ELMWOOD PARK, N.J., Feb. 22 /PRNewswire-FirstCall/ -- Emdeon Corporation today announced financial results for the three months ended December 31, 2006.
Kevin Cameron, Chief Executive Officer of Emdeon, said: "2006 was a year of significant accomplishment for Emdeon. All of our business segments, as well as Emdeon Business Services, generated record results for both the fourth quarter and full year 2006. We substantially repositioned the company selling Emdeon Practice Services and 52% of Emdeon Business Services for $1.76 billion. We used the proceeds to dramatically reduce the number of shares outstanding. With these changes in Emdeon's corporate structure, Emdeon shareholders effectively have a greater participation in the performance of WebMD."
Key Financial Highlights
Revenue for the fourth quarter was $230.1 million. Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") for the fourth quarter was $49.2 million or $0.16 per share. Income from continuing operations for the fourth quarter was $345.5 million or $1.14 per share and net income was $346.4 million or $1.14 per share. Revenue for 2006 was $1.1 billion. Adjusted EBITDA for 2006 was $208.1 million or $0.63 per share. Income from continuing operations for 2006 was $396.7 million or $1.25 per share and net income was $767.7 million or $2.37 per share.
Emdeon's income from continuing operations and net income for the quarter and year ended December 31, 2006 reflect a gain of $352.3 million related to the sale of a 52% interest in its Emdeon Business Services segment. Net income for the year ended December 31, 2006 also includes a gain of $353.2 million, net of income taxes, on the sale of Emdeon Practice Services which was completed in September 2006.
As of December 31, 2006, Emdeon had approximately $648.8 million in cash and short-term investments on a consolidated basis, including $54.2 million in cash and short-term investments held by WebMD Health Corp., its 84.6% owned subsidiary. On February 6, 2007, Emdeon transferred to WebMD $140 million as reimbursement for Emdeon's utilization of the portion of WebMD's net operating loss carry-forwards used in the sale transactions involving Emdeon Practice Services and Emdeon Business Services. This transfer was made in accordance with the tax sharing agreement between the two companies.
Effects of Recent Transactions
On November 16, 2006, Emdeon completed the sale of a 52% interest in its Emdeon Business Services segment (excluding the ViPS business) to an affiliate of General Atlantic LLC. The transaction was structured such that Emdeon Corporation and General Atlantic have an equal number of board members. Emdeon's income from continuing operations and net income for the quarter and year ended December 31, 2006 reflect a gain of $352.3 million for this transaction.
On December 4, 2006, Emdeon completed a tender offer, pursuant to which it purchased 129.2 million shares of Emdeon common stock, representing approximately 45% of the outstanding shares immediately prior to the tender offer, at $12.00 per share.
In comparing Emdeon's results for the quarter and year ended December 31, 2006 with prior year periods, as presented in the attached financial statements, the following considerations under Generally Accepted Accounting Principles apply:
* Emdeon Practice Services (which Emdeon sold to Sage Software in September 2006) is treated as a discontinued operation in the attached financial statements and its results are reported on the line "income from discontinued operations, net of tax" for all periods presented. That line includes, for the year ended December 31, 2006, a gain of $353.2 million, net of income taxes, on the sale of Emdeon Practice Services. * Emdeon Business Services is not treated as a discontinued operation because Emdeon retained a significant ownership interest. Accordingly, Emdeon Business Services is included in Emdeon's consolidated financial results for the first 47 days of the fourth quarter (until the date of the sale transaction) and for the entire prior year period. For the remaining 45 days of the fourth quarter (from the date of the sale transaction through the end of the fourth quarter of 2006), Emdeon's 48% portion of EBS's income is reflected in the line item "Equity in earnings of EBS Master LLC". * Emdeon's financial results reflect the reclassification of ViPS as a separate business segment. Prior to the third quarter of 2006, ViPS had been reported as part of the Emdeon Business Services segment. Prior period results have been reclassified to reflect the current presentation.
In addition, the following considerations apply to calculations of per share amounts in the attached financial statements:
* While the tender offer that was completed in December 2006 reduced the share count by 129.2 million shares, this reduction in our outstanding shares is not fully reflected in the earnings per share calculation for the quarter and year ended December 31, 2006 as the share count is calculated on a weighted average basis. * For the quarter and year ended December 31, 2006, the Company's convertible notes are dilutive to earnings per share, and therefore in accordance with generally accepted accounting principles, the calculation of diluted earnings per share assumes the conversion of the notes into 42 million shares of common stock as of the beginning of the applicable periods and income from continuing operations and net income has been adjusted to exclude the interest expense associated with the notes (approximately $4.6 million and $18.4 million for the quarter and year ended December 31, 2006, respectively). Segment Operating Results
WebMD segment revenue was $80.6 million for the fourth quarter compared to $49.1 million in the prior year period, an increase of 64.1%, driven by continued growth in online services. Segment Adjusted EBITDA was $22.3 million compared to $12.4 million, an increase of 79.3% over the prior year, primarily as a result of the increase in revenues.
ViPS segment revenue was $25.3 million for the fourth quarter compared to $24.0 million in the prior year period, an increase of 5.6%. The increase was attributable to an increase in consulting services and license revenue. Segment Adjusted EBITDA was $5.0 million compared to $4.9 million in the prior year period, an increase of 1.8%. Operating margins decreased slightly to 19.8% as a result of revenue mix.
Porex segment revenue was $21.2 million for the fourth quarter compared to $18.5 million in the prior year period, an increase of 14.6%. The increase was primarily attributable to strength in sales of industrial products in Europe and writing instrument components. Segment Adjusted EBITDA was $6.2 million compared to $4.7 million in the prior year period, an increase of 33.4%. Operating margins increased to 29.5% compared to 25.3% a year ago primarily as a result of the increase in revenues.
Emdeon Business Services segment revenue (from October 1 to November 16) was $103.1 million. Segment Adjusted EBITDA (from October 1 to November 16) was $25.4 million.
Financial Guidance
A schedule outlining Emdeon's financial guidance for 2007 is attached to this press release.
Analyst and Investor Conference Call
As previously announced, Emdeon will host a conference call at 4:45 pm (ET) on February 22, 2007 to discuss its fourth quarter results. Investors can access the call via webcast at www.emdeon.com (in the About Emdeon section). A replay of the call will be available at the same web address.
About Emdeon
Emdeon Corporation's businesses are comprised of WebMD Health Corp, , ViPS and Porex. WebMD provides health information services for consumers, physicians, healthcare professionals, employers and health plans through its public and private online portals and health-focused publications. ViPS provides healthcare data management, analytics, decision-support and process automation solutions and related information technology services to governmental, Blue Cross Blue Shield and commercial healthcare payers. ViPS' solutions and services help its clients improve patient outcomes, increase customer satisfaction and reduce costs. Porex is a developer, manufacturer and distributor of proprietary porous plastic products and components used in healthcare, industrial and consumer applications. In addition, Emdeon owns a 48% minority interest in EBS Master LLC, which provides solutions that automate key business and administrative functions for healthcare payers and providers.
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All statements contained in this press release, other than statements of historical fact, are forward-looking statements, including those regarding: guidance on our future financial results and other projections or measures of our future performance; our expectations concerning market opportunities and our ability to capitalize on them; and the amount and timing of the benefits expected from acquisitions, from new products or services and from other potential sources of additional revenue. These statements speak only as of the date of this press release and are based on our current plans and expectations, and they involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements. These risks and uncertainties include those relating to: market acceptance of our products and services; difficulties in integrating acquired businesses; relationships with customers and strategic partners; difficulties in integrating acquired businesses; and changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet, information technology and plastics industries; and our ability to attract and retain qualified personnel. Further information about these matters can be found in our Securities and Exchange Commission filings. Except as required by applicable law or regulation, we do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances.
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This press release, and the accompanying tables, include both financial measures in accordance with accounting principles generally accepted in the United States of America, or GAAP, as well as certain non-GAAP financial measures. The tables attached to this press release include reconciliations of these non-GAAP financial measures to GAAP financial measures. In addition, an "Explanation of Non-GAAP Financial Measures" is attached to this press release as Annex A.
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WebMD(R), WebMD Health(R), POREX(R) and ViPS(SM) are trademarks of Emdeon Corporation or its subsidiaries.
Emdeon(TM) and Emdeon Business Services(TM) are trademarks of Emdeon Business Services, LLC or its subsidiaries.
EMDEON CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data, unaudited) Three Months Ended Years Ended December 31, December 31, 2006 2005 2006 2005 Revenue: Services $205,743 $241,658 $998,252 $932,273 Products 24,308 22,106 100,356 94,202 Total revenue 230,051 263,764 1,098,608 1,026,475 Cost of operations: Services 108,157 140,675 581,108 555,208 Products 9,676 9,884 42,650 40,446 Total cost of operations 117,833 150,559 623,758 595,654 Development and engineering 6,485 9,058 33,649 35,653 Sales, marketing, general and administrative 71,412 65,595 288,015 254,887 Depreciation and amortization 10,012 16,079 61,976 60,905 Legal expense 738 3,488 2,578 17,835 Gain on sale of EBS 352,297 - 352,297 - Loss on investments - 2,723 - 6,365 Interest income 16,889 8,147 32,339 21,527 Interest expense 4,697 4,652 18,779 16,322 Transition services income 2,184 - 2,524 - Other expenses - - 4,198 3,765 Income from continuing operations before income tax provision (benefit) 390,244 19,757 452,815 56,616 Income tax provision (benefit) 44,111 (4,568) 56,193 (1,001) Minority interest in WebMD Health Corp. 1,359 870 706 908 Equity in earnings of EBS Master LLC 763 - 763 - Income from continuing operations 345,537 23,455 396,679 56,709 Income from discontinued operations, net of tax 889 9,397 371,060 16,265 Net income $346,426 $32,852 $767,739 $72,974 Basic income per common share: Income from continuing operations $1.35 $0.07 $1.42 $0.17 Income from discontinued operations 0.00 0.02 1.33 0.04 Net income $1.35 $0.09 $2.75 $0.21 Diluted income per common share: (a) Income from continuing operations $1.14 $0.07 $1.25 $0.16 Income from discontinued operations 0.00 0.02 1.12 0.05 Net income $1.14 $0.09 $2.37 $0.21 Weighted-average shares outstanding used in computing income per common share: Basic 256,688 348,261 279,234 341,747 Diluted 308,295 355,782 331,642 352,852 (a) Diluted income per common share for the three months and the year ended December 31, 2006 reflects the dilutive impact of the convertible notes. EMDEON CORPORATION CONSOLIDATED SEGMENT INFORMATION (In thousands, except per share data, unaudited) Three Months Ended Years Ended December 31, December 31, 2006 2005 2006 2005 Revenue Emdeon Business Services $103,116 $172,364 $661,090 $689,305 WebMD 80,573 49,104 253,881 168,238 ViPS 25,349 24,003 98,874 90,313 Porex 21,158 18,461 85,702 79,124 Inter-segment eliminations (145) (168) (939) (505) $230,051 $263,764 $1,098,608 $1,026,475 Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") Emdeon Business Services $25,392 $35,214 $152,911 $138,529 WebMD 22,320 12,446 53,079 27,546 ViPS 5,012 4,921 20,529 16,913 Porex 6,242 4,678 24,974 22,524 Corporate (9,781) (13,587) (43,414) (49,481) $49,185 $43,672 $208,079 $156,031 Adjusted EBITDA per diluted common share (a) $0.16 $0.12 $0.63 $0.44 Interest, taxes, non-cash and other items (b) Depreciation and amortization $(10,012) $(16,079) $(61,976) $(60,905) Non-cash stock-based compensation (9,720) (1,249) (44,955) (4,880) Non-cash advertising (2,960) (3,871) (7,414) (10,870) Legal expense (738) (3,488) (2,578) (17,835) Interest income 16,889 8,147 32,339 21,527 Interest expense (4,697) (4,652) (18,779) (16,322) Income tax (provision) benefit (44,111) 4,568 (56,193) 1,001 Minority interest in WebMD Health Corp. (1,359) (870) (706) (908) Equity in earnings of EBS Master LLC 763 - 763 - Gain on sale of EBS 352,297 - 352,297 - Loss on investments - (2,723) - (6,365) Other expenses - - (4,198) (3,765) Income from continuing operations 345,537 23,455 396,679 56,709 Income from discontinued operations, net of tax 889 9,397 371,060 16,265 Net income $346,426 $32,852 $767,739 $72,974 Basic income per common share: Income from continuing operations $1.35 $0.07 $1.42 $0.17 Income from discontinued operations 0.00 0.02 1.33 0.04 Net income $1.35 $0.09 $2.75 $0.21 Diluted income per common share: (c) Income from continuing operations $1.14 $0.07 $1.25 $0.16 Income from discontinued operations 0.00 0.02 1.12 0.05 Net income $1.14 $0.09 $2.37 $0.21 Weighted-average shares outstanding used in computing income per common share: Basic 256,688 348,261 279,234 341,747 Diluted 308,295 355,782 331,642 352,852 (a) Adjusted EBITDA per diluted common share is based on the weighted- average shares outstanding used in computing diluted income per common share. (b) Reconciliation of Adjusted EBITDA to net income (see Annex A - Explanation of Non-GAAP Financial Measures). (c) Diluted income per common share for the three months and the year ended December 31, 2006 reflects the dilutive impact of the convertible notes. EMDEON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, unaudited) December 31, 2006 2005 Assets Cash and cash equivalents $614,691 $155,616 Short-term investments 34,140 267,387 Accounts receivable, net 121,608 195,317 Inventory 9,922 10,791 Prepaid expenses and other current assets 31,871 30,936 Due from EBS Master LLC 30,716 - Assets of discontinued operations - 254,247 Total current assets 842,948 914,294 Marketable equity securities 2,633 4,430 Property and equipment, net 72,040 95,686 Goodwill 337,669 895,975 Intangible assets, net 129,473 235,271 Investment in EBS Master LLC 1,521 - Other assets 65,659 50,027 Total Assets $1,451,943 $2,195,683 Liabilities and Stockholders' Equity Accounts payable $3,996 $7,739 Accrued expenses 113,175 170,102 Deferred revenue 87,438 68,390 Liabilities of discontinued operations - 68,436 Total current liabilities 204,609 314,667 Convertible notes 650,000 650,000 Other long-term liabilities 14,420 14,518 Minority interest in WebMD Health Corp. 102,294 43,229 Convertible redeemable exchangeable preferred stock 98,768 98,533 Stockholders' equity 381,852 1,074,736 Total Liabilities and Stockholders' Equity $1,451,943 $2,195,683 EMDEON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Years Ended December 31, 2006 2005 Cash flows from operating activities: Net income $767,739 $72,974 Adjustments to reconcile net income to net cash provided by operating activities: Income from discontinued operations, net of tax (371,060) (16,265) Depreciation and amortization 61,976 60,905 Minority interest in WebMD Health Corp. 706 908 Equity in earnings of EBS Master LLC (763) - Amortization of debt issuance costs 2,906 2,541 Non-cash advertising 7,414 10,870 Non-cash stock-based compensation 44,955 4,880 Bad debt expense 1,627 2,527 Loss on investments - 6,365 Gain on sale of EBS (352,297) - Loss on redemption of convertible debt - 1,902 Reversal of income tax valuation allowance applied to goodwill 30,770 174 Changes in operating assets and liabilities: Accounts receivable (45,434) (30,021) Inventory 190 (755) Prepaid expenses and other, net (12,131) 2,629 Accounts payable 162 (6,212) Accrued expenses and other long-term liabilities 20,621 7,480 Deferred revenue 15,654 7,954 Net cash provided by continuing operations 173,035 128,856 Net cash provided by discontinued operations 25,985 32,430 Net cash provided by operating activities 199,020 161,286 Cash flows from investing activities: Proceeds from maturities and sales of available-for-sale securities 928,284 1,063,606 Purchases of available-for-sale securities (686,815) (758,687) Purchases of property and equipment (54,885) (51,276) Proceeds received from sale of property and equipment - 400 Cash paid in business combinations, net of cash acquired (152,772) (93,712) Proceeds received from sale of EBS 1,199,872 - Advance to EBS Master LLC (20,016) - Proceeds received from sale of discontinued operations 522,604 - Other changes in equity of discontinued operations 28,279 23,176 Net cash provided by continuing operations 1,764,551 183,507 Net cash used in discontinued operations (26,010) (34,575) Net cash provided by investing activities 1,738,541 148,932 Cash flows from financing activities: Proceeds from issuance of Emdeon and WebMD Health common stock 156,078 48,571 Purchases of treasury stock under repurchase program (83,167) (21,246) Purchases of treasury stock in tender offer (1,552,120) (549,268) Payments of notes payable and other (437) (631) Net proceeds from issuance of convertible debt - 289,875 Issuance of WebMD Health Corp. Class A common stock - 123,344 Redemption of convertible debt - (86,694) Net cash used in continuing operations (1,479,646) (196,049) Net cash used in discontinued operations - - Net cash used in financing activities (1,479,646) (196,049) Effect of exchange rates on cash 1,135 (678) Net increase in cash and cash equivalents 459,050 113,491 Change in cash attributable to discontinued operations 25 2,145 Cash and cash equivalents at beginning of period 155,616 39,980 Cash and cash equivalents at end of period $614,691 $155,616 2007 Consolidated Financial Guidance Summary (in millions, except per share data) Year Ended December 31, 2007 Range WebMD $336.0 $352.0 ViPS 105.5 109.0 Porex 89.5 93.0 Total revenue $531.0 $554.0 Earnings before interest, taxes, non- cash and other items ("Adjusted EBITDA")(a) $97.0 $108.0 Reconciliation of Adjusted EBITDA to income from continuing operations: Interest income, net 17.5 18.5 Depreciation and amortization (51.5) (50.5) Non-cash advertising (5.5) (5.0) Non-cash stock-based compensation (41.0) (40.0) Income tax provision (10.5) (12.5) Equity in earnings of EBS Master LLC 29.5 32.0 Minority interest in WebMD Health Corp. (3.0) (4.0) Income from continuing operations $32.5 $46.5 Adjusted EBITDA per share $0.51 $0.57 Net income per share $0.17 $0.24 Weighted average shares - Diluted 190.0 190.0 (a) See Annex A - Explanation of Non-GAAP Financial Measures Quarterly Revenue Range Q1 Q2 Range Range WebMD ViPS Porex Total revenue $116.0 $120.0 $126.0 $130.0 Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA")(a) Quarterly Mix Reconciliation of Adjusted EBITDA to income from continuing operations: Q1 Q2 Interest income, net 29% 19% Depreciation and amortization 23% 22% Non-cash advertising 41% 0% Non-cash stock-based compensation 26% 25% Income tax provision 3% 18% Equity in earnings of EBS Master LLC 17% 25% Minority interest in WebMD Health Corp. -12% 13% (a) See Annex A - Explanation of Non-GAAP Financial Measures 2007 Consolidated Financial Guidance Summary (in millions, except per share data) Q3 Q4 Range Range WebMD ViPS Porex Total revenue $138.0 $145.0 $151.0 $159.0 Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA")(a) Reconciliation of Adjusted EBITDA to income from continuing operations: Q3 Q4 Interest income, net 23% 29% Depreciation and amortization 25% 30% Non-cash advertising 0% 59% Non-cash stock-based compensation 27% 22% Income tax provision 30% 49% Equity in earnings of EBS Master LLC 27% 31% Minority interest in WebMD Health Corp. 34% 65% (a) See Annex A - Explanation of Non-GAAP Financial Measures Operating Segments Revenue * WebMD - Refer to WebMD Health Corp. Financial Guidance Summary included in its February 21, 2007 press release. * ViPS - Approximately 24% of segment revenue in Q1 increasing to 26% in Q4. * Porex - Approximately 25% of segment revenue in Q1, 26% in Q2, 25% in Q3, and 24% in Q4. Adjusted EBITDA * WebMD - Refer to WebMD Health Corp. Financial Guidance Summary included in its February 21, 2007 press release. * ViPS - Approximately 19% of segment revenue in Q1 increasing to 21% thereafter. * Porex - Approximately 27% of segment revenue in Q1, 31% in Q2, 30% in Q3 and 29% in Q4. * Corporate - Approximately 6.2% of consolidate
