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8-K - FORM 8-K - Change Healthcare Holdings, Inc. | g26403e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Emdeon Reports Fourth Quarter and Full Year 2010 Results
| Revenue of $275.7 million, increased 15.5% over fourth quarter 2009 | ||
| Adjusted EBITDA of $74.1 million, increased 18.4% over fourth quarter 2009 | ||
| Transaction growth during 2010 was 9.4% despite industry-wide healthcare utilization declines | ||
| Completion of Chamberlin Edmonds acquisition in fourth quarter of 2010 broadens revenue cycle management offering with leading technology-enabled government program eligibility and enrollment services | ||
| Expanded clinical information exchange capabilities to deliver real-time patient information at the point of care |
NASHVILLE, Tenn. (March 8, 2011) Emdeon Inc. (NYSE: EM), a leading provider of healthcare
revenue and payment cycle management and clinical information exchange solutions, today announced
financial results for the fourth quarter ended December 31, 2010, as summarized below:
% | % | |||||||||||||||||||||||
(In millions, except per share amts) | 4Q 10 | 4Q 09 | Change | FY 10 | FY 09 | Change | ||||||||||||||||||
Revenue |
$ | 275.7 | $ | 238.6 | 15.5 | % | $ | 1,002.2 | $ | 918.4 | 9.1 | % | ||||||||||||
Net Income |
$ | 15.0 | $ | 4.7 | 219.1 | % | $ | 33.2 | $ | 14.0 | 137.1 | % | ||||||||||||
Earnings per share (diluted) |
$ | 0.11 | $ | 0.03 | 266.7 | % | $ | 0.21 | $ | 0.12 | 75.0 | % | ||||||||||||
Non-GAAP Adjusted EBITDA |
$ | 74.1 | $ | 62.6 | 18.4 | % | $ | 268.1 | $ | 240.3 | 11.6 | % | ||||||||||||
Non-GAAP Adjusted EPS |
$ | 0.25 | $ | 0.20 | 25.0 | % | $ | 0.92 | $ | 0.87 | 5.7 | % | ||||||||||||
Non-GAAP fully diluted shares |
122.6 | 121.0 | 1.3 | % | 122.3 | 112.6 | 8.6 | % |
We are pleased with our financial results in the fourth quarter. Our revenue cycle
management and payment services solutions continued to lead our growth with solid performance.
Despite a challenging healthcare utilization environment, we continued to gain share and signed 12
new sole source payer agreements in the fourth quarter alone, said George Lazenby, Emdeons chief
executive officer. In addition to our operating performance, we also closed our acquisition of
Chamberlin Edmonds (CEA). This acquisition continued our strategy of expanding into
technology-based services that leverage our existing healthcare information network, products and
data in the area of revenue cycle management.
Lazenby continued, Emdeon was successful in advancing many of our strategic growth initiatives
during 2010. In addition to CEA, we closed strategic acquisitions to complete our provider-based
ePayment suite, expand our revenue cycle management denial and recovery services and extend our
payer solutions to include strategic consulting. We also continued our momentum in the government
sector through a new relationship with Noridian, which has already served to improve the visibility
of our solutions in this growing area. And finally, we expanded our position in the emerging area
of clinical information exchange with our national lab hub and electronic prescription network, and
by entering
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into an exclusive relationship with LabCorp to provide a low-cost EHR Lite solution for physician
practices nationwide to assist them in qualifying for HITECH stimulus dollars.
Commenting on 2011, Lazenby added, We are confident the investments we have made position us
solidly for future growth, especially in the areas of revenue cycle management, payment integrity,
payment automation and clinical information exchange. We remain focused on our strategy of
layering value-added products and technology-enabled services on top of our leading health
information network to drive efficiency in healthcare.
Fourth quarter revenue was $275.7 million, an increase of 15.5%, compared to $238.6 million for the
same period in 2009. GAAP operating income for the fourth quarter of 2010 was $28.1 million
compared to $26.5 million for the same period in 2009, an increase of 6.0%, primarily due to margin
from revenue growth offset partially by higher depreciation and amortization. Fourth quarter
Adjusted EBITDA grew 18.4% to $74.1 million, or 26.9% of revenue, from Adjusted EBITDA of $62.6
million, or 26.2% of revenue, in the comparable period in 2009.
GAAP net income (before noncontrolling interest) for the fourth quarter of 2010 was $15.0 million
compared to GAAP net income of $4.7 million for the same period in 2009. GAAP net income per
diluted share for the fourth quarter of 2010 was $0.11 compared to $0.03 for the same period in
2009. Adjusted Net Income per fully diluted share for the fourth quarter of 2010 was $0.25, using
a weighted average fully diluted share count of 122.6 million, compared to $0.20, using a weighted
average fully diluted share count of 121.0 million, for the same period in 2009.
For the year ended December 31, 2010, revenue was $1,002.2 million, an increase of 9.1%, compared
to $918.4 million for 2009. GAAP operating income for 2010 was $117.5 million compared to $101.0
million for the prior year, an increase of 16.3%. Adjusted EBITDA grew 11.6% to $268.1 million, or
26.8% of revenue, from Adjusted EBITDA of $240.3 million, or 26.2% of revenue, in 2009.
GAAP net income (before noncontrolling interest) for 2010 was $33.2 million compared to GAAP net
income of $14.0 million in 2009. GAAP net income per diluted share for 2010 was $0.21 compared to
$0.12 in the prior year. Adjusted Net Income per fully diluted share for 2010 was $0.92, using a
weighted average fully diluted share count of 122.3 million, compared to $0.87, using a weighted
average fully diluted share count of 112.6 million, for 2009.
A reconciliation of Emdeons financial results determined in accordance with U.S. Generally
Accepted Accounting Principles (GAAP) to certain non-GAAP financial measures has been provided in
the financial statement tables included in this release to supplement its unaudited condensed
consolidated financial statements presented on a GAAP basis. An explanation of these non-GAAP
measures is also included below under the heading Explanation of Non-GAAP Financial Measures.
Financial Outlook
Emdeon currently anticipates its annual revenue, Adjusted EBITDA and Adjusted Net Income per fully
diluted share for 2011 to be as follows:
| 2011 revenue to be between $1.105 to $1.135 billion |
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| 2011 Adjusted EBITDA to be between $300 to $310 million | ||
| 2011 Adjusted Net Income per fully diluted share to be between $1.00 to $1.06, using a weighted average share count of 124.0 million |
Notice of Conference Call and Webcast
Emdeon will conduct a conference call/webcast for investors and institutional analysts on Tuesday,
March 8, 2011 at 5:00 pm Eastern Time/4:00 pm Central Time to discuss Emdeons financial results.
To access Emdeons live conference call and webcast, dial 800-299-7928 (617-614-3926 for
international calls) using conference code 13253625 or visit the Investors section of Emdeons
website: www.emdeon.com. Please go to the website at least 15 minutes prior to the event to
register, download and install any necessary audio/video software to access the webcast. For those
unable to listen to the live broadcast, a conference call replay will be available for one week
following the conference call by calling 888-286-8010 (617-801-6888 for international calls) using
conference code 43366927. A webcast replay will also be archived on Emdeons website for at least
30 days following the conference call.
About Emdeon
Emdeon is a leading provider of revenue and payment cycle management and clinical information
exchange solutions, connecting payers, providers and patients in the U.S. healthcare system.
Emdeons product and service offerings integrate and automate key business and administrative
functions of its payer and provider customers throughout the patient encounter. Through the use of
Emdeons comprehensive suite of products and services, which are designed to easily integrate with
existing technology infrastructures, customers are able to improve efficiency, reduce costs,
increase cash flow and more efficiently manage the complex revenue and payment cycle and clinical
information exchange processes. For more information, visit www.emdeon.com.
Forward-Looking Statements
Statements made in this press release that express Emdeons or managements intentions, plans,
beliefs, expectations or predictions of future events are forward-looking statements, which Emdeon
intends to be covered by the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. These statements often include words such as
may, will, should, believe, expect, anticipate, intend, plan, estimate or similar
expressions. Forward-looking statements may include information concerning Emdeons possible or
assumed future results of operations, including descriptions of Emdeons revenues, profitability,
outlook and overall business strategy. You should not place undue reliance on these statements
because they are subject to numerous uncertainties and factors relating to Emdeons operations and
business environment, all of which are difficult to predict and many of which are beyond Emdeons
control. Although Emdeon believes that these forward-looking statements are based on reasonable
assumptions, you should be aware that many factors could affect Emdeons actual financial results
or results of operations and could cause actual results to differ materially from those in the
forward-looking statements, including but not limited to: effects of competition, including
competition from entities that are customers for certain of Emdeons products and services;
Emdeons ability to maintain relationships with its customers and channel partners; Emdeons
ability to effectively cross-sell its products and services to existing
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customers and to continue to generate revenue and maintain profitability by developing or acquiring
and successfully deploying new or updated products and services; pricing pressures on Emdeons
products and services; the anticipated benefits from acquisitions not being fully realized or not
being realized within the expected time frames; and general economic, business or regulatory
conditions affecting the healthcare information technology and services industries; as well as the
other risks discussed in the Risk Factors and Managements Discussion and Analysis of Financial
Condition and Results of Operations sections and elsewhere in Emdeons Annual Report on Form 10-K
for the year ended December 31, 2009, as well as Emdeons periodic and other reports, filed with
the Securities and Exchange Commission.
You should keep in mind that any forward-looking statement made by Emdeon herein, or elsewhere,
speaks only as of the date on which made. Emdeon expressly disclaims any intent, obligation or
undertaking to update or revise any forward-looking statements made herein to reflect any change in
Emdeons expectations with regard thereto or any change in events, conditions or circumstances on
which any such statements are based.
# # #
Contacts:
Investor Relations
Tommy Lewis
615.932.3235
tlewis@emdeon.com
Investor Relations
Tommy Lewis
615.932.3235
tlewis@emdeon.com
4
Emdeon Inc.
Condensed Consolidated Statements of Operations
(unaudited and amounts in thousands, except share and per share amounts)
For the Three Months | For the Year | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenue |
$ | 275,661 | $ | 238,560 | $ | 1,002,152 | $ | 918,448 | ||||||||
Costs and expenses: |
||||||||||||||||
Cost of operations (exclusive of depreciation and
amortization below) |
169,246 | 144,788 | 612,594 | 562,867 | ||||||||||||
Development and engineering |
9,670 | 9,503 | 35,515 | 33,928 | ||||||||||||
Sales, marketing, general and administrative |
30,683 | 28,555 | 111,948 | 113,701 | ||||||||||||
Depreciation and amortization |
37,667 | 28,270 | 124,721 | 105,321 | ||||||||||||
(Gain) loss on abandonment of leased properties |
304 | 933 | (105 | ) | 1,675 | |||||||||||
Operating income |
28,091 | 26,511 | 117,479 | 100,956 | ||||||||||||
Interest income |
(2 | ) | | (14 | ) | (75 | ) | |||||||||
Interest expense |
13,284 | 17,921 | 61,031 | 70,246 | ||||||||||||
Other |
(5,144 | ) | (519 | ) | (9,284 | ) | (519 | ) | ||||||||
Income before income tax provision |
19,953 | 9,109 | 65,746 | 31,304 | ||||||||||||
Income tax provision |
4,931 | 4,416 | 32,579 | 17,301 | ||||||||||||
Net income |
15,022 | 4,693 | 33,167 | 14,003 | ||||||||||||
Net income attributable to noncontrolling interest |
5,331 | 1,552 | 13,621 | 4,422 | ||||||||||||
Net income attributable to Emdeon Inc. |
$ | 9,691 | $ | 3,141 | $ | 19,546 | $ | 9,581 | ||||||||
Net income per share Class A common stock: |
||||||||||||||||
Basic |
$ | 0.11 | $ | 0.03 | $ | 0.22 | $ | 0.12 | ||||||||
Diluted |
$ | 0.11 | $ | 0.03 | $ | 0.21 | $ | 0.12 | ||||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
90,362,054 | 90,322,841 | 90,100,070 | 82,459,169 | ||||||||||||
Diluted |
91,104,919 | 90,443,828 | 90,832,631 | 82,525,002 | ||||||||||||
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Emdeon Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands, except share amounts)
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 99,188 | $ | 211,999 | ||||
Accounts receivable, net of allowance for doubtful accounts of $5,394 and $4,433 at
December 31, 2010 and 2009, respectively |
174,191 | 150,009 | ||||||
Deferred income tax assets |
4,911 | 4,924 | ||||||
Prepaid expenses and other current assets |
25,020 | 16,632 | ||||||
Total current assets |
303,310 | 383,564 | ||||||
Property and equipment, net |
231,307 | 152,091 | ||||||
Goodwill |
908,310 | 703,027 | ||||||
Intangible assets, net |
1,035,886 | 989,280 | ||||||
Other assets, net |
9,750 | 1,451 | ||||||
Total assets |
$ | 2,488,563 | $ | 2,229,413 | ||||
Liabilities and equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 4,732 | $ | 9,910 | ||||
Accrued expenses |
112,245 | 72,493 | ||||||
Deferred revenues |
12,130 | 11,140 | ||||||
Current portion of long-term debt |
12,494 | 9,972 | ||||||
Total current liabilities |
141,601 | 103,515 | ||||||
Long-term debt, excluding current portion |
933,749 | 830,710 | ||||||
Deferred income tax liabilities |
197,355 | 145,914 | ||||||
Tax receivable agreement obligations to related parties |
138,533 | 142,044 | ||||||
Other long-term liabilities |
22,037 | 27,361 | ||||||
Commitments and contingencies |
||||||||
Equity: |
||||||||
Preferred stock (par value, $0.00001), 25,000,000 shares authorized and 0 shares issued
and outstanding |
| | ||||||
Class A common stock (par value, $0.00001), 400,000,000 shares authorized and 91,064,486 and
90,423,941 shares outstanding at December 31, 2010 and 2009, respectively |
1 | 1 | ||||||
Class B common stock, exchangeable (par value, $0.00001), 52,000,000 shares authorized and
24,689,142 and 24,752,955 shares outstanding at December 31, 2010 and 2009, respectively |
| | ||||||
Additional paid-in capital |
738,888 | 730,941 | ||||||
Contingent consideration |
1,955 | | ||||||
Accumulated other comprehensive loss |
(2,569 | ) | (11,198 | ) | ||||
Retained earnings |
53,250 | 33,704 | ||||||
Emdeon Inc. equity |
791,525 | 753,448 | ||||||
Noncontrolling interest |
263,763 | 226,421 | ||||||
Total equity |
1,055,288 | 979,869 | ||||||
Total liabilities and equity |
$ | 2,488,563 | $ | 2,229,413 | ||||
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Emdeon Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited and amounts in thousands)
Condensed Consolidated Statements of Cash Flows
(unaudited and amounts in thousands)
Year Ended December 31, | ||||||||
2010 | 2009 | |||||||
Operating activities |
||||||||
Net income |
$ | 33,167 | $ | 14,003 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
124,721 | 105,321 | ||||||
Equity-based compensation expense |
17,721 | 25,415 | ||||||
Deferred income tax expense (benefit) |
12,236 | (1,248 | ) | |||||
Amortization of debt discount and issuance costs |
12,911 | 11,947 | ||||||
Amortization of discontinued cash flow hedge from other comprehensive loss |
5,800 | 7,970 | ||||||
Change in fair value of interest rate swap (not subject to hedge accounting) |
(3,908 | ) | | |||||
(Gain) loss on abandonment of leased properties |
(105 | ) | 1,675 | |||||
Change in contingent consideration |
(9,284 | ) | | |||||
Other |
524 | (502 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(2,429 | ) | (2,571 | ) | ||||
Prepaid expenses and other |
(12,552 | ) | 4,945 | |||||
Accounts payable |
(7,499 | ) | 4,731 | |||||
Accrued expenses, deferred revenue and other liabilities |
451 | (9,234 | ) | |||||
Tax receivable agreement obligations to related parties |
95 | 299 | ||||||
Net cash provided by operating activities |
171,849 | 162,751 | ||||||
Investing activities |
||||||||
Purchases of property and equipment |
(79,988 | ) | (48,292 | ) | ||||
Payments for acquisitions, net of cash acquired |
(251,464 | ) | (76,250 | ) | ||||
Other |
(3,000 | ) | 1,300 | |||||
Net cash used in investing activities |
(334,452 | ) | (123,242 | ) | ||||
Financing activities |
||||||||
Proceeds from issuance of stock |
306 | 147,964 | ||||||
Repurchase of Class A common stock |
| (1,586 | ) | |||||
Repurchase of Units of EBS Master LLC |
| (5,373 | ) | |||||
Proceeds from incremental term loan |
97,982 | | ||||||
Debt principal and sublicense obligation payments |
(11,423 | ) | (29,203 | ) | ||||
Repayment of assumed debt obligations |
(35,254 | ) | (200 | ) | ||||
Payments on revolver |
| (10,000 | ) | |||||
Capital contributions from stockholders |
| 203 | ||||||
Other |
(1,819 | ) | (793 | ) | ||||
Net cash provided by financing activities |
49,792 | 101,012 | ||||||
Net (decrease) increase in cash and cash equivalents |
(112,811 | ) | 140,521 | |||||
Cash and cash equivalents at beginning of period |
211,999 | 71,478 | ||||||
Cash and cash equivalents at end of period |
$ | 99,188 | $ | 211,999 | ||||
7
Emdeon Inc.
Segment Information
(unaudited and amounts in thousands)
Segment Information
(unaudited and amounts in thousands)
For the Three Months Ended December 31, 2010 |
For the Three Months Ended December 31, 2009 |
|||||||||||||||||||||||||||||||||||||||
Corporate & | Corporate & | |||||||||||||||||||||||||||||||||||||||
Payer | Provider | Pharmacy | Eliminations | Consolidated | Payer | Provider | Pharmacy | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Revenue from external customers |
||||||||||||||||||||||||||||||||||||||||
Claims management |
$ | 49,149 | $ | | $ | | $ | | $ | 49,149 | $ | 47,165 | $ | | $ | | $ | | $ | 47,165 | ||||||||||||||||||||
Payment services |
62,483 | | | | 62,483 | 55,552 | | | | 55,552 | ||||||||||||||||||||||||||||||
Patient statements |
| 64,307 | | | 64,307 | | 67,086 | | | 67,086 | ||||||||||||||||||||||||||||||
Revenue cycle management |
| 70,164 | | | 70,164 | | 40,287 | | | 40,287 | ||||||||||||||||||||||||||||||
Dental |
| 7,595 | | | 7,595 | | 7,823 | | | 7,823 | ||||||||||||||||||||||||||||||
Pharmacy services |
| | 21,963 | | 21,963 | | | 20,647 | | 20,647 | ||||||||||||||||||||||||||||||
Inter-segment revenue |
1,189 | 161 | | (1,350 | ) | | 468 | 110 | | (578 | ) | | ||||||||||||||||||||||||||||
Net revenue |
112,821 | 142,227 | 21,963 | (1,350 | ) | 275,661 | 103,185 | 115,306 | 20,647 | (578 | ) | 238,560 | ||||||||||||||||||||||||||||
Costs and expenses: |
||||||||||||||||||||||||||||||||||||||||
Cost of operations |
74,819 | 87,467 | 8,278 | (1,318 | ) | 169,246 | 65,379 | 73,236 | 6,721 | (548 | ) | 144,788 | ||||||||||||||||||||||||||||
Development and engineering |
3,189 | 4,470 | 2,011 | | 9,670 | 3,505 | 4,011 | 1,987 | | 9,503 | ||||||||||||||||||||||||||||||
Sales, marketing, general and
administrative |
6,681 | 9,662 | 1,450 | 12,890 | 30,683 | 5,342 | 7,643 | 2,608 | 12,962 | 28,555 | ||||||||||||||||||||||||||||||
Loss on abandonment |
| 304 | | | 304 | | 45 | | 888 | 933 | ||||||||||||||||||||||||||||||
Segment contribution (1) |
$ | 28,132 | $ | 40,324 | $ | 10,224 | $ | (12,922 | ) | 65,758 | $ | 28,959 | $ | 30,371 | $ | 9,331 | $ | (13,880 | ) | 54,781 | ||||||||||||||||||||
Depreciation and amortization |
37,667 | 28,270 | ||||||||||||||||||||||||||||||||||||||
Interest income |
(2 | ) | | |||||||||||||||||||||||||||||||||||||
Interest expense |
13,284 | 17,921 | ||||||||||||||||||||||||||||||||||||||
Other income, net |
(5,144 | ) | (519 | ) | ||||||||||||||||||||||||||||||||||||
Income before income tax
provision |
$ | 19,953 | $ | 9,109 | ||||||||||||||||||||||||||||||||||||
For the Year Ended December 31, 2010 |
For the Year Ended December 31, 2009 |
|||||||||||||||||||||||||||||||||||||||
Corporate & | Corporate & | |||||||||||||||||||||||||||||||||||||||
Payer | Provider | Pharmacy | Eliminations | Consolidated | Payer | Provider | Pharmacy | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Revenue from external customers |
||||||||||||||||||||||||||||||||||||||||
Claims management |
$ | 194,239 | $ | | $ | | $ | | $ | 194,239 | $ | 184,605 | $ | | $ | | $ | | $ | 184,605 | ||||||||||||||||||||
Payment services |
234,176 | | | | 234,176 | 211,985 | | | | 211,985 | ||||||||||||||||||||||||||||||
Patient statements |
| 262,521 | | | 262,521 | | 274,390 | | | 274,390 | ||||||||||||||||||||||||||||||
Revenue cycle management |
| 198,019 | | | 198,019 | | 155,112 | | | 155,112 | ||||||||||||||||||||||||||||||
Dental |
| 31,403 | | | 31,403 | | 31,513 | | | 31,513 | ||||||||||||||||||||||||||||||
Pharmacy services |
| | 81,794 | | 81,794 | | | 60,843 | | 60,843 | ||||||||||||||||||||||||||||||
Inter-segment revenue |
3,501 | 402 | | (3,903 | ) | | 902 | 1,498 | | (2,400 | ) | | ||||||||||||||||||||||||||||
Net revenue |
431,916 | 492,345 | 81,794 | (3,903 | ) | 1,002,152 | 397,492 | 462,513 | 60,843 | (2,400 | ) | 918,448 | ||||||||||||||||||||||||||||
Costs and expenses: |
||||||||||||||||||||||||||||||||||||||||
Cost of operations |
283,050 | 303,252 | 30,067 | (3,775 | ) | 612,594 | 253,473 | 294,700 | 16,668 | (1,974 | ) | 562,867 | ||||||||||||||||||||||||||||
Development and engineering |
12,127 | 16,078 | 7,310 | | 35,515 | 12,677 | 15,294 | 5,957 | | 33,928 | ||||||||||||||||||||||||||||||
Sales, marketing, general and
administrative |
26,700 | 30,711 | 5,970 | 48,567 | 111,948 | 25,803 | 31,978 | 8,047 | 47,873 | 113,701 | ||||||||||||||||||||||||||||||
(Gain) Loss on abandonment |
66 | 477 | | (648 | ) | (105 | ) | | 45 | | 1,630 | 1,675 | ||||||||||||||||||||||||||||
Segment contribution (1) |
$ | 109,973 | $ | 141,827 | $ | 38,447 | $ | (48,047 | ) | 242,200 | $ | 105,539 | $ | 120,496 | $ | 30,171 | $ | (49,929 | ) | 206,277 | ||||||||||||||||||||
Depreciation and amortization |
124,721 | 105,321 | ||||||||||||||||||||||||||||||||||||||
Interest income |
(14 | ) | (75 | ) | ||||||||||||||||||||||||||||||||||||
Interest expense |
61,031 | 70,246 | ||||||||||||||||||||||||||||||||||||||
Other income, net |
(9,284 | ) | (519 | ) | ||||||||||||||||||||||||||||||||||||
Income before income tax
provision |
$ | 65,746 | $ | 31,304 | ||||||||||||||||||||||||||||||||||||
(1) | Segment contribution has been reduced by equity-based compensation expense of $5,030, $3,916, $17,721, and $25,415 for the three months ended December 31, 2010 and 2009 and for the years ended December 31, 2010 and 2009, respectively. Segment contribution without such equity-based compensation expense would have been $70,788, $58,697, $259,921 and $231,692 for the three months ended December 31, 2010 and 2009 and for the years ended December 31, 2010 and 2009, respectively. |
8
Explanation of Non-GAAP Financial Measures
Emdeons management believes that, in order to properly understand Emdeons short-term and
long-term financial trends, investors may wish to consider the impact of certain non-cash or
non-operating items, when used as a supplement to financial performance measures prepared in
accordance with U.S. Generally Accepted Accounting Principles (GAAP). These items result from
facts and circumstances that vary in frequency and/or impact continuing operations. In addition,
management uses results of operations before such excluded items to evaluate the operational
performance of Emdeon as a basis for strategic planning and, in the case of Adjusted EBITDA, as a
performance evaluation metric in determining achievement of certain executive and management
incentive compensation programs. Investors should consider these non-GAAP measures in addition to,
and not as a substitute for, financial performance measures prepared in accordance with GAAP. In
addition to the description provided below, reconciliations of GAAP to non-GAAP results are
provided in the financial statement tables included in this release.
In this release, Emdeon defines Adjusted EBITDA as EBITDA (which is defined as net income before
income tax provision (benefit), net interest expense and depreciation and amortization), plus
certain other non-cash or non-operating items (collectively, EBITDA Adjustments).
In this release, Emdeon defines Adjusted Net Income as the sum of (i) GAAP net income, (ii) EBITDA
Adjustments, (iii) non-cash interest expense and (iv) depreciation and amortization expense
resulting from adjustments of assets to fair value in connection with acquisition accounting, less
income taxes computed based on a normalized income tax rate. Emdeon defines Adjusted Net Income
per fully diluted share as the quotient of Adjusted Net Income and weighted average shares
outstanding, assuming all potentially dilutive securities (except for contingently issuable shares
subject to performance conditions) are fully dilutive and outstanding shares from their date of
grant or issuance.
To properly evaluate Emdeons business, Emdeon encourages investors to review the GAAP financial
information included in this release, and not rely on any single financial measure to evaluate
Emdeons business. Emdeon also strongly encourages investors to review the reconciliation of GAAP
net income and GAAP net income per diluted share to the applicable non-GAAP measures of Adjusted
EBITDA, Adjusted Net Income and Adjusted Net Income per fully diluted share. These non-GAAP
measures, as Emdeon defines them, may not be similar to non-GAAP measures used by other companies.
Management uses Adjusted EBITDA and Adjusted Net Income per fully diluted share to facilitate a
comparison of Emdeons operating performance on a consistent basis from period to period that, when
viewed in combination with Emdeons GAAP results, management believes provides a more complete
understanding of factors and trends affecting Emdeons business than GAAP measures alone.
Management believes these non-GAAP measures assist Emdeons board of directors, management, lenders
and investors in comparing Emdeons operating performance on a consistent basis because they remove
where applicable, the impact of Emdeons capital structure, asset base, acquisition accounting,
non-cash charges and non-operating items from Emdeons operations.
Emdeon also presents Adjusted EBITDA and Adjusted Net Income per fully diluted share on a
forward-looking basis as part of its Financial Outlook for 2011. Emdeon is unable to present a
quantitative reconciliation of these forward-looking non-GAAP financial measures to the most
directly comparable forward-looking GAAP financial measures because management cannot predict, with
sufficient
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reliability, contingent payments relating to past and possible future acquisitions, changes in the
fair value of Emdeons interest rate swap agreement and the effect on income taxes of these and
other items attributable to Emdeons capital structure, all of which are difficult to estimate and
primarily dependent on future events.
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Emdeon Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(unaudited and amounts in thousands)
Reconciliation of GAAP Net Income to Adjusted EBITDA
(unaudited and amounts in thousands)
For the Three Months | For the Year | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income |
$ | 15,022 | $ | 4,693 | $ | 33,167 | $ | 14,003 | ||||||||
Interest expense, net |
13,282 | 17,921 | 61,017 | 70,171 | ||||||||||||
Income tax provision |
4,931 | 4,416 | 32,579 | 17,301 | ||||||||||||
Depreciation and amortization |
37,667 | 28,270 | 124,721 | 105,321 | ||||||||||||
EBITDA |
70,902 | 55,300 | 251,484 | 206,796 | ||||||||||||
Equity-based compensation |
5,030 | 3,916 | 17,721 | 25,415 | ||||||||||||
Acquisition method adjustments |
49 | 209 | 254 | 1,398 | ||||||||||||
IPO-related transaction costs |
| | | 1,513 | ||||||||||||
Facilities consolidation costs |
1,796 | 1,964 | 3,347 | 2,541 | ||||||||||||
Tax receivable agreements change in
estimate |
413 | 299 | 95 | 299 | ||||||||||||
Acquisition and divestiture related
costs, net |
1,079 | 911 | 4,521 | 2,321 | ||||||||||||
Contingent consideration adjustments |
(5,144 | ) | | (9,284 | ) | | ||||||||||
EBITDA Adjustments |
3,223 | 7,299 | 16,654 | 33,487 | ||||||||||||
Adjusted EBITDA |
$ | 74,125 | $ | 62,599 | $ | 268,138 | $ | 240,283 | ||||||||
Emdeon Inc.
Reconciliation of GAAP Net Income to Adjusted Net Income
(unaudited and amounts in thousands)
Reconciliation of GAAP Net Income to Adjusted Net Income
(unaudited and amounts in thousands)
For the Three Months | For the Year | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income |
$ | 15,022 | $ | 4,693 | $ | 33,167 | $ | 14,003 | ||||||||
Income tax provision |
4,931 | 4,416 | 32,579 | 17,301 | ||||||||||||
EBITDA Adjustments |
3,223 | 7,299 | 16,654 | 33,487 | ||||||||||||
Non-cash interest expense |
1,619 | 5,108 | 16,367 | 19,918 | ||||||||||||
Depreciation and amortization resulting
from acquisition method adjustments |
26,749 | 19,458 | 86,208 | 76,444 | ||||||||||||
Adjusted net income before income taxes |
51,544 | 40,974 | 184,975 | 161,153 | ||||||||||||
Normalized income tax provision |
20,360 | 16,185 | 73,065 | 63,655 | ||||||||||||
Adjusted Net Income |
$ | 31,184 | $ | 24,789 | $ | 111,910 | $ | 97,498 | ||||||||
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Emdeon Inc.
Reconciliation of GAAP Net Income Per Diluted Share of Class A Common Stock to
Adjusted Net Income Per Fully Diluted Share(1)
(unaudited)
Reconciliation of GAAP Net Income Per Diluted Share of Class A Common Stock to
Adjusted Net Income Per Fully Diluted Share(1)
(unaudited)
For the Three Months | For the Year | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income per diluted share of Class A common stock |
$ | 0.11 | $ | 0.03 | $ | 0.21 | $ | 0.12 | ||||||||
Impact of assuming full dilution of all
outstanding equity instruments for the
period |
0.01 | 0.00 | 0.06 | 0.01 | ||||||||||||
Adjustments on a per share basis: |
||||||||||||||||
Income tax provision |
0.04 | 0.04 | 0.27 | 0.15 | ||||||||||||
EBITDA Adjustments |
0.03 | 0.06 | 0.14 | 0.30 | ||||||||||||
Non-cash interest expense |
0.01 | 0.04 | 0.13 | 0.18 | ||||||||||||
Depreciation and amortization resulting from
acquisition method adjustments |
0.22 | 0.16 | 0.71 | 0.68 | ||||||||||||
Adjusted net income before income taxes |
0.42 | 0.33 | 1.52 | 1.44 | ||||||||||||
Normalized income tax provision |
0.17 | 0.13 | 0.60 | 0.57 | ||||||||||||
Adjusted Net Income per fully diluted share |
$ | 0.25 | $ | 0.20 | $ | 0.92 | $ | 0.87 | ||||||||
(1) | The calculation of Adjusted Net Income per fully diluted share assumes the following equity-based instruments were fully converted into Class A common stock on their date of issuance: |
(shares in thousands)* | ||||||||||||||||
For the Three Months | For the Year | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Weighted average of: |
||||||||||||||||
Class A shares outstanding |
90,747 | 90,323 | 90,622 | 82,459 | ||||||||||||
Class B shares outstanding |
24,689 | 24,753 | 24,698 | 25,039 | ||||||||||||
Restricted stock units outstanding |
657 | 639 | 683 | 859 | ||||||||||||
Options to purchase Class A shares outstanding |
6,495 | 5,247 | 6,262 | 4,254 | ||||||||||||
Shares assumed in Adjusted Net Income per
fully diluted share calculation |
122,588 | 120,962 | 122,265 | 112,611 | ||||||||||||
* | Note: Above shares include all potential securities as dilutive and outstanding except for shares issued and equity awards in connection with 2010 acquisitions and not contemplated in the shares denominator utilized in the 2010 annual Adjusted Net Income per fully diluted share financial outlook range. |
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