NDC Ndchealth Corp

ATLANTA, Oct. 12 /PRNewswire-FirstCall/ -- NDCHealth Corporation (NYSE:NDC), a leading provider of healthcare technology and information solutions, today announced financial and operating results for its fiscal first quarter ended September 2, 2005. Total revenue from continuing operations was $100.0 million, a 9.9% increase from $91.0 million in the first quarter of fiscal 2005. Income from continuing operations for the first quarter was $2.6 million, or $0.07 per diluted share, compared to income of $0.8 million, or $0.02 per diluted share, in the same period in fiscal 2005. Net income after discontinued operations for the first quarter of fiscal 2006 was $2.6 million, or $0.07 per diluted share, compared to a net loss of $7.0 million, or ($0.19) per diluted share, in the first quarter of fiscal 2005. Adjusted income from continuing operations(1), a non-GAAP measure, for the first quarter of fiscal 2006 was $0.15 per diluted share, compared to adjusted income from continuing operations in the first quarter of fiscal 2005 of $0.03 per diluted share. Adjusted EBITDA(2), also a non-GAAP measure, in the first quarter increased 37.4% to $25.1 million, versus $18.2 million in the same period of fiscal 2005. Adjusted income and adjusted EBITDA exclude the effect of Restructuring, Special Governance and Other Charges, which in the first quarter consisted of $3.9 million in expenses associated with the pending sale of the company and costs associated with stockholder litigation and the SEC investigation. The first quarter of fiscal 2006 included the impact of one additional week of operating results when compared to the comparable quarter in fiscal 2005. The incremental 14th week added approximately $2.4 million in revenue and $2.6 million in total expenses. "Our first quarter results illustrate our ability to deliver growth and increased profitability as we continue to see momentum across all of our businesses," said Walter Hoff, NDCHealth chairman and chief executive officer. "This performance demonstrates that our efforts to more tightly focus our business activities, implement improved operating practices and increase our market penetration through product enhancements and new introductions have been successful. We continue to believe our operational activities point to clear signs that these businesses can achieve long-term, sustainable growth in revenue and earnings." First Quarter Financial Review NDCHealth reports its financial and operating performance in four segments: Pharmacy Services and Systems, Hospital Solutions, Physician Solutions and Information Management. On a business segment basis: - Pharmacy Services and Systems revenue increased $2.4 million, or 7.6%, in the first quarter of fiscal 2006 compared to the same quarter of fiscal 2005, reflecting an increase in pharmacy transaction services revenue as well as higher revenue from system sales to independent and mail order pharmacies, partially offset by a decline in legacy systems revenue. The incremental 14th week in the quarter added approximately $1.2 million in transaction services revenue and $0.6 million in operating expense. Segment operating margin was 17.5% versus 10.1% in the same quarter a year ago. - Hospital Solutions revenue in the first quarter of fiscal 2006 increased $1.5 million, or 9.0%, from the first quarter last fiscal year, driven by increased sales and installations of NDC ePREMIS(R) at higher per transaction pricing than the legacy PREMIS system. The incremental 14th week in the quarter added approximately $0.8 million in transaction services revenue and $0.2 million in operating expense. Segment operating margin was 30.9% versus 26.5% in the same quarter a year ago. - Physician Solutions revenue increased $1.1 million, or 17.3%, in the first quarter of fiscal 2006 compared to the same period in fiscal 2005 due to higher system sales. The incremental 14th week in the quarter added approximately $0.4 million in additional revenue and $0.2 million in operating expense. Segment operating margin was 24.7% versus 8.6% in the same quarter a year ago. - Information Management revenue in the first quarter increased $4.0 million, or 10.9%, compared to the same quarter in fiscal 2005, driven by growth in core product and service offerings as well as new product growth from the company's advanced analysis, market research and longitudinal product solutions. The additional 14th week in the quarter had an immaterial effect on revenue but added approximately $0.8 million in operating expense. Segment operating margin was 5.8% versus a breakeven operating margin in the same quarter a year ago. On a consolidated basis: - Cost of Service in the first quarter increased $0.8 million, or 1.5%, from the same quarter of fiscal 2005 due primarily to the impact of additional compensation expense in the 14th accounting week, which offset cost savings from lower staffing levels and data costs when compared to the first quarter last year. - Sales, General and Administrative expense in the first quarter of fiscal 2006 increased $1.4 million, or 6.2%, from the same period a year ago. The incremental 14th week added about $1.0 million in Sales, General and Administrative expense in the quarter. - Restructuring, Special Governance and Other Charges in the quarter increased $3.5 million from the first quarter of fiscal 2005, reflecting expenses associated with the pending sale of the company and costs associated with stockholder litigation and the SEC investigation. - Total outstanding debt at September 2, 2005 was $254.7 million, down $16.1 million from $270.8 million at May 27, 2005. Business Highlights - Pharmacy network services volume totaled more than 1.63 billion transactions in the first quarter of fiscal 2006, a 25.7% increase from the same period last year as NDCHealth benefited from an incremental 14th week as well as continuing to increase penetration of its core claims processing and pre- and post-edit transaction services. - The company has now signed agreements for seven pharmacy chains to implement the NDC EnterpriseRx(TM) pharmacy management system, a robust inventory, central fill and centralized patient management solution. Initial installations and revenue are expected to begin in the third quarter of fiscal 2006, which will also positively affect cash flow. - NDCHealth sold an additional 41 ePREMIS units and installed 109 units during the first quarter of fiscal 2006, increasing the total ePREMIS installed base to 665 sites. New ePREMIS sales are expected to increase in the second quarter from the seasonally slower activity experienced during the summer months. - On September 29th, the company announced a long-term agreement whereby Acxiom Corporation will transform and manage the technology infrastructure of NDCHealth's Information Management business unit. The collaborative project will create a proprietary data factory utilizing Acxiom's automated grid-enabled information management platform that is expected to allow the Information Management unit to develop and deploy new information product offerings faster and at a lower cost. - NDCHealth recently announced it received notification of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to the proposed sale of its Information Management business to Wolters Kluwer and the proposed merger of NDCHealth with Per-Se Technologies. As disclosed on August 29, 2005, the companies signed definitive agreements pertaining to these transactions, which, subject to approval by both NDCHealth and Per-Se stockholders and other customary closing conditions, are anticipated to close in NDCHealth's fiscal third quarter. Financial Outlook For the second quarter of fiscal 2006 ending December 2, 2005, management expects revenue to be in the range of $98.5 million to $101.0 million. Adjusted EBITDA(2) is expected to be in the range of $24.5 million to $27.0 million, before approximately $2.5 million in estimated Restructuring, Special Governance and Other Charges. Adjusted income per diluted share from continuing operations(1), before Restructuring, Special Governance and Other Charges, is expected to be in the range of $0.13 to $0.17 in the second quarter of fiscal 2006, versus $0.06 in adjusted income per diluted share in the same period of fiscal 2005. Conference Call and Webcast NDCHealth will host a conference call to discuss its financial results and business outlook beginning at 5:00 pm ET today, October 12, 2005. To listen to the conference call, please dial 877-421-3895 (706-679-0822 for international callers), or access the webcast through the Investor Relations page at http://www.ndchealth.com/. A replay of the conference call will be available via webcast or by dialing 800-642-1687 (706-645-9291 for international callers) and entering conference ID 1205542. Cautionary Information Regarding Forward-Looking Statements This press release contains forward-looking statements, including those related to the company's financial guidance for the second quarter of fiscal 2006. These statements involve risks and uncertainties that may cause actual results to differ materially. NDCHealth's projected results for future periods are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but may be beyond management's control. Forward-looking statements are only predictions and are not guarantees of performance, and include statements preceded by, followed by or that include the words "may," "could," "would," "should," "believe," "expect," "anticipate," "plan," "estimate," "target," "project," "intend," or similar expressions. These statements include, among others, statements regarding the company's expected business outlook, anticipated financial and operating results, its business strategy and means to implement the strategy, the company's objectives, the likelihood of the company's success in developing and introducing new products and expanding its business, the timing of the introduction of new and modified products or services, and sources of liquidity. These forward-looking statements are based on management's beliefs and assumptions, which in turn are based on currently available information. Important risks and assumptions relating to the forward-looking statements include, without limitation: (1) the completion of the announced sale of the company; (2) the ability to retain employees despite uncertainty created by the pending sale of the company; (3) the company's ability to comply with the Sarbanes-Oxley Act of 2002; (4) demand for the company's products and services; (5) the company's ability to expand in new and existing markets; (6) the cost of product development; (7) the timely completion, market demand and acceptance of the company's products; (8) competitive forces; (9) industry conditions affecting NDCHealth's customers; (10) expected pricing levels; (11) expected growth of revenue and net income; (12) access to data from suppliers; (13) complex state and federal regulations and their impact on the demand for information products or availability of certain data; (14) the timing and cost of planned capital expenditures; (15) the availability of capital to invest in business growth and expansion; (16) the timing of recognition of certain revenue; (17) the potential for information or network services interruptions; (18) adequate protection of proprietary technology; (19) unanticipated changes in accounting rules and/or interpretations; (20) outcomes and cost of litigation and/or the Securities and Exchange Commission investigation; (21) the company's ability to maintain compliance with certain restrictive debt covenants; and (22) the company's substantial indebtedness, which could adversely affect its financial condition, results of operations and liquidity. Many of these risk factors and assumptions are beyond the company's ability to control or predict, and are not intended to represent a complete list of all risks and uncertainties inherent in the company's business, and should be read in conjunction with the more detailed cautionary statements included in NDCHealth's Annual Report on Form 10-K/A for the fiscal year ended May 27, 2005 and other company filings with the Securities and Exchange Commission. The company believes its forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on the company's current assumptions and expectations. Forward- looking statements speak only as of the date they are made, and the company undertakes no obligation to update publicly any of them in light of new information or future events. Important Legal Information This communication shall not constitute an offer of any securities for sale. In connection with the proposed merger of NDCHealth Corporation with Per-Se Technologies, Inc., NDCHealth and Per-Se have filed a registration statement on Form S-4 containing a preliminary joint proxy statement/prospectus for the stockholders of both companies with the SEC, and each will file other documents regarding the proposed transactions with the SEC as well. The final joint proxy statement/prospectus will be mailed to the stockholders of both NDCHealth and Per-Se, and investors are urged to carefully read the final document, as well as any amendments and supplements thereto, and any other relevant documents in their entirety before making any voting or investment decision as they will contain important information about the proposed transaction. You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC's website (http://www.sec.gov/). You may also obtain these documents, free of charge, from NDCHealth's website (http://www.ndchealth.com/) under the tab "Investor Relations" through the "SEC Filing" link. You may also obtain these documents, free of charge, from Per-Se's website (http://www.per-se.com/) under the tab "Investors" through the "SEC Filing" link. NDCHealth Corporation and Per-Se Technologies and their respective directors and executive officers may be deemed participants in the solicitation of proxies from stockholders in connection with this transaction. Information about the directors and executive officers of NDCHealth and Per-Se Technologies and information about other persons who may be deemed participants in this transaction will be included in the joint proxy statement/prospectus. You can find information about NDCHealth's executive officers and directors in NDCHealth's Form 10-K/A filed with the SEC on September 14, 2005. You can find information about Per-Se Technologies' executive officers and directors in Per-Se's definitive proxy statement filed with the SEC on March 25, 2005. About NDCHealth NDCHealth is a leading information solutions company serving all sectors of healthcare. Its network solutions automate the exchange of information among pharmacies, payers, hospitals and physicians. Its systems and information management solutions help improve operational efficiencies and business decision making for providers, retail pharmacy and pharmaceutical manufacturers. Headquartered at Atlanta, Ga., NDCHealth provides information vital to the delivery of healthcare every day. For additional information, please visit http://www.ndchealth.com/. NDCHealth is a trademark of NDCHealth Corporation. All other company and product names mentioned may be trademarks of the company. (1) Adjusted income per share from continuing operations, a non-GAAP measure, can be derived from the company's Condensed Consolidated Statements of Operations, and is defined as Income from Continuing Operations, before the after-tax effect of Restructuring, Special Governance and Other Charges, on a per share basis. Reconciliation of adjusted income from continuing operations to Income from Continuing Operations, the most directly comparable GAAP financial measure, is provided in an accompanying table. (2) Adjusted EBITDA, a non-GAAP measure, can be derived from the company's Condensed Consolidated Statements of Operations, and is defined as Operating Income before Depreciation and Amortization, and Restructuring, Special Governance and Other Charges. Reconciliation of adjusted EBITDA to Operating Income, the most directly comparable GAAP financial measure, is provided in an accompanying table. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS NDCHealth Corporation and Subsidiaries (Unaudited) (In thousands, except per share data) Three Months Ended September 2, August 27, 2005 2004 Revenue $99,980 $91,008 Operating Expenses: Cost of Service 51,201 50,434 Sales, General and Administrative 23,708 22,333 Depreciation and Amortization 9,493 10,269 Restructuring, Special Governance and Other Charges 3,926 388 88,328 83,424 Operating Income 11,652 7,584 Other Income (Expense): Interest and Other Income 154 61 Interest and Other Expense (7,046) (6,395) (6,892) (6,334) Income from Continuing Operations before Income Taxes 4,760 1,250 Provision for Income Taxes 2,121 488 Income from Continuing Operations 2,639 762 Loss from Discontinued Operations - (7,727) Net Income (Loss) $2,639 $(6,965) Basic Earnings (Loss) Per Share: Income from Continuing Operations $0.07 $0.02 Discontinued Operations $- $(0.22) Basic Earnings (Loss) Per Share $0.07 $(0.20) Weighted Average Shares 35,955 35,638 Diluted Earnings (Loss) Per Share: Income from Continuing Operations $0.07 $0.02 Discontinued Operations $- $(0.21) Diluted Earnings (Loss) Per Share $0.07 $(0.19) Weighted Average Shares 36,191 36,002 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NDCHealth Corporation and Subsidiaries (Unaudited) (In thousands) Three Months Ended September 2, August 27, 2005 2004 Cash flows from operating activities: Net income (loss) $2,639 $(6,965) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Loss on discontinued operations - 7,727 Depreciation and amortization 9,493 10,269 Deferred income taxes 2,121 529 Allowance for doubtful accounts 1,547 1,960 Other, net 1,459 1,186 Total 17,259 14,706 Changes in assets and liabilities: Accounts receivable, net 1,431 (640) Prepaid expenses and other assets 7,183 4,597 Accounts payable and accrued liabilities (10,820) (15,291) Accrued interest on long-term debt (4,893) (5,379) Deferred revenue (737) (5,281) Total (7,836) (21,994) Net cash provided by (used in) operating activities 9,423 (7,288) Cash flows from investing activities: Capital expenditures-Property Acquisitions (3,449) (6,677) Capital expenditures-Capitalized External Use Software (4,642) (4,005) Acquisitions and other investing activities (11) (1,838) Net cash used in investing activities (8,102) (12,520) Cash flows from financing activities: Net repayments/borrowings under lines of credit (5,000) 38,500 Principal payments under long-term debt arrangements (11,081) (29,446) Net issuances related to stock activities 345 (71) Dividends paid - (1,439) Net cash (used in) provided by financing activities (15,736) 7,544 Cash provided by divestiture of discontinued operations 11,609 - Net cash used in discontinued operations (715) (7,904) Decrease in cash and cash equivalents (3,521) (20,168) Cash and cash equivalents, beginning of period 17,790 24,585 Cash and cash equivalents, end of period $14,269 $4,417 CONDENSED CONSOLIDATED BALANCE SHEETS NDCHealth Corporation and Subsidiaries (Unaudited) (In thousands, except share data) September 2, May 27, 2005 2005 ASSETS Current Assets: Cash and Cash Equivalents $14,269 $17,790 Accounts Receivable (Less Allowance of $7,539 and $6,603 respectively.) 48,027 50,977 Prepaid Expenses 18,495 22,777 Deferred Income Taxes 4,424 6,214 Other Current Assets 9,352 8,843 Total Assets of Discontinued Operations - 36,245 Total Current Assets 94,567 142,846 Property and Equipment, Net 66,619 69,842 Capitalized External Use Software, Net 72,481 68,474 Goodwill 352,064 351,474 Intangible Assets, Net 59,418 61,886 Debt Issuance Cost 10,842 11,496 Deferred Income Taxes 18,019 18,350 Other Assets 23,754 25,299 Total Assets $697,764 $749,667 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current Portion of Long-term Debt $25,939 $31,529 Trade Accounts Payable 21,102 24,033 Accrued Compensation and Benefits 7,051 9,901 Accrued Interest 5,631 10,524 Deferred Revenue 33,655 34,772 Other Accrued Liabilities 30,983 33,795 Total Liabilities of Discontinued Operations - 11,967 Total Current Liabilities 124,361 156,521 Deferred Revenue 4,005 4,602 Other Non-current Liabilities 25,563 26,789 Long-term Debt 228,764 239,255 Total Liabilities 382,693 427,167 Commitments and Contingencies - - Stockholders' Equity: Preferred Stock, par value $1.00 per share; 1,000,000 shares authorized, none issued - - Common Stock, par value $.125 per share; 200,000,000 shares authorized; 36,206,400 and 36,210,808 shares issued, respectively. 4,526 4,526 Capital in excess of par value 248,728 248,446 Retained Earnings 73,546 70,907 Deferred Compensation and Other (4,498) (5,039) Other Comprehensive (Loss) Income (7,231) 3,660 Total Stockholders' Equity 315,071 322,500 Total Liabilities and Stockholders' Equity $697,764 $749,667 ADJUSTED INCOME PER SHARE FROM CONTINUING OPERATIONS RECONCILIATION NDCHealth Corporation and Subsidiaries (Continuing Operations) Adjusted Diluted Income Per Share from Continuing Operations is defined as Income from Continuing Operations before the after-tax effect of Restructuring, Special Governance and Other Charges on a per share basis. Adjusted Diluted Income Per Share is not a Generally Accepted Accounting Principles (GAAP) measurement and may not be comparable to Earnings Per Share reported by other companies. Management believes Adjusted Diluted Income Per Share is useful to investors, analysts and others because it provides a meaningful representation of the company's ongoing operating earnings performance as it excludes certain items that management believes are not reflective of the company's core operating results over time. Reconciliation of Adjusted Income Per Share from Continuing Operations to Diluted Earnings Per Share from Continuing Operations, the most directly comparable GAAP financial measure, for the three-month ended September 2, 2005 and August 27, 2004 is provided below. Non-GAAP measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. Three Months Ended September 2, August 27, 2005 2004 Income from Continuing Operations (After-tax) $2,639 $762 (Effective Tax Rates: 44.6%* in Q1 FY06 and 39.0% in Q1 FY05) Restructuring, Special Governance and Other Charges (After-tax) $2,736 $237 (Effective Tax Rates: 30.3% in Q1 FY06 and 39.0% in Q1 FY05) Adjusted Income from Continuing Operations $5,375 $999 Weighted Average Shares - Diluted 36,191 36,002 Three Months Ended September 2, August 27, 2005 2004 Diluted Income Per Share from Continuing Operations $0.07 $0.02 Restructuring, Special Governance and Other Charges $0.08 $0.01 Adjusted Income Per Share from Continuing Operations $0.15 $0.03 * The effective tax rate of 44.6% in the first quarter of fiscal 2006 reflects the effect of certain non-deductible expenses included in Restructuring, Special Governance and Other Charges in the quarter, and is not expected to be representative of the tax rate for the remainder of fiscal 2006. ADJUSTED EBITDA RECONCILIATION NDCHealth Corporation and Subsidiaries Adjusted EBITDA is defined as Operating Income before Depreciation and Amortization, and Restructuring, Special Governance and Other Charges. Adjusted EBITDA is not a Generally Accepted Accounting Principles (GAAP) measurement and may not be comparable to EBITDA reported by other companies. Management believes Adjusted EBITDA is useful to investors, analysts and others because it provides a more meaningful representation of the company's performance as it excludes certain items that either do not impact the company's cash flows or which management believes are not reflective of the company's core operating results over time. Reconciliation of Adjusted EBITDA to Operating Income, the most directly comparable GAAP financial measure, for the three-month periods ended September 2, 2005 and August 27, 2004 is provided below. Non-GAAP measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. (In Thousands) Three Months Ended September 2, August 27, 2005 2004 Operating Income $11,652 $7,584 Depreciation and Amortization 9,493 10,269 Restructuring, Special Governance and Other Charges 3,926 388 Adjusted EBITDA $25,071 $18,241 SEGMENT FINANCIAL SUMMARY NDCHealth Corporation and Subsidiaries (Continuing Operations) (In Thousands) Q1/Q1 FY 2005 FY 2006 Y-Y Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 % Change Pharmacy Services and Systems: Revenue $31,154 $32,717 $33,143 $31,650 $33,510 7.6% Operating Income before Charges $3,159 $2,364 $4,916 $4,878 $5,868 85.8% % margin 10.1% 7.2% 14.8% 15.4% 17.5% Restructuring, Special Governance and Other Charges $- $- $(1,162) $(4,910) $- Operating Income after Charges $3,159 $2,364 $3,754 $(32) $5,868 85.8% Hospital Solutions: Revenue $16,144 $15,535 $15,730 $16,856 $17,596 9.0% Operating Income before Charges $4,279 $3,336 $3,876 $4,798 $5,445 27.2% % margin 26.5% 21.5% 24.6% 28.5% 30.9% Restructuring, Special Governance and Other Charges $- $(265) $(501) $(115) $- Operating Income after Charges $4,279 $3,071 $3,375 $4,683 $5,445 27.2% Physician Solutions: Revenue $6,477 $7,943 $10,610 $7,480 $7,599 17.3% Operating Income before Charges $556 $1,522 $3,964 $2,096 $1,879 237.9% % margin 8.6% 19.2% 37.4% 28.0% 24.7% Restructuring, Special Governance and Other Charges (Benefit) $- $(646) $(45) $(23) $- Operating Income after Charges $556 $876 $3,919 $2,073 $1,879 237.9% Information Management: Revenue $37,233 $40,485 $40,632 $43,769 $41,275 10.9% Operating Income before Charges $(22) $2,635 $3,397 $2,633 $2,386 nm % margin -0.1% 6.5% 8.4% 6.0% 5.8% Restructuring, Special Governance and Other Charges $- $(433) $(140) $- $- Operating Income after Charges $(22) $2,202 $3,257 $2,633 $2,386 nm Other: (1) Operating Expense $(388) $(1,535) $(1,222) $(3,592) $(3,926) nm NDCHealth - Total Revenue $91,008 $96,680 $100,115 $99,755 $99,980 9.9% Operating Income before Charges $7,972 $9,857 $16,153 $14,405 $15,578 95.4% % margin 8.8% 10.2% 16.1% 14.4% 15.6% Restructuring, Special Governance and Other Charges $(388) $(2,879) $(3,070) $(8,640) $(3,926) nm Operating Income after Charges $7,584 $6,978 $13,083 $5,765 $11,652 53.6% 8.3% 7.2% 13.1% 5.8% 11.7% (1) Includes Restructuring, Special Governance and Other Charges not directly identified to an Operating Segment. DATASOURCE: NDCHealth Corporation CONTACT: Robert Borchert, VP-Investor Relations of NDCHealth Corporation, +1-404-728-2906, or Web site: http://www.ndchealth.com/

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