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8-K - FORM 8-K - Change Healthcare Holdings, Inc.g26403e8vk.htm
Exhibit 99.1
(EMDEON LOGO)
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, Emdeon’s 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 Emdeon’s 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 Emdeon’s financial results.
To access Emdeon’s 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 Emdeon’s 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 Emdeon’s 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. Emdeon’s 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 Emdeon’s 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 Emdeon’s or management’s 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 Emdeon’s possible or assumed future results of operations, including descriptions of Emdeon’s 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 Emdeon’s operations and business environment, all of which are difficult to predict and many of which are beyond Emdeon’s control. Although Emdeon believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Emdeon’s 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 Emdeon’s products and services; Emdeon’s ability to maintain relationships with its customers and channel partners; Emdeon’s 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 Emdeon’s 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in Emdeon’s Annual Report on Form 10-K for the year ended December 31, 2009, as well as Emdeon’s 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 Emdeon’s 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

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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)
                 
    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  
 
           

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Emdeon Inc.
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.

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Explanation of Non-GAAP Financial Measures
Emdeon’s management believes that, in order to properly understand Emdeon’s 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 Emdeon’s business, Emdeon encourages investors to review the GAAP financial information included in this release, and not rely on any single financial measure to evaluate Emdeon’s 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 Emdeon’s operating performance on a consistent basis from period to period that, when viewed in combination with Emdeon’s GAAP results, management believes provides a more complete understanding of factors and trends affecting Emdeon’s business than GAAP measures alone. Management believes these non-GAAP measures assist Emdeon’s board of directors, management, lenders and investors in comparing Emdeon’s operating performance on a consistent basis because they remove where applicable, the impact of Emdeon’s capital structure, asset base, acquisition accounting, non-cash charges and non-operating items from Emdeon’s 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 Emdeon’s interest rate swap agreement and the effect on income taxes of these and other items attributable to Emdeon’s 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)
                                 
    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)
                                 
    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)
                                 
    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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