NDCHealth Reports Fiscal Third Quarter Results
ATLANTA, April 6 /PRNewswire-FirstCall/ -- NDCHealth Corporation , a leading provider of healthcare technology and information solutions, today announced financial and operating results for its third fiscal quarter ended February 25, 2005.
Total revenue from continuing operations was $122.6 million, including $20.4 million from the Pharmacy Benefit Services segment, a 10.1% increase from $111.3 million in the third quarter of fiscal 2004, which included $6.6 million from the Pharmacy Benefit Services segment. Income from continuing operations for the third quarter was $4.8 million, or $0.13 per diluted share, which includes the effect of $2.0 million, or $0.03 per diluted share after tax, in severance-related restructuring charges. This compared to income from continuing operations of $10.2 million, or $0.28 per diluted share, in the same period in fiscal 2004. Total net income after discontinued operations was $4.8 million, or $0.13 per diluted share, compared to net income of $9.2 million, or $0.25 per diluted share, in the third quarter of fiscal 2004.
Total revenue from continuing operations in the third quarter of fiscal 2005 increased 4.4% from the second quarter of fiscal 2005, driven by growth from all three business segments, as expected.
"We are encouraged by this quarter's financial and operating performance as our revenue grew from our most recent second quarter and we began to realize the benefits of the profit improvement initiatives we have implemented over the last several months," said Walter Hoff, NDCHealth chairman and chief executive officer. "We have reduced expenses and taken steps to realign our business to gain sustainable operating efficiencies and heightened customer focus. We continue to believe the results of our actions will enable us to address the significant market opportunities ahead of us while making NDCHealth a more valuable company for our customers, employees and stockholders."
Business Review - Network Services and Systems segment revenue declined $4.2 million or 6.2% in the third quarter of fiscal 2005 from the same period last year, but increased $3.7 million or 6.1% from the most recent second quarter. This year-over-year decrease was primarily caused by lower physician software sales, lower revenue from legacy pharmacy systems and a decline in retail information sales to pharmacy customers, which more than offset revenue growth from pharmacy network services. - Network services' transaction volume totaled more than 1.48 billion in the third quarter of fiscal 2005, a 15.9% increase from the same period last year and up 7.4% from the most recent second quarter as NDCHealth continued to gain market share in core claims processing and increase penetration of its pre- and post-edit (PPE) transaction services. - Pharmacy services and systems revenue decreased $2.2 million or 5.7% in the third quarter compared to the same quarter of fiscal 2004, but increased $0.7 million or 2.1% from the most recent second quarter. Pharmacy transaction revenue grew but was more than offset by lower legacy systems revenue and retail information sales compared to last year's third quarter. The company sold 60 PharmacyRx(TM) systems to regional and independent pharmacies during the third quarter of fiscal 2005, and a total of 167 during the first nine months of the current fiscal year. NDCHealth ended the period with an installed base of 343 pharmacies, and a scheduled installation backlog of 114 PharmacyRx systems. The company expects pharmacy network services revenue to continue to grow, but does not expect pharmacy systems revenue to show sustained growth until its EnterpriseRx(TM) system for large pharmacy chains is generally available and begins to generate revenue, currently expected during the second half of calendar 2005. - Hospital customer revenue in the third quarter of fiscal 2005 was essentially flat with the third quarter of fiscal 2004, and increased $0.3 million or 2.4% from the most recent second quarter as the company began to realize the benefits from the market adoption of the NDC ePREMIS(R) revenue cycle management solution by both new and legacy customers. NDCHealth sold 47 ePREMIS units and installed 70 units during the third quarter of fiscal 2005, increasing the total ePREMIS installed base to 471. As of February 25, 2005, the scheduled installation backlog moving into the fourth quarter of fiscal 2005 was 200 units. - Physician customer revenue decreased $1.8 million or 14.1% in the third quarter of fiscal 2005 compared to the same period in fiscal 2004, but increased $2.8 million or 34.4% from the most recent second quarter. The sequential improvement reflects an increase in unit sales following the release of the NDCMedisoft(TM) practice management system upgrade in late January 2005, continued sales of the NDCLytec(TM) upgrade launched in October 2004, and $1.2 million in recorded revenue for which a returns reserve is no longer required based on a change in company policy for exchanges of physician software. The year-over-year decline was due to the fact that the company no longer recognizes certain advertising and customer support activities of its value added resellers in either revenue or expense. - Other revenue, which includes data processing services provided to former affiliate Global Payments, Inc. and third-party paper claims and statement printing services, declined 8.4% compared with the third quarter last fiscal year to $3.1 million. As previously disclosed, Global Payments may discontinue the service agreement on or after September 30, 2005, which would eliminate a portion of the Other revenue stream. - Information Management revenue in the third quarter of fiscal 2005 increased $1.7 million or 4.6% compared to the same quarter last year, as growth in new product revenue, such as the Intelligent Health Repository (IHR) services and other emerging products, continued to offset declines in certain legacy product offerings and revenue compression from certain pharmaceutical manufacturer customers. Revenue was approximately flat versus the most recent second quarter. - Pharmacy Benefit Services revenue tripled in the third quarter compared to the same period in fiscal 2004, and increased 9.3% from the most recent second quarter. The company disclosed on March 28, 2005 that it sold its membership interest in HealthTran LLC, which makes up the Pharmacy Benefit Services business segment, to an investor group including certain management executives of HealthTrans.
Cost of Service increased $13.2 million or 24.0% from the third quarter of fiscal 2004, reflecting strong growth in revenue and associated Cost of Service in the Pharmacy Benefit Services segment. Compared to the most recent second quarter, Cost of Service decreased $3.2 million in the Network Services and Systems segment and $1.0 million in the Information Management segment due primarily to cost reduction initiatives, including lower telecommunications, data center and data costs, lower staffing, lower software development spending and a more favorable mix of business.
Sales, General and Administrative expense in the third quarter of fiscal 2005 rose 16.3% or $4.0 million from a year ago. The quarter included $3.6 million in legal, audit and governance-related costs above normal levels. This included expenses related to stockholder litigation, the SEC investigation, certain commercial litigation, internal and external audit costs associated with the recent financial restatement and work to achieve compliance with the requirements of the Sarbanes-Oxley legislation, as well as professional fees associated with the Board of Directors' evaluation of strategic alternatives to maximize stockholder value.
In the third quarter of fiscal 2005, adjusted EBITDA(1), a non-GAAP measure, was $26.0 million, a 28.0% increase from the most recent second quarter. Free cash flow(2), also a non-GAAP measure, was a negative $2.6 million in the quarter as the company's improved income performance was offset by its $10.5 million semi-annual interest payment on outstanding bonds, and a negative $11.0 million in the nine-month period ended February 25, 2005. The company expects to be free cash flow positive for the second half of fiscal 2005.
Strategic Alternatives Update
On March 30, 2005, NDCHealth announced that its Board of Directors voted to pursue the potential sale of the company. The Blackstone Group L.P. and Goldman, Sachs & Co. are acting as the company's financial advisors. NDCHealth notes that there can be no assurance regarding the outcome of this process. The company does not intend to comment further publicly until the conclusion of the potential sale process, unless it determines it would be appropriate to do so at an earlier stage.
On March 28, 2005, NDCHealth sold its 49.5% membership interest in HealthTran LLC to a partnership including certain management executives of HealthTrans for approximately $8.8 million in cash, which has been used to pay down senior debt. HealthTrans, a pharmacy benefit administrator that comprised the company's Pharmacy Benefit Services business segment, contributed 16.6% and approximately 2.8% of NDCHealth's total revenue and operating income, respectively, in the third fiscal quarter ended February 25, 2005. This transaction will result in a net gain of approximately $2.5 million, or $0.04 per diluted share, in the fourth fiscal quarter.
In March 2005, the company signed agreements to sell its Canadian pharmacy systems and Canadian pharmacy and dental claims processing services operations to Emergis Inc. for approximately $14.5 million in cash. Net proceeds will be used to pay down senior debt. Based on a revised evaluation of the tax effects of the transaction, the company currently estimates this transaction will result in a negligible impact on net income in the fourth fiscal quarter.
Financial Outlook
Because the company sold its ownership interest in Pharmacy Benefit Services and is selling the majority of its Canadian operations, these businesses will be reclassified as discontinued operations in the fourth quarter of fiscal 2005 and prior periods will be restated to reflect this reclassification. The company currently expects revenue from continuing operations, which will consist of its core Network Services and Systems and Information Management segments, in the fourth quarter to be in the range of $98 million to $100 million. This will compare to revenue from continuing operations, after reclassifying revenue from businesses sold during the fourth quarter of fiscal 2005, of approximately $100 million in the third quarter of fiscal 2005 and $94 million in the fourth quarter of fiscal 2004.
Compared to third quarter earnings, the fourth quarter will be unfavorably affected by a normal seasonal decline in physician software sales from the high levels realized in the third quarter, and increased staffing, project- related and sales promotional expenses focused on reducing future costs and growing revenue in the Information Management business. These factors lead the company to expect adjusted diluted earnings per share from continuing operations(3) to be in the range of $0.08 to $0.12 in the fourth quarter prior to the effect of additional restructuring and related charges that may be incurred and are currently estimated to be approximately $1.0 million, or $0.02 per diluted share. Included in income from continuing operations and earnings per share are approximately $3.5 million, or $0.06 per diluted share, in higher than normal levels of legal, audit and governance-related costs as noted above in the Sales, General and Administrative expense discussion. Finally, management expects adjusted EBITDA, before the effects of restructuring and related costs, to be in the range of $21.5 million to $24 million in the fourth quarter of fiscal 2005.
Separately, the Board of Directors voted to continue the suspension of NDCHealth's quarterly dividend payment of $0.04 per share to focus the use of the company's cash flow on reducing outstanding debt.
Conference Call and Webcast
NDCHealth management will host a conference call to discuss these results today, April 6, 2005 beginning at 5:00 pm ET. The conference call can be accessed by dialing 877-421-3895 (706-679-0822 for international/local callers), or by webcast through the Investor Relations page at http://www.ndchealth.com/ . A replay of the conference call will be available through April 22, 2005, and can be accessed either through the webcast or by dialing 800-642-1687 (706-645-9291 for international/local callers) and entering conference ID 5205841.
Cautionary Information Regarding Forward-Looking Statements
This press release contains forward-looking statements related to the company's expected business outlook for fiscal year 2005 and guidance for the fourth fiscal quarter of 2005. These statements involve risks and uncertainties that may cause actual results to differ materially. The company's business outlook and the 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 amount and timing of future capital expenditures, 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, financing plans, working capital needs 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 company's ability to expand in new and existing markets; (2) demand for the company's products and services; (3) the cost of product development; (4) the timely completion, market demand and acceptance of the company's new pharmacy and information products; (5) competitive forces; (6) gains in market share; (7) industry conditions affecting NDCHealth's customers; (8) expected pricing levels; (9) expected growth of revenue and net income; (10) the timing and cost of planned capital expenditures; (11) the availability of capital to invest in business growth and expansion; (12) the timing of recognition of certain revenue; (13) access to data from suppliers; (14) the potential for information or network services interruptions; (15) adequate protection of proprietary technology; (16) unanticipated changes in accounting rules and/or interpretations; (17) complex state and federal regulations and their impact on the demand for information products or availability of certain data; (18) outcomes and cost of litigation and/or the SEC investigation; (19) expected proceeds from the disposition of certain assets; (20) the company's substantial indebtedness, which could adversely affect its financial condition, results of operations and liquidity; (21) the company's ability to comply with Sarbanes-Oxley; and (22) the potential sale of the company. 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 28, 2004 and other company filings with the Securities and Exchange Commission. The company believes its forward-looking statements are reasonable; however, you should not place undue reliance 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.
About NDCHealth
NDCHealth is a leading information solutions company serving all sectors of healthcare. Its network solutions have long been among the nation's leading, automating 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 more information, 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 EBITDA, a non-GAAP measure, can be derived from the company's Unaudited Condensed Consolidated Statements of Operations, and is defined as Operating Income before Depreciation and Amortization, and Restructuring and Other Charges. Reconciliation of adjusted EBITDA to Operating Income, the most directly comparable GAAP financial measure, is provided in an accompanying table. 2. Free cash flow, a non-GAAP measure, can be derived from the company's Unaudited Condensed Consolidated Statements of Cash Flows, and is defined as net cash (used in) provided by operating activities less capital expenditures and dividends paid. Reconciliation of free cash flow to Net Cash provided by Operating Activities, the most directly comparable GAAP financial measure, is provided in an accompanying table. 3. Forecast adjusted diluted earnings per share from continuing operations, a non-GAAP measure, is defined as diluted earnings per share from continuing operations before Restructuring and Other charges. Reconciliation of adjusted diluted earnings per share from continuing operations to diluted earnings per share from continuing operations, 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 February 25, February 27, 2005 2004 (As Restated) Revenue: Network Services and Systems $64,006 $68,232 Information Management 38,188 36,504 Pharmacy Benefit Services 20,394 6,585 $122,588 $111,321 Operating Expenses: Cost of Service 68,012 54,836 Sales, General and Administrative 28,544 24,549 Depreciation and Amortization 9,751 9,000 Restructuring and Other Charges 2,026 - 108,333 88,385 Operating Income 14,255 22,936 Other Income (Expense): Interest and Other Income 112 114 Interest and Other Expense (6,281) (6,720) Minority Interest in Earnings (194) (80) (6,363) (6,686) Income from Continuing Operations before Income Taxes 7,892 16,250 Provision for Income Taxes 3,080 6,094 Income from Continuing Operations 4,812 10,156 Income (Loss) from Discontinued Operations 27 (946) Net Income $4,839 $9,210 Basic Earnings (Loss) Per Share: Income from Continuing Operations $0.13 $0.29 Discontinued Operations $ - $(0.03) Basic Income Per Share $0.14 $0.26 Weighted Average Shares 35,727 35,232 Diluted Earnings (Loss) Per Share: Income from Continuing Operations $0.13 $0.28 Discontinued Operations $ - $(0.03) Diluted Income Per Share $0.13 $0.25 Weighted Average Shares 35,987 36,284 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS NDCHealth Corporation and Subsidiaries (Unaudited) (In Thousands, Except Per Share Data) Nine Months Ended February 25, February 27, 2005 2004 (As Restated) Revenue: Network Services and Systems $181,936 $197,297 Information Management 111,910 109,898 Pharmacy Benefit Services 55,277 16,029 $349,123 $323,224 Operating Expenses: Cost of Service 205,685 159,925 Sales, General and Administrative 78,396 70,469 Depreciation and Amortization 30,587 26,397 Restructuring and Other Charges 4,242 3,297 318,910 260,088 Operating Income 30,213 63,136 Other Income (Expense): Interest and Other Income 255 371 Interest and Other Expense (18,860) (21,260) Minority Interest in Earnings (437) (498) (19,042) (21,387) Income from Continuing Operations before Income Taxes 11,171 41,749 Provision for Income Taxes 4,358 15,646 Income from Continuing Operations 6,813 26,103 Loss from Discontinued Operations (13,708) (2,701) Net (Loss) Income $(6,895) $23,402 Basic (Loss) Earnings Per Share: Income from Continuing Operations $0.19 $0.75 Discontinued Operations $(0.38) $(0.08) Basic (Loss) Income Per Share $(0.19) $0.67 Weighted Average Shares 35,677 34,934 Diluted (Loss) Earnings Per Share: Income from Continuing Operations $0.19 $0.73 Discontinued Operations $(0.38) $(0.08) Diluted (Loss) Income Per Share $(0.19) $0.66 Weighted Average Shares 35,961 35,672 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NDCHealth Corporation and Subsidiaries (Unaudited) (In Thousands) Nine Months Ended February 25, February 27, 2005 2004 (As Restated) Cash flows from operating activities: Net (loss) income $(6,895) $23,402 Adjustments to reconcile net (loss) income to cash provided by operating activities: Loss on discontinued operations 13,708 2,701 Non-cash restructuring and other charges 376 453 Depreciation and amortization 30,587 26,397 Deferred income taxes 3,929 16,515 Allowance for doubtful accounts 5,815 7,414 Other, net 4,757 3,997 Total 52,277 80,879 Changes in assets and liabilities, net of the effects of acquisitions: Accounts receivable 1,592 (11,957) Prepaid expenses and other assets 3,446 (748) Accounts payable and accrued liabilities (6,770) 7,941 Accrued interest on long-term debt (5,650) (6,399) Deferred revenue (27,593) 99 Net cash provided by operating activities 17,302 69,815 Cash flows from investing activities: Capital expenditures (25,429) (32,282) Proceeds from the sale of equipment 513 2,148 Acquisitions and other investing activities (2,797) (6,374) Net cash used in investing activities (27,713) (36,508) Cash flows from financing activities: Net borrowings under lines of credit 48,500 - Net principal payments under long- term debt arrangements (40,302) (16,445) Net cash used in refinancing activities - (395) Net issuances related to stock activities 513 8,433 Dividends paid (2,880) (4,254) Net cash provided by (used in) financing activities 5,831 (12,661) Net cash used in discontinued operations (3,020) (3,891) (Decrease) increase in cash and cash equivalents (7,600) 16,755 Cash and cash equivalents, beginning of period 27,617 15,150 Cash and cash equivalents, end of period $20,017 $31,905 Supplemental Disclosures Cash paid for Interest $25,290 $28,046 Income taxes (refunded) paid $(62) $158 CONDENSED CONSOLIDATED BALANCE SHEETS NDCHealth Corporation and Subsidiaries (Unaudited) (In Thousands, Except Per Share Data) February 25, May 28, 2005 2004 (As Restated) ASSETS Current Assets: Cash and Cash Equivalents $20,017 $27,617 Accounts Receivable (Less Allowance of $7,729 and $7,568, respectively.) 61,533 69,110 Deferred Income Taxes 4,445 28,389 Prepaid Expenses 23,468 22,146 Other Current Assets 11,248 15,389 Total Assets of Discontinued Operations 45,059 70,459 Total Current Assets 165,770 233,110 Property and Equipment, Net 76,969 80,666 Capitalized External Use Software, Net 67,835 61,567 Goodwill 363,380 362,429 Intangible Assets, Net 64,354 71,760 Debt Issuance Cost 12,139 12,963 Deferred Income Taxes 5,415 - Other Assets 23,310 22,561 Total Assets $779,172 $845,056 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current Portion of Long-term Debt $52,191 $33,656 Trade Accounts Payable 19,373 29,693 Accrued Compensation and Benefits 6,722 6,252 Accrued Interest 5,273 10,923 Deferred Revenue 32,936 54,214 Other Accrued Liabilities 43,938 35,757 Total Liabilities of Discontinued Operations 12,060 24,761 Total Current Liabilities 172,493 195,256 Deferred Revenue 969 7,208 Deferred Income Taxes - 14,600 Other Non-current Liabilities 24,030 29,225 Long-term Debt 259,282 269,619 Total Liabilities 456,774 515,908 Commitments and Contingencies - - Minority Interest in Equity of Subsidiaries 1,750 1,313 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; 36,054,806 and 36,006,641 shares issued, respectively. 4,507 4,501 Capital in excess of par value 246,167 245,314 Retained Earnings 70,652 80,426 Deferred Compensation and Other (5,803) (7,694) Other Comprehensive Income 5,125 5,288 Total Stockholders' Equity 320,648 327,835 Total Liabilities and Stockholders' Equity $779,172 $845,056 ADJUSTED EBITDA RECONCILIATION NDCHealth Corporation and Subsidiaries Adjusted EBITDA is defined as Operating Income before Depreciation and Amortization, and Restructuring 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 and nine-month periods ended February 25, 2005 and February 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 Nine Months Ended February February February February 25, 27, 25, 27, 2005 2004 2005 2004 (As Restated) (As Restated) Operating Income $14,225 $22,936 $30,213 $63,136 Depreciation and Amortization 9,751 9,000 30,587 26,397 Restructuring and Other Charges 2,026 - 4,242 3,297 Adjusted EBITDA $26,002 $31,936 $65,042 $92,830 FREE CASH FLOW RECONCILIATION NDCHealth Corporation and Subsidiaries Free cash flow is defined as net cash from operations less capital expenditures and dividends paid. Free cash flow is not a Generally Accepted Accounting Principles (GAAP) measurement and may not be comparable to free cash flow reported by other companies. In light of the company's goal to reduce its levels of senior debt and interest expense, management believes free cash flow is useful to investors, analysts and others because it provides a meaningful measure of the company's ability to generate cash and reduce its debt. Reconciliation of free cash flow to Net Cash Provided by Operating Activities, the most directly comparable GAAP financial measure, for the three-month and nine-month periods ended February 25, 2005 and February 27, 2004 is provided below. Non-GAAP measures should be evaluated with, and are not a substitute for, GAAP financial measures. (In Thousands) Three Months Ended Nine Months Ended February February February February 25, 27, 25, 27, 2005 2004 2005 2004 (As Restated) (As Restated) Net Cash Provided by Operating Activities $4,902 $16,833 $17,302 $69,815 Capital Expenditures $(7,466) $(10,643) $(25,429) $(32,282) Dividends Paid $- $(1,434) $(2,880) $(4,254) Free Cash Flow $(2,564) $4,756 $(11,007) $33,279 EPS GUIDANCE FOR THE FOURTH QUARTER OF FISCAL 2005 ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS RECONCILIATION NDCHealth Corporation and Subsidiaries (Continuing Operations) Adjusted Diluted Earnings Per Share from Continuing Operations (Adjusted EPS) is defined as Diluted Earnings Per Share from Continuing Operations before Restructuring and Other Charges. Adjusted EPS 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 EPS 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 Forecast Adjusted EPS to Diluted Earnings Per Share from Continuing Operations, the most directly comparable GAAP financial measure, for the three-month period ending May 27, 2005 is provided below. Non-GAAP measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. 4th Quarter Ending FORECAST: 27-May-05 EPS from Continuing Operations $0.06 - 0.10 Restructuring and Other Charges $0.02 Adjusted EPS from Continuing Operations $0.08 - 0.12 SEGMENT FINANCIAL SUMMARY NDCHealth Corporation and Subsidiaries (Continuing Operations) (In Thousands) Fiscal 2004 Qtr 3 Qtr 4 Network Services and Systems: (As Restated) (As Restated) Revenue $68,232 $61,273 Cost of Service $29,033 $29,903 Gross Profit $39,199 $31,370 % margin 57.4% 51.2% Operating Income $16,408 $7,967 % margin 24.0% 13.0% Information Management: Revenue $36,504 $35,101 Cost of Service $20,140 $21,319 Gross Profit $16,364 $13,782 % margin 44.8% 39.3% Operating Income $6,364 $758 % margin 17.4% 2.2% Pharmacy Benefit Services: Revenue $6,585 $13,879 Cost of Service $5,663 $13,011 Gross Profit $922 $868 % margin 14.0% 6.3% Operating Income $164 $(118) % margin 2.5% -0.9% Other:* Operating Income $- $(622) NDCHealth - Total Revenue $111,321 $110,253 Cost of Service $54,836 $64,233 Gross Profit $56,485 $46,020 % margin 50.7% 41.7% Operating Income $22,936 $7,985 % margin 20.6% 7.2% * Includes Restructuring and Other Charges not allocated to Operating Segments. SEGMENT FINANCIAL SUMMARY NDCHealth Corporation and Subsidiaries (Continuing Operations) (In Thousands) Fiscal 2005 Qtr 1 Qtr 2 Qtr 3 Network Services and Systems: (As Restated) Revenue $57,576 $60,354 $64,006 Cost of Service $31,256 $32,788 $29,579 Gross Profit $26,320 $27,566 $34,427 % margin 45.7% 45.7% 53.8% Operating Income $5,329 $3,463 $8,853 % margin 9.3% 5.7% 13.8% Information Management: Revenue $35,320 $38,402 $38,188 Cost of Service $20,392 $20,766 $19,748 Gross Profit $14,928 $17,636 $18,440 % margin 42.3% 45.9% 48.3% Operating Income $2,704 $4,847 $5,186 % margin 7.7% 12.6% 13.6% Pharmacy Benefit Services: Revenue $16,232 $18,651 $20,394 Cost of Service $15,063 $17,408 $18,685 Gross Profit $1,169 $1,243 $1,709 % margin 7.2% 6.7% 8.4% Operating Income $218 $269 $394 % margin 1.3% 1.4% 1.9% Other:* Operating Income $- $(872) $(178) NDCHealth - Total Revenue $109,128 $117,407 $122,588 Cost of Service $66,711 $70,962 $68,012 Gross Profit $42,417 $46,445 $54,576 % margin 38.9% 39.6% 44.5% Operating Income $8,251 $7,707 $14,255 % margin 7.6% 6.6% 11.6% * Includes Restructuring and Other Charges not allocated to Operating Segments. SEGMENT FINANCIAL SUMMARY NDCHealth Corporation and Subsidiaries (Continuing Operations) (In Thousands) Q3/Q3 Q2/Q3 Y-Y Sequential % Change % Change Network Services and Systems: Revenue -6.2% 6.1% Cost of Service 1.9% -9.8% Gross Profit -12.2% 24.9% % margin Operating Income -46.0% 155.6% % margin Information Management: Revenue 4.6% -0.6% Cost of Service -1.9% -4.9% Gross Profit 12.7% 4.6% % margin Operating Income -18.5% 7.0% % margin Pharmacy Benefit Services: Revenue 209.7% 9.3% Cost of Service 229.9% 7.3% Gross Profit 85.4% 37.5% % margin Operating Income 140.2% 46.5% % margin Other:* Operating Income nm nm NDCHealth - Total Revenue 10.1% 4.4% Cost of Service 24.0% -4.2% Gross Profit -3.4% 17.5% % margin Operating Income -37.8% 85.0% % margin * Includes Restructuring and Other Charges not allocated to Operating Segments. NETWORK SERVICES AND SYSTEMS SEGMENT REVENUE BY CUSTOMER GROUP NDCHealth Corporation and Subsidiaries (Continuing Operations) (In Thousands) Fiscal 2004 Fiscal 2005 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 (As Restated) (As Restated)(As Restated) Pharmacy $38,625 $37,192 $33,982 $35,670 $36,416 Hospital 13,653 14,603 13,852 13,371 13,686 Physician 12,529 6,092 6,268 8,011 10,765 Other 3,425 3,386 3,474 3,302 3,139 Total $68,232 $61,273 $57,576 $60,354 $64,006 NETWORK SERVICES AND SYSTEMS SEGMENT REVENUE BY CUSTOMER GROUP NDCHealth Corporation and Subsidiaries (Continuing Operations) (In Thousands) Q3/Q3 Q2/Q3 Y-Y Sequential % Change % Change Pharmacy -5.7% 2.1% Hospital 0.2% 2.4% Physician -14.1% 34.4% Other -8.4% -4.9% Total -6.2% 6.1%
NDCHealth CorporationCONTACT: Robert Borchert, VP-Investor Relations of NDCHealthCorporation, +1-404-728-2906, or robert.borchert@ndchealth.com
Web site: http://www.ndchealth.com/