 or more physicians.

For physician practice groups with fewer than 25 physicians that are seeking an EHR, a practice management system, or a combined EHR and practice management solution, we offer our HealthMatics EHR, Ntierprise Practice Management and HealthMatics Office, which combines the two offerings into one complete solution for clinical and back-office automation.

TouchScript is an e-prescribing solution that physicians can access via the Internet to quickly, safely and securely prescribe medications, check for drug interactions, access medication histories, review drug reference information, and send prescriptions directly to a pharmacy or mail order facility. TouchScript can be a starting point for medical groups to seamlessly transition over time to a complete EHR. Another e-prescribing offering, eRx NOW, is an easy-to-use, web-based solution that is safe, secure, requires no downloading and no new hardware. eRx NOW is accessible by Internet on computers, handheld devices and cell phones and is offered free of charge to every prescriber in America via the National ePrescribing Patient Safety Initiative, a collaborative initiative introduced and led by us to enhance patient safety and reduce preventable medication errors.

Our offerings for hospitals that are seeking EDIS and care management solutions include HealthMatics ED, EmSTAT and Canopy. HealthMatics ED electronically streamlines processes for large hospital Emergency Departments, including tracking, triage, nurse and physician charting, disposition and reporting.

EmSTAT offers similar functionality for streamlining the Emergency Department care process in small hospitals. Canopy is a Web-based solution that streamlines and speeds the patient care management process by automating utilization, case, discharge and quality management processes relating to patient hospital visits. On December 31, 2007, we acquired Extended Care Information Network, Inc. (“ECIN”), a provider of hospital care management and discharge planning software. ECIN’s web-based solutions include Utilization Management, Discharge Planning and Case Management systems that assist hospitals in streamlining case management workflow, increasing productivity, improving patient throughput and reducing length of stay.

In our information services segment, our key product offerings are Physicians Interactive and Physician Relationship Management Platform (“PRMP”). Physicians Interactive is a web-based solution that connects physicians with pharmaceutical companies, medical device manufacturers and biotech companies. One element of this solution, often referred to as e-Detailing, uses interactive sessions to provide clinical education and information to physicians about medical products and disease states, which promotes more informed decision-making, increased efficiency and ultimately higher quality patient care. Other elements of the Physicians Interactive offerings include e-surveys, clinical updates, resource centers, key opinion leader materials and other physician relationship management services. PRMP provides pharmaceutical companies with a turnkey system to build an electronic dialogue and manage ongoing relationships with physicians. The PRMP incorporates a full suite of online tools, including campaign management, physician communication and education and sample and rep requests, as well as e-Detailing opportunities.

Finally, our prepackaged medications segment is comprised of our medication services business unit. This business unit provides point-of-care medication management and medical supply services and solutions for physicians and other healthcare providers.

Cost of revenue for the software and related services segment consists primarily of salaries, bonuses and benefits of our billable professionals, third-party software costs, hardware costs, capitalized software amortization and other direct engagement costs. Cost of revenue for the prepackaged medications segment consists primarily of the cost of the medications, cost of salaries, bonuses and benefits for repackaging personnel, shipping costs, repackaging facility costs and other costs. Cost of revenue for the information services segment consists primarily of salaries, bonuses and benefits of our program management and program development personnel, third-party program development costs, costs to recruit physicians and other program management costs.

Selling, general and administrative expenses consist primarily of salaries, bonuses and benefits for management and support personnel, commissions, facilities costs, depreciation and amortization, general operating expenses, non-capitalizable product development expenses and selling and marketing expenses. Selling, general and administrative expenses for each segment consist of expenses directly related to that segment. Expenses for the year ended December 31, 2006 include non-recurring expenses related to the A4 acquisition.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

Revenue from software licensing arrangements, where the service element is considered essential to the functionality of the other elements of the arrangement, is accounted for under American Institute of Certified Public Accountants Statement of Position (“SOP”) 81-1, “Accounting for Performance of Construction-Type Contracts and Certain Production-Type Contracts.” Allscripts recognizes such revenue on an input basis using actual hours worked as a percentage of total expected hours required by the arrangement, provided that the fee is fixed and determinable and collection of the receivable is probable. If any such software licensing arrangement is deemed to have extended payment terms, revenue is recognized using the input method but is limited to the amounts due and payable. Maintenance and support revenue from software licensing arrangements is recognized over the term of the applicable support agreement based on vendor-specific objective evidence of fair value of the maintenance and support revenue, which is generally based upon contractual renewal rates.

Revenue from software licensing arrangements where the service element is not considered essential to the functionality of the other elements of the arrangement is accounted for under SOP 97-2, “Software Revenue Recognition,” as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” Such revenue is recognized upon shipment of the software or as services are performed, provided that persuasive evidence of an arrangement exists, fees are considered fixed and determinable, and collection of the receivable is considered probable. The revenue recognized for each separate element of a multiple-element software contract is based upon vendor-specific objective evidence of fair value, which is based upon the price the customer is required to pay when the element is sold separately.

Revenue from Allscripts’ sales of pharmaceutical products, net of provisions for estimated returns, is recognized upon shipment of the pharmaceutical products, the point at which the customer takes ownership and assumes risk of loss, when no performance obligations remain and collection of the receivable is probable. Allscripts offers customers the right to return pharmaceutical products under various policies and estimates and maintains reserves for product returns based on historical experience following the provisions of FAS No. 48, “Revenue Recognition When Right of Return Exists.”

Certain of Allscripts’ customer arrangements in its information services segment encompass multiple deliverables. Allscripts accounts for these arrangements in accordance with Emerging Issues Task Force (“EITF”) No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). If the deliverables meet the separation criteria in EITF 00-21, the deliverables are separated into separate units of accounting, and revenue is allocated to the deliverables based on their relative fair values. The criteria specified in EITF 00-21 are that the delivered item has value to the customer on a stand-alone basis, there is objective and reliable evidence of the fair value of the undelivered item, and if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor. Applicable revenue recognition criteria is considered separately for each separate unit of accounting.

Management applies judgment to ensure appropriate application of EITF 00-21, including value allocation among multiple deliverables, determination of whether undelivered elements are essential to the functionality of delivered elements and timing of revenue recognition, among others. For those arrangements where the deliverables do not qualify as a separate unit of accounting, revenue from all deliverables is treated as one accounting unit and recognized on a straight-line basis over the term of the arrangement. Changes in circumstances and customer data may affect management’s analysis of EITF 00-21 criteria, which may cause Allscripts to adjust upward or downward the amount of revenue recognized under the arrangement.

In accordance with EITF issued Consensus 01-14, “Income Statement Characterization of Reimbursements for ‘Out-of-Pocket’ Expenses Incurred,” revenue includes reimbursable expenses charged to Allscripts’ clients.

Allowance for Doubtful Accounts Receivable

We rely on estimates to determine our bad debt expense and the adequacy of our allowance for doubtful accounts. These estimates are based on our historical experience and the industry in which we operate. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances and related bad debt expense may be required.

Inventories

We adjust the value of our inventory downward for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Investment in Medem

Allscripts holds an investment in Medem totaling $2,900 as of December 31, 2007. The investment has been accounted for under the cost basis of accounting and is recorded in other assets in the consolidated balance sheet. The fair value of the investment is dependent upon the actual and forecast financial performance of Medem, its market indicators of value, and the volatility inherent in the external markets for this type of investment. In assessing potential impairment of the investment, we consider these factors, as well as the forecasted financial performance of Medem, liquidation preference value of the stock that we hold, and estimated potential for investment recovery. If any of these factors indicate that the investment has become other-than-temporarily impaired, we may have to record an impairment charge.

On May 28, 2007, Allscripts entered into an Option Purchase Agreement (the “Option Agreement”) with Medem. Pursuant to the Option Agreement, Allscripts sold to Medem the irrevocable three-year option held by Allscripts for a total purchase price of $2,592. The fair value of the three-year option was estimated at approximately $200 at the time of investment on August 18, 2004. The sale of the option resulted in a gain of approximately $2,392 and is recorded in Allscripts’ operating results for the year ended December 31, 2007.

Goodwill and Intangible Assets

We evaluate the value of intangible assets based upon the present value of the future economic benefits expected to be derived from the assets. We assess the impairment of the identifiable intangibles and goodwill annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. If we determine that the value of the intangible assets and goodwill may not be recoverable from future cash flows, a write-down of the value of the asset may be required.

We estimate the useful lives of our intangible assets and amortize the value over that estimated life. If the actual useful life is shorter than our estimated useful life, we will amortize the remaining book value over the remaining useful life or the asset may be deemed to be impaired and, accordingly, a write-down of the value of the asset may be required.

During the third quarter of 2007, we made an immaterial adjustment to the value recorded for the A4 acquisition. We originally based our valuation of the Allscripts shares issued to A4 shareholders on the average closing price of the stock of Allscripts on March 2, 2006, the date of the consummation of the A4 acquisition. In conformity with SFAS 141 and EITF 99-12, we have adjusted the total purchase price to reflect the average closing price of our stock for the five trading days commencing two trading days before, and ending two trading days after, the date of the first public announcement of the A4 acquisition on January 19, 2006. This change in valuation resulted in a decrease in goodwill and additional paid in capital of $9,520.

Software Capitalization

The carrying value of capitalized software is dependent upon the ability to recover its value through future revenue from the sale of the software. If we determine in the future that the value of the capitalized software could not be recovered, a write-down of the value of the capitalized software to its recoverable value may be required.

We estimate the useful life of our capitalized software and amortize the value over that estimated life. If the actual useful life is shorter than our estimated useful life, we will amortize the remaining book value over the remaining useful life or the asset may be deemed to be impaired and, accordingly, a write-down of the value of the asset may be required.

Income Taxes

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” which establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in addressing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns.

In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. A change in the assessment of the outcomes of such matters could materially impact our consolidated financial statements. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. In accordance with FIN 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109”, we recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes may be required. If we ultimately determine that payment of these amounts is unnecessary, then we reverse the liability and recognizes a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained if challenged by the taxing authorities. To the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our liabilities, our effective tax rate in a given period may be materially affected. An unfavorable tax settlement would require cash payments and may result in an increase in our effective tax rate in the year of resolution. A favorable tax settlement would be recognized as a reduction in our effective tax rate in the year of resolution. We report interest and penalties related to uncertain income tax positions as income taxes.

As of December 31, 2007 and 2006, we recognized a net deferred tax asset of $10,471 and $23,522, respectively. Net deferred tax assets are primarily comprised of net deductible temporary differences and net operating loss carryforwards that are available to reduce taxable income in future periods. As of December 31, 2007 and 2006, we consider it more likely than not that we will have taxable income in the future to allow us to realize our deferred tax assets. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we consider all available positive and negative evidence, including past operating results, projections of future taxable income and the feasibility of ongoing tax planning strategies.

Results of Operations

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Software and Related Services

Software and related services revenue for the year ended December 31, 2007 increased 28.3%, or $49,170, from $173,503 in 2006 to $222,673 in 2007. The increase is attributable to a full year effect of A4 in 2007, an increase in revenue recorded for add-on software sales to existing customers, an increase in related support and maintenance revenue due to the increase in our installed customer base and an increase in hardware revenue, offset by a decrease in software and implementation services revenue accounted for under percentage of completion. The decrease in software and implementation services revenue is primarily due to slower than expected deployment schedules of TouchWorks version 11.0, which management believes will continue into 2008.

Gross profit for software and related services for the year ended December 31, 2007 increased 23.9%, or $24,655, from $103,152 in 2006 to $127,807 in 2007. The increase in gross profit is primarily a result of add-on software sales to existing customers and an increase in support and maintenance revenue which are traditionally higher-margin products. Gross profit for software and related services as a percentage of revenue decreased from 59.5% in 2006 to 57.4% in 2007. Allscripts’ gross profit as a percentage of revenue has been adversely impacted due to the contribution of gross profit from the A4 product line, which tends to have lower margins than our traditional overall software and related services product lines, during all twelve months of 2007, compared to only ten months in 2006. In addition, the gross profit as a percentage of revenue was negatively affected by pricing pressures in the HealthMatics business driven by competitors and by the incremental deployment effort related to TouchWorks version 11.0 software that was experienced during the second half of 2007 when compared to the same period of 2006.

Operating expenses for software and related services for the year ended December 31, 2007 increased $13,833 from $49,054 in 2006 to $62,887 in 2007. Assuming the A4 acquisition was consummated on January 1, 2006, the total operating expense incurred during 2006 would have been $69,173 or $53,973 when excluding acquisition-related expenses which includes certain bonuses, resulting in a year-over-year increase of $8,914. The increase in operating expenses during the full twelve months of 2007 compared to the same period in 2006 is primarily the result of an increase of approximately $10,700 in compensation-related costs, as well as an increase in travel and

marketing expenses as our existing and prospective customer base continues to grow. These increases in operating costs for 2007 reflect the overall growth experienced in the software and services business and also reflect increased headcount during 2007. A total of $2,042 and $1,093 was recorded for stock-based compensation in 2007 and 2006, respectively.

We had capitalized software costs of $13,338 in 2007 and $7,446 for the same period in 2006, which was capitalized pursuant to Statement of Financial Accounting Standard “SFAS” No. 86, “Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed” in our software and related services segment. The increase in capitalized software is largely attributed to the development of TouchWorks version 11.0, which launched in June 2007, TouchWorks version 11.1, third party contracted clinical content development of approximately $5,200, the inclusion of approximately $1,400 of capitalized software related to our A4 businesses and upgrades to our e-prescribing software when compared to the year ended December 31, 2006. The amortization expense for capitalized software that has been generally released as of December 31, 2007 is expected to be approximately $5,800, $5,000, $3,000, $1,200, and $0 for the five years ended December 31, 2012, respectively.

Prepackaged Medications

Prepackaged medications revenue for the year ended December 31, 2007 increased $271, from $43,688 in 2006 to $43,959 in 2007. The increase is due to an increase in prepackaged medications revenue of approximately $331, driven primarily by new business, offset somewhat by management’s focus in reducing lower-margin revenue from wholesaler customers. Total medication units shipped in 2007 increased slightly from approximately 2.4 million units shipped in 2006 compared to approximately 2.6 million units shipped in 2007.

Gross profit for prepackaged medications for the year ended December 31, 2007 decreased 5.9%, or $440, from $7,425 in 2006 to $6,985 in 2007. Gross profit as a percentage of revenue decreased from 17.0% in 2006 to 15.9% in 2007. The decrease in gross profit is due to an increase in compensation of approximately $300 and an increase in medication material costs due to the sale of more generic than brand medications. The decrease in gross profit as a percentage of revenue is primarily due to an increase in headcount additions as certain revenue-producing headcount were reclassified from operating expenses to cost of revenue in 2007.

Operating expenses for prepackaged medications for the year ended December 31, 2007 increased slightly by $135, from $3,124 in 2006 to $3,259 in 2007. The increase is primarily due to an increase of approximately $131 in sales commissions and an increase in compensation expense of $321 due to increased headcount, offset by a decrease of $366 in bad debt expense, primarily relating to one wholesaler customer in 2006.

Information Services

Information services revenue for the year ended December 31, 2007 increased 41.7%, or $4,498, from $10,778 in 2006 to $15,276 in 2007. This improvement is primarily attributed to the recognition of a full twelve months of revenue related to the development and hosting of several PRMP solutions during the year ended December 31, 2007. We recognized a partial year of revenue for these PRMP solutions in 2006 due to the timing of contract signings in 2006. Revenue from e-Detailing sessions remained consistent on a year-over-year basis.

Gross profit for information services increased 4.8%, or $260, from $5,361 in 2006 to $5,621 in 2007. Gross profit as a percentage of revenue decreased from 49.7% in 2006 to 36.8% in 2007. The decrease in gross profit as a percentage of revenue is primarily due to an increase in the number of hosted PRMP solutions, which is traditionally a lower-margin product than our e-Detailing solution.

Operating expenses for information services decreased $82, from $4,016 in 2006 to $3,934 in 2007. The decrease is primarily due to a decrease in compensation related charges of $141 caused by a decrease in headcount and is slightly offset by an increase in depreciation expense.

Unallocated Corporate Expenses

Unallocated corporate expenses for the year ended December 31, 2007 increased by $2,346 from $39,876 in 2006 to $42,222 in 2007. The increase in 2007 primarily relates to an increase in depreciation expense related to our new general ledger system which was placed into service during the second quarter of 2007, but absent in the comparable period of 2006, as well as an increase in our facilities costs as we expanded our corporate facilities. Operating expenses for 2006 included $1,021 in non-recurring integration costs related to the A4 acquisition that was recognized in the first quarter of 2006. Amortization of intangibles increased by $364, from $10,272 in 2006 to $10,636 in 2007. This increase is primarily due to acquisition-related amortization for our July 10, 2007 acquisition of Source Medical Solutions, Inc. in which we recorded approximately $345 of amortization during 2007.

Interest Income and Interest Expense

Interest and other income for 2007 increased 25.2%, or $798, from $3,163 in 2006 to $3,961 in 2007. The increase in interest income is attributed to an increase in the average cash and marketable securities balances during 2007 when compared to 2006. The cash and marketable securities balances were lower in 2006 due to the timing of the A4 acquisition and the repurchase of 1,250 shares of Allscripts common stock from IDX, a subsidiary of GE. Interest expense remained constant during 2007 and 2006 at $3,715 and $3,712, respectively.

Income taxes

We adopted FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of FIN 48, we recorded an approximate $273 increase in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 balance of goodwill in relation to the A4 acquisition on March 2, 2006. As of December 31, 2007, the gross amount of unrecognized tax benefits was $6,400, of which $6,400 was recorded as a reduction to certain tax carryovers. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $4,600. All remaining amounts would be adjustments to goodwill.

We also recognized accrued interest and penalties related to unrecognized tax benefits in income tax expense and have also accrued amounts as adjustments to goodwill. We had approximately $1,300 in interest and penalties related to unrecognized tax benefits accrued as of December 31, 2007. It is unlikely that the balance of the unrecognized tax benefits will change in any material amount in the next 12 months.

During the first quarter of 2006, management reversed $61,284 of its net operating loss valuation allowance against goodwill in purchase accounting for the A4 acquisition in 2006. In connection with the reversal of its valuation allowance in purchase accounting, we wrote off approximately $5,656 of net operating losses (“NOL”) pursuant to Internal Revenue Code Section 382, which imposes an annual limitation on the future utilization of net operating losses.

A tax provision of $10,186 and $7,424 were recorded for the years ended December 31, 2007 and 2006, respectively. The 2007 tax provision includes the benefit of approximately $2,089 in Federal research and development tax credits relating to a study performed on tax years 1998 through 2007 which principally reduced the effective tax rate from 38.4% in 2006 to 33.1% in 2007.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Three and Six Months Ended June 30, 2008 Compared to Three and Six Months Ended June 30, 2007

Software and Related Services

Software and related services revenue for the three months ended June 30, 2008 increased $13,498, or 24.7%, from $54,681 during the three months ended June 30, 2007 to $68,179 during the same period in 2008. Software and related services revenue for the six months ended June 30, 2008 increased $20,876, or 19.7%, from $105,921 during the six months ended June 30, 2007 to $126,797 during the same period in 2008. The quarterly increase is attributable to an increase in software revenue of approximately $6,200 for revenue contributed by ECIN, which we acquired on December 31, 2007, an increase of approximately $5,200 in sales to smaller physician practices and emergency department customers, an increase of approximately $1,700 in support and maintenance revenue due to the increase in our installed customer base, an increase of approximately $2,500 in software and implementation services revenue accounted for under percentage of completion and other related services. These increases were partially offset by a decrease in add-on license revenue of approximately $2,200. The six month increase is due to approximately $11,600 contributed by ECIN which was absent in 2007, an increase of $7,700 in sales to smaller physician practices and emergency department customers and an increase of approximately $3,200 in support and maintenance revenue, partially offset by a decrease in add-on license revenue of approximately $2,600.

Gross profit for software and related services increased $6,328, or 19.8%, from $31,884 during the second quarter of 2007 to $38,212 in the same period of 2008. Gross profit also increased $10,169, or 16.7%, from $60,742 in the first half of 2007 to $70,911 in the first half of 2008. The increase in gross profit for both periods is primarily a result of an increase in support and maintenance revenue which is traditionally higher-margin relative to other revenue streams and due to the ECIN margin contribution for the three and six month periods ended June 30, 2008 which were not present in 2007. Gross profit for software and related services as a percentage of revenue decreased from 58.3% during the second quarter of 2007 to 56.0% in the second quarter of 2008. Gross profit for software and related services as a percentage of revenue decreased from 57.3% during the first half of 2007 to 55.9% in the first half of 2008. The gross profit as a percentage of revenue for both periods was negatively affected by the incremental deployment cost associated with our TouchWorks version 11.0 software.

Operating expenses for software and related services for the second quarter ended June 30, 2008 increased $3,292 from $14,970 in the second quarter of 2007 to $18,262 in the same period of 2008. Operating expenses for software and related services for the six months ended June 30, 2008 increased $6,720 from $29,617 in the first six months of 2007 to $36,337 in the same period of 2008. The net increase in operating expenses during the second quarter of 2008 compared to the same period in 2007 is primarily the result of an increase in compensation-related costs of approximately $2,800 due to increased headcount resulting from the growth of the business, the addition of ECIN employees and an increase in bonus expense as well as an increase in bad debt of approximately $1,500, partially offset by a decrease of approximately $700 in consulting and marketing costs combined. The six month increase in operating expenses is primarily due to an increase in compensation-related expenses of approximately $5,700 attributable to an increase in headcount, an increase of approximately $1,800 in bad debt expense and an increase in travel expenses of approximately $600. The six month increase is partially offset by a decrease in third party consultant expense of approximately $1,200.

We had capitalized software costs of $7,305 during the first half of 2008 and $6,740 for the same period in 2007, which was capitalized pursuant to Statement of Financial Accounting Standard “SFAS” No. 86, “Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed” in our software and related services segment. The increase in capitalized software of $565 is primarily due to the addition of capitalized software related to our A4 and ECIN businesses, which were absent in the same period of 2007.

Prepackaged Medications

Prepackaged medications revenue for the three months ended June 30, 2008 decreased $1,446, from $10,939 in 2007 to $9,493 in the same period of 2008. Prepackaged medications revenue for the six months ended June 30, 2008 decreased $2,080, from $21,168 in 2007 to $19,088 in the same period of 2008. The decrease is primarily due to an overall decrease in average selling prices for medications due to increased competitive factors, management’s focus on reducing lower-margin revenue from wholesaler customers, and due to a decrease in medication orders as a result of increased order monitoring and related restrictions experienced in 2008. Approximately $950 of the year-over-year decrease was due to the reduction in medication prices and the effect of increased order monitoring and the remaining decrease of approximately $500 is due to a reduction in wholesaler revenue during the second quarter of 2008 in comparison to the same period in 2007. Of the six month decrease, approximately $950 was attributed to the reduction in medication prices and the effect of increased order monitoring and approximately $1,100 was due to a reduction in wholesaler revenue in the six months ended June 30, 2008 when compared to the same period in 2007.

Gross profit for prepackaged medications for the three months ended June 30, 2008 decreased $153, or 8.5%, from $1,798 in the second quarter of 2007 to $1,645 in the same period of 2008. Gross profit for prepackaged medications for the six months ended June 30, 2008 decreased $92, from $3,719 in the first half of 2007 to $3,627 in the same period of 2008. Gross profit as a percentage of revenue increased from 16.4% in the second quarter of 2007 to 17.3% in the same period of 2008. Gross profit as a percentage of revenue increased from 17.6% in the first half of 2007 to 19.0% in the same period of 2008. The increase in gross profit as a percentage of revenue for both periods is primarily due to the reduction in lower-margin revenue from wholesaler customers experienced in the first six months of 2008.

Operating expenses for prepackaged medications for the quarter ended June 30, 2008 decreased by $122, from $848 in 2007 to $726 in 2008. Operating expenses for prepackaged medications for the first half of the year decreased $54, from $1,540 in 2007 to $1,486 in 2008. The second quarter decrease is primarily due to a decrease in bad debt expense of approximately $80 and a decrease in consulting expense of approximately $50. The six month decrease is due to a decrease in bad debt expense of approximately $125 and a decrease in consulting expense of $50, offset by an increase in compensation expense of $150.

Information Services

Information services revenue for the three months ended June 30, 2008 decreased $581, or 13.1%, from $4,421 in the second quarter of 2007 to $3,840 in the same period of 2008. Information services revenue for the six months ended June 30, 2008 decreased $258, or 3.2%, from $7,974 in the first half of 2007 to $7,716 in the same period of 2008. The decrease for both periods is primarily attributed to the decrease of revenue related to the development and hosting of several PRMP solutions of approximately $500 and $200 during the second quarter of 2008 and first half of 2008, respectively.

Gross profit for information services for the quarter ended June 30, 2008 decreased $496, or 27.7%, from $1,789 in the second quarter of 2007 to $1,293 in the same period in 2008. During the first half of 2008, gross profit for information services decreased $630, or 19.2%, from $3,283 in the first half of 2007 to $2,653 in the same period in 2008. Gross profit as a percentage of revenue decreased from 40.5% in the second quarter of 2007 to 33.7% in the same period in 2008. Gross profit as a percentage of revenue decreased from 41.2% in the first half of 2007 to 34.4% in the same period in 2008. The decrease in gross profit and gross profit as a percentage of revenue for both periods is primarily due to an increase in headcount and a decrease in revenue accounted for under percentage of completion for the hosted PRMP solutions.

Operating expenses for information services for the three months ended June 30, 2008 decreased $159, or 13.3%, from $1,193 in the second quarter of 2007 to $1,034 in the same period in 2008. Operating expenses for information services for the six months ended June 30, 2008 decreased $183, or 8.2%, from $2,228 in the first half of 2007 to $2,045 in the same period in 2008. The decrease for both periods is due to a decrease in compensation-related expenses attributed to a decrease in headcount of approximately $170 and $270 in the second quarter of 2008 and the first half of 2008, respectively.

Unallocated Corporate Expenses

Unallocated corporate expenses for the three months ended June 30, 2008 increased by $5,277 from $10,990 in the second quarter of 2007 to $16,267 in the same period in 2008. Unallocated corporate expenses for the six months ended June 30, 2008 increased by $11,687 from $19,566 in the first half of 2007 to $31,253 in the same period in 2008. Excluding approximately $3,004 in acquisition related expenses relating to the transactions contemplated by the Merger Agreement with Misys plc and other

integration related expenses, unallocated corporate expenses for the second quarter of 2008 increased by $2,273. This increase primarily relates to an increase in compensation related costs of $600 resulting from an increase in headcount and the ECIN acquisition, an increase in deal related amortization of $860 relating to the ECIN acquisition, and due to a reduction of $300 in corporate internally developed software capitalized. The balance of the three month increase is due to other immaterial changes. The increase for the six months ended June 30, 2008 is largely attributable to Misys transaction and other integration related expenses totaling $5,666. The remaining increase of $6,021 is due to an increase in compensation-related expenses of $2,100, an additional $1,700 of intangible amortization related to the ECIN acquisition, an increase of approximately $500 in facilities expenses, and due to a reduction of $300 in corporate internally developed software capitalized. The balance of the six month increase is due to other immaterial changes.

Interest Income and Interest Expense

Interest and other income recognized during the second quarter of 2008 decreased $729, or 65.9%, from $1,106 in the second quarter of 2007 to $377 in the comparable period in 2008. Interest and other income recognized during the first half of 2008 decreased $1,201, or 56.0%, from $2,143 in the first half of 2007 to $942 in the comparable period in 2008. The decrease in interest income for both periods is attributed to the net cash of $37,802 used for the purchase of ECIN as of December 31, 2007, which represents total net cash used of $87,802 less $50,000 borrowed under the Credit Facility and due to a decrease in effective interest rates for each comparable period.

Interest expense recognized during the three months ended June 30, 2008 increased $453, from $930 in the second quarter of 2007 to $1,383 in the same period in 2008. Interest expense recognized during the first six months of 2008 increased $1,164, from $1,863 in the first half of 2007 to $3,027 in the same period in 2008. The increase in interest expense is due to the new Credit Facility we entered into on December 31, 2007 which provides for a total unsecured commitment of $60,000 and matures on January 1, 2012. As of June 30, 2008, $50,000 in borrowings were outstanding under the Credit Facility and the net proceeds received were used towards the net cash purchase price of $87,802 related to the purchase of ECIN as of December 31, 2007.

Gain on sale of equity investment

During the second quarter of 2007 we entered into an Option Purchase Agreement with Medem and agreed to sell to Medem for a total purchase price of $2,592 an irrevocable three-year option held by Allscripts to purchase additional shares of Medem’s common stock. The sale of the option resulted in a gain of approximately $2,392 and is recorded in our operating results for the three and six months ended June 30, 2007.

Income taxes

Tax provisions of $1,503 and $4,010 were recorded for the three months ended June 30, 2008 and 2007, respectively and $1,553 and $6,970 for the six months ended June 30, 2008 and 2007, respectively.

Liquidity and Capital Resources

At June 30, 2008 and December 31, 2007, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities of $66,055 and $63,003, respectively. The increase of $3,052 is reflective of the following:

Operating activities

For the six months ended June 30, 2008, we generated $22,358 in net cash provided by operations, compared to $6,916 in the same period of 2007. This net improvement of $15,442 is due primarily to an improvement in accounts receivable management which improved by approximately $9,900 for the first half of 2008 due to management’s focus on cash collections and also due to a reduction in payments related to prepaid expenses of approximately $5,900 during the first half of 2008 compared to the same period in 2007. During the first half of 2007 we prepaid $1,700 for third-party software development, prepaid commissions of approximately $2,200 and other miscellaneous prepayments that were all absent in the same period in 2008. In addition, we received a refund of approximately $600 during the first half of 2008 relating to prepaid marketing services from prior years. These operating cash flow improvements were partially offset by a decrease of approximately $650 in accounts payable and accrued costs due to the timing of vendor and employee payments.

Investing activities

During the first half of 2008, we used $5,657 of cash for capital expenditures and $6,170 for capitalized software development costs. In addition, we made additional ECIN acquisition payments of $9,024 during the first six months of 2008. We used $5,104 and $8,035 in the six months ended June 30, 2007 to fund capital expenditures and capitalized software costs, respectively.

Financing activities

During the six months ended June 30, 2008, we received $1,667 in proceeds from the exercise of stock options and purchases of stock under our employee stock purchase plan, compared to the receipt of $7,923 during the same period in 2007.

Allscripts’ working capital increased by $13,037 or 17.4%, for the six months ended June 30, 2008, from $75,067 at December 31, 2007 to $88,104 at June 30, 2008. The increase is primarily due to an increase in cash and short-term marketable securities of $13,204 resulting primarily from cash generated from operations and the maturities of long-term securities, an increase in net accounts receivable of $2,496 and an increase in inventories of $1,195 attributed to an increase in purchases of hardware to be resold to customers during the first six months of 2008. At June 30, 2008, we had an accumulated deficit of $510,810, compared to $513,242 at December 31, 2007.

Future Capital Requirements

On August 6, 2008, Allscripts entered into a commitment letter with JPMorgan Chase Bank, N.A. in order to set forth terms regarding an amendment and restatement of its existing revolving credit facility. The amended credit facility would (i) increase the aggregate principal amount available thereunder from $60,000 to $75,000 and (ii) provide a backstop facility of up to $50,000 to be used to fund any repurchases of Allscripts’ 3.50% Convertible Senior Debentures arising by reason of the transactions with Misys plc (“Misys”). The amended credit facility will contain usual and customary representations, warranties and covenants for transactions of this type. The amended credit facility is subject to customary closing conditions.

We believe that our cash, cash equivalents and marketable securities of $66,055 as of June 30, 2008 and our cash flow from operations will be sufficient to meet the anticipated cash needs of our business for the next twelve months. Our primary needs for cash over the next twelve months will be to fund working capital, service approximately $4,925 in interest payments on our debt instruments, pay acquisition expenses related to the Transactions with Misys plc, fund capital expenditures, contractual obligations and investment needs of our current business.

We cannot provide assurance that our actual cash requirements will not be greater than we expect as of the date of this report. We will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, which might impact our liquidity requirements or cause us to issue additional equity or debt securities.

If sources of liquidity are not available or if we cannot generate sufficient cash flow from operations during the next twelve months, we might be required to obtain additional sources of funds through additional operating improvements, capital market transactions, asset sales or financing from third parties, a combination thereof or otherwise. We cannot provide assurance that these additional sources of funds will be available or, if available, would have reasonable terms.

Off Balance Sheet Arrangements

In connection with the corporate facilities lease agreement, Allscripts has provided to the lessor an unconditional irrevocable letter of credit in favor of the lessor in the amount of $500 as security for the full and prompt performance by Allscripts under the lease agreement. The letter of credit may be drawn upon by the lessor and retained, used or applied by lessor for the purpose of curing any monetary default or defaults of Allscripts under the lease. The letter of credit provides for an expiration date of one year from the commencement date of the lease, and will automatically extend for additional successive one-year periods through the term of the lease. As of June 30, 2008 and 2007, no amounts had been drawn on the letter of credit.

In connection with our acquisition of ECIN, we assumed a $200 irrevocable letter of credit with a lending institution. A security deposit in the form of a letter of credit is specified in ECIN’s Chicago office lease agreement. The letter of credit contains an automatic renewal provision that requires notice of non-renewal to the beneficiary no later than 60 days prior to the current expiration date. The letter of credit expires on June 30, 2009. Under the ECIN Chicago office lease agreement, we have the right to reduce the letter of credit over time to $75 on November 1, 2008 and to $50 on November 1, 2009. As of June 30, 2008, no amounts had been drawn on the letter of credit.

CONF CALL

Glen Tullman

Thank you very much and good afternoon. I couldn’t be more excited about our call today or the prospects for Allscripts. And before we get started, I am going to ask Bill Davis to read our disclosure statement. Bill?

Bill Davis

Thanks, Glen. The statements made by Allscripts or its representatives in this conference call will include certain forward-looking statements that are based on the current beliefs of Allscripts management as well as assumptions made by and information currently available to Allscripts management. Wherever practical, Allscripts will identify these forward-looking statements by using words such as may will expect anticipates believes intends estimates could or similar expressions.

These forward-looking statements are subject to a variety of risks and uncertainties, including those listed in the earnings press release issued by Allscripts today, and in Allscripts filings with the Securities and Exchange Commission, which could cause Allscripts actual results, performance, prospects or opportunities in 2008 and beyond to differ materially from those expressed in or implied by these statements.

Except as required by the federal security laws, Allscripts undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this release.

In addition, a portion of this conference call will cover the proposed business combination involving Allscripts Healthcare Solutions Inc., and Misys Healthcare Systems LLC, a wholly owned subsidiary of Misys PLC. In connection with this proposed transaction, Allscripts intends to file with the Securities and Exchange Commission a preliminary proxy statement, a definitive proxy statement and other related materials.

The definitive proxy statement will be mailed to the shareholders of Allscripts. Before making any decision with respect to the proposed transaction investors and security holders are urged to read these documents and other relevant materials when they become available because they will contain important information about the company and the proposed transaction.

Investors and security holders can obtain copies of Allscripts materials and all other offer documents filed with the SEC when available at no charge on the SEC's website www.sec.gov. Copies can also be obtained at no charge by directing a request for such materials to Lee Shapiro, our President and Secretary at our corporate officers in Chicago.

Investors and security holders may also read and copy any reports, statements and other information filed by Allscripts with the SEC, at the SEC public reference room at 100 F Street in Washington DC. Please call the SEC at 1-800-SEC-0330 or visit SEC's website for further information on its public reference room.

Allscripts Directors, Executive Officers and other members of management and employees may, under the rules of the SEC be deemed to be participants in the solicitation of proxies from the stockholders of Allscripts in favor of the proposed transaction. Information about Allscripts, its Directors, and its Executive Officers and their ownership of Allscripts securities is set forth in our Form 10-Ka, which was filed with the SEC on April 25, 2008.

Additional information regarding the interest of these persons maybe obtained by reading the proxy statement and other relevant materials to be filed with the SEC when they become available.

With that, I'd like to turn the call back over to our CEO, Glen Tullman.

Glen Tullman

Thanks, Bill. I’m happy to have this opportunity to share my thoughts about our people, our clients the strength of our market and positive trends driving it in our business performance. While Bill will cover the financials in detail later during this call, I want to begin by saying that I am very pleased with our strong operating results for the quarter, sales where in excess of $55 million and this quarter set new records for Allscripts with $81.5 million in total revenue and $68.2 million in revenue from software and related services, a 25% increase over Q2 results from a year ago. Our TouchWorks business unit lead the way, do impart to solid progress we made with version 11.0 of our TouchWorks electronic health record.

As a result our bottom line excluding transaction related expenses came in at $4.2 million for the second quarter and $5.9 million for the first six months of the year. Let me begin the discussion on the quarter by talking about our people. Our team state focused and delivered for our clients while we continue to invest in the right things. Driving revenue with a 25% year-over-year growth rate, developing new products and innovating all at the same time requires energy and commitment and our team has it, and we asked many of our best people to work on activities related to our pending merger with Misys.

Even with all this in motion our people stepped up to the challenge and delivered to our clients. I’m very proud of them, with respect V11.0 we have made significant progress with certified workflows, enhance documentation and a reduction in cycle times which translated directly into our results. The bottom line is we expect continuing improvement going forward. What’s most exciting is the way our clients are using our software and solutions from all of our business units to transform healthcare in the community they serve.

Committed people and great clients are powerful combination and I’m please to say that our partnerships with our clients are stronger today than they have ever been before. The best evidence of this will be seeing tomorrow at our Annual Users Conference when close to 2000 clients and partners join us in Chicago.

As you can imagine this is a great opportunity to educate our clients and celebrate their accomplishments, but it also provide the openings to discuss our other products and services. While all of this is going on inside our customer base, the market continues to expand and the trends and actions of the federal and state governments are all helpings for a solid growth across the market.

I’m sure you are all aware that congress recently past landmark legislation on electronic prescribing, that for the first time will provide meaningful incentives for physicians to automate. We estimate these incentives range from $2500 to $4000 per physicians. As the largest provider of the electronic prescribing software in the country with more end users and more prescriptions transmitted electronically than any other company we stand the benefit.

In fact, we are already seeing evidence of increased interest. As an example two day’s after congress approved the Medicare legislation, more than a 1000 attendees including physicians, administrators, CIOs and CEOs joined us for an Allscripts hoisting webcast to explain the legislation and how to leverage it.

We believe that getting physicians to use electronic prescribing serves as the on-ramp to the electronic healthcare highway and I want to clarify one point on this legislation. Physicians will receive the incentives whether they use standalone e-prescribing or e-prescribing as a part of one of our electronic health records.

Allscripts is the only company to provide both options. So, whether a practice is adopting standalone e-prescribing or a full electronic health record Allscripts unequally positioned to meet the needs of the market. Additionally, the starts safe-harbor as I’m sure your where provides hospitals the opportunity to help subsidies the deployment of either e-prescribing or Electronic Health Records and we have seen considerable opportunity and activity in this area. As I’ve often stated, healthcare can benefit from a push from the government, but it doesn’t require it. There is an amazing amount of energy already built into the market.

A good example is our July Executive Summit that we held in Chicago, with a 110 prospects a significant opportunity and a significant turnout from across all of our businesses. We typically go to contract with a significant number of the attendees that join us at these events. With that said, the best indication of market momentum is our sales performance and with $55.9 million in sales this quarter there is a lot to talk about.

During the quarter, we signed Blue Cross Blue Shield of North Carolina, for state wide e-prescribing program, building upon a successful pilot that we announced almost two years ago. This states largest health insurance, insurer I should say with more than $3.6 million members. Blue Cross, Blue Shield of North Carolina is offering Allscripts to electronic prescribing software at no-cost to physicians throughout the state, and they are also providing a $1000 bonus to physicians who utilize e-prescribing on top of any government incentives.

Importantly the bonus in our software are available two physicians who are already using e-prescribing contain within and complete electronic health record. Once again Allscripts is the only electronic prescribing solution that Blue Cross, Blue Shield is providing at no cost to its prescribers and the only vendor featured with a direct to Allscripts button, no loss on there new e-prescribing website. We think this state wide program sets an example prepares across the nation of how to leverage technology to improve the quality of healthcare services they deliver and speaking of statewide programs our TouchWorks team delivered a major implementation of our combined electronic health record and practice management solution for the New Mexico department of public help.

As Governor, Bill Richardson’s office announce last week, all 49 of the States public health clinics are now successfully running our system via web based, remote hosted model. The health department also received about $900,000 for a matching ramp program help private practices cover the cost of electronic health record systems and we are in a strong position to capture that business as well.

Earlier today we issued two press releases about agreements signed in the second quarter. We announced that Hartford Healthcare Corporation in Hartford Connecticut will implement our emergency department information system as well as our Electronic Health Record taking advantage of the stock rules. Harford is the latest of several major hospital agreements we’ve signed that connect physicians in the emergency department to physicians outside the hospital using our systems. With our Allscripts connect initiatives, something you will here more and more about, we are bridging the information GAAP in connecting physicians in all environments which we believe will improve the quality of patient care reduce unnecessary procedures and errors and therefore lower cost.

Being on the network, the Allscripts network that is we’ll seen move from a nice to have to our requirement of doing business for physicians they will want just like your banker or your broker the best information provide real time to make the highest quality most cost effective decisions, and we continue to see meaningful activity by hospitals like Hartford and each Jefferson general hospital in new islands, which we announced earlier in Q2 who view the start changes as an important opportunity to engage with physicians in their community.

They see physicians as their LifeBlood and are using technology to connect with them for referrals. Another example of hospital traction that we announced today is Evangelical Community Hospital in Pennsylvania. Evangelical will host our electronic health record for a 100 physicians and subsidize its cost in on going fees associated with providing the system to physicians in that community, as allowed under the stock regulations. The 135 bed hospital is also implementing and element of our electronic health record that many hospitals find attractive.

Our iHealth, personal health record provided in partnership with Medem for patients who want to have their medical information accessible by care givers wherever they may travel and Evangelical will implement Allscripts study manager providing the data tools to more easily participate in clinical research. Study manager creates new revenue streams for physicians inside and outside the hospital and provides advanced care options for patients. On the Practice Management front, we continue to see great results from our Practice Management solution for physician practices. I’d like to announce several large new clients, who selected our TouchWorks Electronic Health record and Practice Management solution during the second quarter.

Center Medical and Surgical in the State College Pennsylvania, the largest multi-specialty group in Central Pennsylvania is implementing our combined system for 55 physicians and 22 mid-level providers. The center for Orthopedic and Neurosurgical Care Bend, Oregon is implementing our combined solution, which is our electronic health record in Practice Management for system for 33 physicians, and Edward Health Service Corporation in Naperville, Illinois will provide our Practice Management solution on a standalone basis and combined with our electronic health record to a total of 76 physicians and 19 mid-level providers.

We are not only selling practice management, but we are able to deliver with seamless system go lives for clients. This means converting 100s of physicians at a time to a new system that generates their billing and scheduling, to the most sensitive parts of their businesses and doing so without a hitch. To name just two very large examples, this is true of LSU Health Care Network in New Orleans with 500 physicians and Novant Health Care in North Carolina with nearly 900 physicians and I’m also pleased to report that Novant, which was just ranked forth most integrated delivery network in the United States and also uses our electronic health record signed the largest agreement yet for our new clinical quality solution tool or known as CQS. They are purchase of 900 CQS licenses for physicians will entirely automate their participation in paper performance programs, while also giving their physician substantial new disease management capabilities.

CQS fulfils the promise of healthcare IT, by leading physicians view aggregate patient data in real time. Unlike quality reports that come after the fact and immediately take proactive steps to help adverse patients and deliver preventive care. To change gears our HealthMatics business, which focuses on smaller physician offices also had a very strong quarter. Financially, we had solid growth on the top and bottom lines as more and more physicians in small and medium-size medical groups are drawn to Allscripts.

For example integrated medical professionals of Long Island, New York, one of the largest Urology group in the country purchased additional licenses for both electronic and health record and our practice management solution, another example, Children’s Medical Group the largest pediatrics group in Mississippi purchased our integrated solution for 13 physicians at their three locations.

The market even for smaller groups is moving. Our hospital solutions grew, which includes both our care management and emergency department solutions also delivered a strong quarter. As an indication of the strength of our solutions our ED solution rank number one in both utilization and implementation in the class report, which as you know is the consumer reports of healthcare IT and to validate that point Stephanie Reel the CIO of Johns Hopkins recently paid our ED team a great compliment on the widely HIStalk blog.

Referring to the ED implementations, she told the blog In my carrier it was the first time a system came in ahead of schedule and under budget. Pretty impressive words from one of the most recognized CIOs in the industry and we made important progress in our care management group by quickly combining the best aspects of our Canopy and recently acquired ECIN Solutions into a single integrated web-based offering that is now the clear market leader.

At the ACMA conference, the biggest case management show of the year, close to half the attendees came to the Allscripts’ Care Management launch, a great example of our presence in this space, and on the sales front, our care management business had a record quarter selling into the Post-Acute market adding 439 new facilities who pay us a monthly subscription fee. These results significantly add to the Allscripts networks, which has already far and away the industries largest network of Post-Acute providers. Over 200 of these new clients were homecare and hospice providers, so lots of exciting news and great performances from our hospital solutions group.

Meanwhile our physicians interactive and NSG units continue to operate to plant. At this point I would like to ask Bill Davis to discuss our financial results for the second quarter. Bill?

Bill Davis

Thanks, Glen. As Glen indicated we are very pleased with our financial result this quarter including strong clinical bookings, record revenues as well as measurable operational improvements in several of our businesses including TouchWorks in our version 11.0 implementation cycles. We continue to believe that our financial and operational progress will only continue in the second half of this year.

We are also very excited about the progress we are making to prepare for our merger with Misys Healthcare. We continued to work towards the closing as they expected to occur in the later part of September. I planned on providing a more detail update regarding Misys merger in a few minutes, but I would like to first provide a quick overview of our second quarter performance. Our total bookings during the quarter were approximately $55.9 million consistent with prior quarter bookings do not taking to consideration the $9.5 million of sales and medications.

Our clinical software businesses contributed $53.5 million in bookings during the quarter excluding ongoing support. This represents approximately 12% sequential growth over the first quarter of this year. Consistent with Glen’s comment earlier, we are very encouraged by the strong demand for our clinical software products and our team’s ability to continue to execute in the mix of a lot of change in our business.

Rounding up our booking performance for the quarter is our physician’s interactive business, which had booking of $2.4 million. Total bookings for the first six month of 2008, were approximately $107.9 million or 22% growth over the same six-month period in 2007, our clinical software businesses contributed approximately $101.3 million of our six-month booking performance and represents 25% increase over the last year.

Turning now to backlog we ended the second quarter with $291 million in backlog, the backlog breakout is as follows. License and service fees related to our clinical software businesses represents $144.7 million of our backlog, software subscription in ASP contractual commitments makes up another $63.6 million and support maintenance fees which are expected to be recognize over the next 12 months are $65.7 million and then physicians interactive make up the balance to $17 million bringing our total backlog to $291 million. Our ending backlog is indicative of our strong revenue growth in the quarter, and the fact that we enjoyed acceleration of backlog take down that was driven by improved deployment cycle times in both our Touchworks and HealthMatics businesses.

Our second quarter revenue of $81.5 million represented $11.5 million or 16% increase over the same three month period last year. It also represents the first time our total revenues exceeded $80 million in the quarter, our clinical software businesses contributed the majority of that increase and represented 25% revenue growth year-over-year and 16% sequential growth. This improvement was in part due to the improvements made in our Touchworks V11.0 deployment cycles. We are encouraged by the progress being made and believe there is opportunity for further improvement as we move into the second half of this year.

Physicians interactive had revenue of $3.8 million in the second quarter and we also saw another solid quarter from our meds business with revenue of $9.5 million. In terms of revenue mix, our software and related services segment represented approximately 84% of our total revenue in the second quarter. Second quarter revenue by segment is as follows. Our medication business delivered $9.5 million or 12% of our total, our clinical software business delivered $68.2 million or 84% of our total and again our information services or physicians interactive deliver the balance of $3.8 million for a total of $81.5 million.

Looking now to gross margins, overall our gross margin was approximately 50.5% in the second quarter. The 50 dip improvement over Q1 was due to a positive revenue mix shift offset by slightly lower margins in our meds and our physician interactive businesses.

Margins by segment were as follows; our medication’s delivered margins of 17% in the quarter, while our clinical software segment delivered 56%, which is consistent with the first quarter and then information services of PI delivered 34% again for total of 50.5%. The sequential change in our meds gross margin is attributed to mix of drugs we sold in the quarter.

Turning now to expenses; operating expenses excluding amortization of intangibles and stock-based compensation for the quarter were $31.5 million. This compares to $29.8 million of expenses in the first quarter. The second quarter contemplates the inclusion of approximately $3 million of transaction related expenses and that first quarter included approximately $2.7 million of transaction related expenses.

Taking that into account our normalized operating expenses were approximately $28.5 million in the second quarter and $27.1 million in the first quarter; the increase quarter-on-quarter is primarily due to an increase in incentive compensation and bad debt expense that are commenced with our revenue growth and improved profitability. Both the increases were partially offset by less marketing spend in the quarter.

With regards to capitalized software, we have $2.3 million in the quarter. This amount compares to $2.4 million we capitalized in the first quarter and is reflective of the investment we continued to make in the development of both our TouchWorks and HealthMatics product lines. Please note, that these capitalized software amounts do not include approximately $1.6 million or $800,000 we spent in Q1 and in Q2 respectively on our Walters core content creation project.

Also note that total capitalized software amount will continue to fluctuate from quarter-to-quarter depending on our product development cycle. Sock based compensation was approximately $1.6 million for the quarter and deal related amortization was approximately $3.4 million; both amounts are relatively consistent with prior quarter.

Net income for the quarter was approximately $2.4 million or $0.04 per diluted share, excluding the $3 million of transaction related expenses our net income would have been approximately $4.2 after-tax or $0.07 per diluted share. The $0.07 per diluted share includes $2.1 million or $0.04 per share of acquisition-related amortization net of tax as well as $1 million or $0.02 per share of stock based compensation also net of tax bringing our non-GAAP adjusted earnings for the quarter to $0.13 per diluted share.

Net income for the six months ended June 30, was approximately $2.4 million or $0.04 per share excluding the $5.7 million of transaction related expenses net of tax our net income would have been approximately $5.9 million or $0.10 per diluted share.

Basic shares outstanding for the quarter were $56.8 million and diluted shares were $57.8 million. The $7.3 million shares issuable under our convertible debt offering were not dilutive to our GAAP earnings per share in the second quarter nor were they for the six month ended June 30. Therefore the 7.3 million shares are excluded in both our GAAP and non-GAAP adjusted earnings diluted per share computation for such period. With regard to overall headcount we ended the quarter with approximately 1,149 employees which compares to the 1,157 employees we reported in the first quarter.

Turning now to our balance sheet, we ended quarter with $66.1 million in cash and marketable securities which is reflective of us generating approximately $7.4 million in cash from operations in the quarter. The strong cash flows from operations were supplemented by $1.4 million of additional proceeds from option exercises and contributions to our employee stock purchase plan.

Cash inflows were offset by approximately $3.6 million of capital expenditures and capitalized software. Accounts receivable at June 30, were approximately $83.8 million, which includes approximately $7 million of receivables related to Easton. Day sales outstanding improved to 93 days in the quarter.

I would like to close by making a few comments regarding our pending merger with Misys Healthcare. I have received several questions as well as the fact that there appears to be some confusion regarding certain deal related considerations that I wanted to try to address and clear up to today.

First we previously commented that we anticipate the combined pro forma model for 2008 to be total revenue in excess of $700 million and adjusted earnings of approximately $85 million to $90 million. We wanted to confirm that such projections are in fact based on U.S. GAAP results from Misys Healthcare and reconciling differences between the segment information provided by Misys Plc and Misys Healthcares U.S. GAAP results were in fact contemplated in such pro forma perspective.

We filed an 8-K last week to provide you with the reconciliation between the two publicly reported numbers. You should anticipate similar adjustments to Misys Healthcare’s 2008 financial results when we filed their carve-out financial statements for the year ended May 31 2008 later this month. With that said, we have consistently thought about the Misys Healthcare business as one that is capable of generating at least $380 million of revenue and 15% to 16% operating margin on a U.S. GAAP basis, which is consistent with their current run rate as evidenced by their recently completed fourth quarter.

I also wanted to confirm that the $85 million to $90 million of non-GAAP pro forma adjusted earnings for 2008 contemplates $15 million to $20 million of pre-tax cost synergies. While we intend to provide further color on synergy at the time we closed the transaction, we continue to be comfortable with our first year cost savings estimate.

Please note that the $85 million to $90 million of non-GAAP pro forma adjusted earnings for 2008 do not take into account the anticipated deferred revenue adjustment we expect to record as we revalue Allscripts balance sheet on the date of consummation nor do such results take into account any onetime transaction fee associated with consummating the transaction or cost associated with implementing cost synergies. Again we intend to provide more color on both as the consummation drives the year.

We encourage people to think about our opening cash balance to be in the range of $30 million to $35 million, once you take into account such onetime expenses. With regard to the timing of the close as I mentioned earlier, we continue to work towards the consummation of the merger by the end of September. The ultimate timing is heavily dependent on the completion of the SEC review process and our requirement to file audited financial statements for Misys Healthcare for the year ended May 31 2008 as well as our Form 10-Q for this recently completed second quarter.

Finally, we have received a lot of questions regarding our convertible debt holders and what they are likely to do when the merger is consummated i.e. are they likely to convert, hold or put the securities back to the company. The reality is that each convert holder will make their own investment decision and therefore there is no way to be certain what they will do. We do encourage you to refer to our Proxy statement in which we outline the range of possible outcomes related to the convertible shares and resulting impact on our expected share count as well as the dividend amount.

In closing, I wanted to acknowledge the great efforts of our employees as well as our clients. We are very encouraged by the progress we made in the second quarter and look forward to our momentum continuing in the second half of 2008.

With that I’d like to turn it back over to Glen for some closing remarks.

Glen Tullman

Thanks, Bill. I thought I would just add two comments relative to the pending Misys transaction. As Bill noted, we expect to close the transaction in September to the extent its appropriate our integration planning for day one is proceeding well and my perspective is the more I learn about this transaction, the more excited I get about the prospects for our combined company.

With that said, let me close by giving you a thought; for years we’ve talked about the market for clinical software connectivity and information services focused on the ambulatory market and driven through physicians. We believe that market is here today and Allscripts is the best physician to capitalize on the opportunity through our broad and industry leading product suite, our committed people and our ability to deliver for our clients.

Our record performance this quarter is indicative of our persistence and drive to transform healthcare through the simple act of focusing on our clients and ensuring they have the support they need to transform their own businesses. One client at a time we’re fulfilling our shared vision of a connected healthcare system that provides higher quality care, more cost effectively.

So I want to thank you for your time today and for all of your continued support and at this point, Bill and I are pleased to take your questions.


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