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8-K - 8-K - Premier, Inc.a13-23910_18k.htm
EX-99.2 - EX-99.2 - Premier, Inc.a13-23910_1ex99d2.htm

Exhibit 99.1

 

 

PRESS RELEASE

 

For information contact:

 

 

Jim Storey

 

Alven Weil

Vice President, Investor Relations

 

Director, PR and Communications

704.816.5958

 

704.816.5797

jim_storey@premierinc.com

 

alven_weil@premierinc.com

 

PREMIER, INC. REPORTS FISCAL 2014 FIRST-QUARTER RESULTS

 

CHARLOTTE, NC, November 11, 2013 — Premier, Inc. (NASDAQ: PINC) today reported financial results for the fiscal 2014 first quarter ended September 30, 2013.

 

First-quarter highlights:

 

·                  Net revenue increased 21.2% to $240.6 million from the first quarter of fiscal 2013.  On a pro forma basis, which reflects the impact of the company’s reorganization and initial public offering (IPO),* net revenue increased 10.1% to $199.3 million.

 

·                  Adjusted EBITDA* increased 31.3% to $124.3 million from the first quarter of fiscal 2013. On a pro forma basis, Adjusted EBITDA increased 7.6% to $83.1 million.

 

·                  Pro forma adjusted fully distributed net income* increased 5.0% to $44.0 million, or $0.30 per share, from the first quarter of fiscal 2013.

 

·                  Supply Chain Services business segment pro forma revenue increased 9.9% to $146.2 million and pro forma Adjusted EBITDA increased 4.2% to $84.2 million, compared with the first quarter of fiscal 2013.

 

·                  Performance Services business segment pro forma revenue increased 10.4% to $53.1 million and pro forma Adjusted EBITDA rose 36.1% to $16.3 million, compared with the first quarter of fiscal 2013.

 

·                  Completed acquisition of contract management and data services company SYMMEDRx.

 

·                  On October 1, 2013, the company completed its IPO, issuing 32.4 million Class A shares of common stock at $27.00 per share. The IPO generated net proceeds of $821.7 million, of which $543.9 million was distributed to the company’s member owners and $277.8 million was retained by the company for working capital and general corporate purposes, including potential future acquisitions and development activities.

 

*  See “Use and Definition of Non-GAAP Measures” and related reconciliation to GAAP financial measures below for important information regarding non-GAAP financial measures. See “Reorganization and Initial Public Offering” for important information regarding pro forma results.

 

“Premier’s mission is to improve the health of communities by transforming care delivery in America,” said Susan DeVore, Premier, Inc. president and CEO.  “This is a very real, long-term

 



 

commitment. Our recent initial public offering provides us with additional capital to acquire, build and partner to develop the capabilities today that we believe will allow us to grow and deliver tomorrow’s solutions.

 

“Our performance in the first quarter of fiscal 2014, which was in line with management expectations, and our outlook for the full fiscal year as a whole, demonstrate the multiple avenues of potential growth available to Premier as we expand both our capabilities and our member and customer base,” DeVore said.

 

“Recent member additions include leading health systems that have indicated they will be working with Premier across our Supply Chain and Performance Services segments as they seek holistic solutions to the challenges they face,” DeVore continued. “We believe our expanding suite of solutions and enhanced technology platform have increased the potential for Premier’s future growth through the deepening and broadening relationships with our member healthcare providers, as we work together to address the formidable cost, efficiency, safety and population management issues facing this nation’s healthcare system.”

 

Results of operations for the first quarter of fiscal 2014

 

 

 

ACTUAL
PHSI (1)

 

PRO FORMA (2)
Premier, Inc.

 

Consolidated First-Quarter Financial Highlights

 

Three Months Ended September 30,

 

Three Months Ended September 30,

 

(in thousands, except per share data) (3)

 

2013

 

2012

 

% Change

 

2013

 

2012

 

% Change

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Supply Chain Services Segment

 

$

187,458

 

$

150,458

 

24.6

%

$

146,195

 

$

133,001

 

9.9

%

Performance Services Segment

 

53,118

 

48,108

 

10.4

%

53,118

 

48,108

 

10.4

%

Total net revenue

 

$

240,576

 

$

198,566

 

21.2

%

$

199,313

 

$

181,109

 

10.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Supply Chain Services Segment

 

$

125,480

 

$

98,267

 

27.7

%

$

84,217

 

$

80,810

 

4.2

%

Performance Services Segment

 

16,329

 

12,000

 

36.1

%

16,329

 

12,000

 

36.1

%

Segment-adjusted EBITDA

 

$

141,809

 

$

110,267

 

28.6

%

$

100,546

 

$

92,810

 

8.3

%

Corporate

 

(17,475

)

(15,578

)

12.2

%

(17,475

)

(15,578

)

12.2

%

Total adjusted EBITDA

 

$

124,334

 

$

94,689

 

31.3

%

$

83,071

 

$

77,232

 

7.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP pro forma adjusted fully distributed net income

 

 

 

 

 

 

 

$

43,983

 

$

41,882

 

5.0

%

Non-GAAP earnings per share on pro forma adjusted fully distributed net income - diluted

 

 

 

 

 

 

 

$

0.30

 

$

0.29

 

5.0

%

Weighted average fully distributed shares outstanding - diluted

 

 

 

 

 

 

 

145,009

 

144,983

 

 

 

 


(1) Premier Healthcare Solutions, Inc. and subsidiaries

(2) Reflects the impact of the Company’s reorganization and initial public offering

(3) See attached schedules for reconciliation of first-quarter 2014 and 2013 reported GAAP results to Non-GAAP pro forma results

 

On a pro forma basis, Premier generated net revenue of $199.3 million for the first quarter of fiscal 2014, an increase of $18.2 million, or 10.1%, from $181.1 million reported for the same period last year. The primary drivers of revenue growth were improved product revenue sales within the Supply Chain Services segment and increased SaaS (software as a service) informatics product subscriptions and advisory services within the Performance Services segment.

 

On a pro forma basis, the company generated non-GAAP adjusted fully distributed net income of $44.0 million, or $0.30 per diluted share, for the first quarter of fiscal 2014, compared with $41.9 million, or $0.29 per diluted share, for the first quarter of fiscal 2013. Pro forma Adjusted EBITDA was $83.1 million, an increase of 7.6% from first quarter a year earlier. Adjusted fully distributed net income and pro forma Adjusted EBITDA for the first quarter of fiscal 2014 add back strategic and financial restructuring expenses of $1.8 million and acquisition-related and

 

2



 

stock-based compensation expenses of $0.5 million. Adjusted fully distributed net income and Adjusted EBITDA for the year-earlier results add back $0.6 million in expenses related to strategic and financial restructuring costs. Adjusted fully distributed net income and Adjusted EBITDA for the first quarter of fiscal 2014 were positively impacted by revenue growth in both of the company’s business segments. This growth was partially offset by increases in selling, general and administrative services related both to the company’s reorganization and to increased headcount and employee-related expenses to support the growth of the company.

 

Cash provided by operating activities was $64.0 million in the first quarter of fiscal 2014, compared to $57.3 million for the same quarter last year. Operating cash flows increased primarily due to the increase in net income, but were partially offset by an increase in receivables and other current assets, as well as a decrease in accounts payable and accrued expenses.

 

Capital expenditures were $12.3 million in the first quarter of fiscal 2014, unchanged from the prior year. Other investing activities in the quarter primarily consisted of the $28.7 million acquisition of SYMMEDRx, a business with a track record of analyzing and reducing costs for health systems through the innovative use of data.

 

At September 30, 2013, the company’s cash, cash equivalents and marketable securities totaled $132.9 million, consisting of $75.4 million in cash and cash equivalents and $57.5 million in marketable securities with maturities ranging from three to 12 months. The company paid cash distributions to its limited partners in the first quarter of $208.3 million, attributable to earnings through June 30, 2013. In November 2013, the board approved an additional cash distribution of $78.0 million, of which $11.8 million has already been paid and the remainder will be paid later this month, to its limited partners attributable to earnings for the first quarter ended September, 30, 2013, calculated in a consistent manner with the company’s historical semi-annual cash distributions provided to member owners prior to the Reorganization and IPO. Total borrowings at September 30, 2013, which include notes payable and borrowings under the company’s line of credit, were $99.2 million. The company’s outstanding balance on its revolving line of credit was $60.0 million at September 30, 2013, which it repaid in October.

 

On a GAAP basis, Premier generated net revenue of $240.6 million for the quarter ended September 30, 2013, an increase of 21.2% from $198.6 million for the same period last year. The company generated net income of $112.7 million, up 32.5% from $85.1 million for the 2013 first quarter.

 

Segment results

 

Premier operates two business segments:

 

·                  Supply Chain Services includes one of the largest healthcare group purchasing organizations (GPO) in the United States, serving acute and alternate sites. The segment also includes the company’s specialty pharmacy and direct sourcing activities.

 

·                  Performance Services includes one of the nation’s largest informatics and advisory services businesses in the United States focused on healthcare providers. The Performance Services segment includes the company’s SaaS informatics products, technology-enabled performance improvement collaboratives, advisory services and insurance services.

 

3



 

Segment Results

 

Three Months Ended September 30,

 

Actual YoY

 

Pro forma YoY

 

(in thousands)

 

2013

 

2012

 

2013

 

2012

 

% Change

 

% Change

 

 

 

PHSI

 

Pro forma - Premier, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Supply Chain Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net administrative fees

 

$

143,576

 

$

117,489

 

$

102,313

 

$

100,032

 

22.2

%

2.3

%

Other services and support

 

134

 

39

 

134

 

39

 

243.6

%

243.6

%

Services

 

143,710

 

117,528

 

102,447

 

100,071

 

22.3

%

2.4

%

Products

 

43,748

 

32,930

 

43,748

 

32,930

 

32.9

%

32.9

%

Total Supply Chain Services

 

187,458

 

150,458

 

146,195

 

133,001

 

24.6

%

9.9

%

Performance Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

53,118

 

48,108

 

53,118

 

48,108

 

10.4

%

10.4

%

Total

 

$

240,576

 

$

198,566

 

$

199,313

 

$

181,109

 

21.2

%

10.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Supply Chain Services

 

$

125,480

 

$

98,267

 

$

84,217

 

$

80,810

 

27.7

%

4.2

%

Performance Services

 

16,329

 

12,000

 

16,329

 

12,000

 

36.1

%

36.1

%

Total segment Adjusted EBITDA

 

141,809

 

110,267

 

100,546

 

92,810

 

28.6

%

8.3

%

Corporate

 

(17,475

)

(15,578

)

(17,475

)

(15,578

)

12.2

%

12.2

%

Total

 

$

124,334

 

$

94,689

 

$

83,071

 

$

77,232

 

31.3

%

7.6

%

 

Supply Chain Services

 

For the fiscal first quarter ended September 30, 2013, the Supply Chain Services segment generated GAAP net revenue of $187.5 million, an increase of $37.0 million, or 24.6% from $150.5 million in the prior year. On a pro forma basis, Supply Chain Services segment revenue was $146.2 million, an increase of $13.2 million, or 9.9%, from $133.0 million in the prior year. Revenue growth was driven by increased net administrative fees in the GPO and further penetration of the direct sourcing and specialty pharmacy businesses.

 

On a pro forma basis, Supply Chain Services Adjusted EBITDA of $84.2 million for the fiscal first quarter increased $3.4 million, or 4.2%, from $80.8 million for the same period a year ago.

 

Performance Services

 

For the fiscal first quarter ended September 30, 2013, the Performance Services segment generated GAAP net revenue of $53.1 million, an increase of $5.0 million, or 10.4%, from $48.1 million for the same quarter last year.  The revenue growth is attributable primarily to new SaaS informatics products subscriptions and an increase in revenue from advisory services.

 

Performance Services Adjusted EBITDA was $16.3 million for the quarter, compared to $12.0 million last year, an increase of 36.1%.

 

Outlook and guidance

 

Premier believes it is well-positioned to help its members successfully address the cost, safety, efficiency and population health management issues facing the healthcare industry over the next several years. The company believes it enjoys a strong competitive position, a solid value proposition based on its large, integrated technology platform, and a long-standing collaborative relationship with major healthcare systems across the United States.

 

The guidance below is based on the following key assumptions: increasing use of Performance Services products and offerings, as well as stable growth in the Supply Chain segment through

 

4



 

the addition of acute and alternate-site GPO members and deeper penetration of existing members’ supply spend. Based on these assumptions, year-to-date results and the company’s current outlook, Premier has established the following financial guidance for the full fiscal year ending June 30, 2014:

 

Fiscal 2014 Financial Guidance

 

Premier, Inc. introduces full-year fiscal 2014 financial guidance, as follows:

 

(in millions, except per share data)

 

FY 2014

 

Pro Forma Net Revenue:

 

 

 

Supply Chain Services segment

 

$614.0 - $631.0

 

Performance Services segment

 

231.0 - 238.0

 

Total Pro Forma Net Revenue

 

845.0 - 869.0

 

 

 

 

 

Non-GAAP pro forma adjusted EBITDA

 

$335.0 - $355.0

 

 

 

 

 

Non-GAAP pro forma adjusted fully distributed EPS

 

$1.20 - $1.29

 

 

The statements in this “Outlook and Guidance” discussion are “forward-looking statements.” For additional information regarding the use and limitations of such statements, see “Forward-Looking Statements” below.

 

Conference call

 

Premier management will host a conference call and live audio webcast on Tuesday, November 12, 2013, at 8 a.m. ET, to discuss the company’s financial results. The conference call can be accessed through a link provided on the investor relations page on Premier’s website at investors.premierinc.com. Those wishing to participate in the call may do so by dialing 855.601.0048 (international callers should dial 702.495.1234) and providing the operator with conference ID number 93595004. Please call approximately 15 minutes before the start of the call to ensure you are connected. A replay of the conference call will be available beginning approximately two hours after the completion of the conference call through November 26, 2013, by dialing 800.585.8367 (702.495.1234 for international callers), and using the conference ID number above. The webcast will also be archived on the investor relations page on Premier’s website.

 

About Premier, Inc., Malcolm Baldrige National Quality Award recipient

 

Premier, Inc. (NASDAQ:PINC) is a leading healthcare improvement company, uniting an alliance of more than 2,900 U.S. hospitals and nearly 100,000 other providers to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and advisory and other services, Premier enables better care and outcomes at a lower cost. Premier plays a critical role in the rapidly evolving healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide. Headquartered in Charlotte, N.C., Premier is passionate about transforming American healthcare. Please visit Premier’s news and investor sites on www.premierinc.com; as well as Twitter, Facebook, LinkedIn, YouTube, Instagram, Foursquare and Premier’s blog for more information about the company.

 

5



 

Reorganization and initial public offering

 

On October 1, 2013, Premier completed its IPO by issuing 32,374,751 shares of its Class A common stock, at a price of $27.00 per share, which included 4,222,793 shares sold pursuant to the option granted to the underwriters by Premier, which was exercised in full prior to the completion of the IPO, raising net proceeds of approximately $821.7 million, after underwriting discounts and commissions but before expenses. In connection with the IPO, Premier completed the reorganization of the company on October 1, 2013, issuing 112.6 million shares of Class B common stock representing 77.7% of the common stock outstanding, and corresponding Class B units in Premier Healthcare Alliance, L.P. to its 181 member owners.

 

The company’s historical consolidated operating results do not reflect the reorganization, the IPO and contemplated use of net proceeds from the IPO. Therefore, in addition to presenting the historical actual results, the company presents and discusses pro forma results, which reflect the impact of the company’s reorganization and IPO and the contemplated use of net proceeds from the IPO, to provide a more comparable indication of future expectations.

 

The key pro forma adjustments include:

 

·                  The reorganization, which included the formation of a C-Corporation and the sale of 22.3% of the member’s partnership interests to the public through the issuance of approximately 32.4 million shares of Premier Class A common stock, with the member owners retaining their ownership interest in the form of 112.6 million shares of Premier Class B common stock.

 

·                  Payments to each member owner of revenue share from Premier equal to 30% of all gross administrative fees collected.

 

·                  Payments due to member owners pursuant to the tax receivable agreement equal to 85% of the amount of cash savings, if any, in income and franchise taxes, that Premier realizes.

 

·                  The further adjustments set forth in the notes to the pro forma financial statements provided below.

 

Further details of the reorganization and pro forma adjustments are in the company’s IPO prospectus, dated September 25, 2013, as filed with the Securities and Exchange Commission (SEC), and in the company’s Form 10-Q first-quarter report, to be filed with the SEC on or about November 12, 2013. The prospectus is accessible on the SEC’s website at www.sec.gov and in the investor relations section of the company’s website at investors.premierinc.com.

 

Use and definition of non-GAAP measures

 

Premier, Inc. uses Adjusted EBITDA, Segment Adjusted EBITDA and adjusted fully distributed net income to facilitate a comparison of the company’s operating performance on a consistent basis from period to period that, when viewed in combination with its results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting the company’s business than GAAP measures alone. The company believes Adjusted EBITDA and Segment Adjusted EBITDA assist its board of directors, management and investors in comparing the company’s operating performance on a consistent basis from period to period because they remove the impact of the company’s asset base (primarily depreciation and amortization) and items outside the control of management (taxes), as well as other non-cash (impairment of intangible assets and purchase accounting adjustments) and non-recurring items, from operations.

 

6



 

In addition, adjusted fully distributed net income eliminates the variability of noncontrolling interest as a result of member owner exchanges of Class B common stock and corresponding Class B units into shares of Class A common stock (which exchanges are a member owner’s cumulative right, but not obligation, beginning on October 31, 2014, and each year thereafter, and are limited to one-seventh of the member owner’s initial allocation of Class B common units).  Adjusted fully distributed net income is defined as net income attributable to PHSI (i) excluding income tax expense, (ii) excluding the effect of non-recurring and non-cash items, (iii) assuming the exchange of all the Class B common units into shares of Class A common stock, which results in the elimination of noncontrolling interest in Premier LP, and (iv) reflecting an adjustment for income tax expense on pro forma fully distributed net income before income taxes at the company’s estimated effective income tax rate.

 

EBITDA is defined as net income before interest and investment income, net, income tax expense, depreciation and amortization and amortization of purchased intangible assets. Adjusted EBITDA is defined as EBITDA before merger and acquisition related expenses and non-recurring, non-cash or non-operating items, and including equity in net income of unconsolidated affiliates. Non-recurring items are expenses that have not been incurred within the prior two years and are not expected to recur within the next two years. Such expenses include certain strategic and financial restructuring expenses. Non-operating items include gain or loss on disposal of assets. Segment Adjusted EBITDA is defined as the segment’s net revenue less operating expenses directly attributable to the segment, excluding depreciation and amortization, amortization of purchased intangible assets, merger and acquisition related expenses and non-recurring or non-cash items, and including equity in net income of unconsolidated affiliates. Operating expenses directly attributable to the segment include expenses associated with sales and marketing, general and administrative and product development activities specific to the operation of each segment. General and administrative corporate expenses that are not specific to a particular segment are not included in the calculation of Segment Adjusted EBITDA. Adjusted EBITDA is a supplemental financial measure used by the company and by external users of the company’s financial statements.

 

Management considers Adjusted EBITDA an indicator of the operational strength and performance of the company’s business. Adjusted EBITDA allows management to assess performance without regard to financing methods and capital structure and without the impact of other matters that management does not consider indicative of the operating performance of the business. Segment Adjusted EBITDA is the primary earnings measure used by management to evaluate the performance of the company’s business segments.

 

Forward-looking statements

 

Statements made in this release that are not statements of historical or current facts, such as those under the heading “Outlook and Guidance,” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Premier to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. Accordingly, readers should not place undue reliance on any forward looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in the conditional or future tenses or that include terms such as “believes,” “belief,” “expects,” “estimates,” “intends,” “anticipates” or “plans” to be uncertain and forward-looking.  Forward-looking statements may include comments as to Premier’s beliefs

 

7



 

and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside Premier’s control. More information on potential factors that could affect Premier’s financial results is included from time to time in the “Forward Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Premier’s periodic and current filings with the SEC, as well as those discussed under the “Risk Factors” and “Forward Looking Statements” section of Premier’s IPO Prospectus, dated September 25, 2013, filed with the SEC and available on Premier’s website at investors.premierinc.com. Forward looking statements speak only as of the date they are made. Premier undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after that date.

 

(Tables follow)

 

8



 

Consolidated Statements of Income

(Unaudited)

(In thousands, except pershare data)

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

PHSI

 

Pro forma - Premier, Inc.

 

Net revenue:

 

 

 

 

 

 

 

 

 

Net administrative fees

 

$

143,576

 

$

117,489

 

$

102,313

 

$

100,032

(a)

Other services and support

 

53,252

 

48,147

 

53,252

 

48,147

 

Services

 

196,828

 

165,636

 

155,565

 

148,179

 

Products

 

43,748

 

32,930

 

43,748

 

32,930

 

 

 

 240,576

 

198,566

 

199,313

 

181,109

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Services

 

27,488

 

24,080

 

27,488

 

24,080

 

Products

 

40,038

 

30,152

 

40,038

 

30,152

 

 

 

 67,526

 

54,232

 

67,526

 

54,232

 

Gross profit

 

173,050

 

144,334

 

131,787

 

126,877

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

62,318

 

55,732

 

62,643

 

55,732

(b)

Research and development

 

852

 

3,638

 

852

 

3,638

 

Amortization of purchased intangible assets

 

601

 

385

 

601

 

385

 

 

 

63,771

 

59,755

 

64,096

 

59,755

 

Operating income

 

109,279

 

84,579

 

67,691

 

67,122

 

Equity in net income of unconsolidated affiliates

 

4,114

 

2,781

 

4,114

 

2,781

 

Interest and investment income, net

 

220

 

224

 

220

 

224

 

Gain on disposal of assets

 

4

 

 

4

 

 

Other income, net

 

4,338

 

3,005

 

4,338

 

3,005

 

Income before income taxes

 

113,617

 

87,584

 

72,029

 

70,127

 

Income tax expense

 

891

 

2,517

 

6,761

 

8,144

(b)(c)

Net income

 

112,726

 

85,067

 

65,268

 

61,983

 

Add: Net loss attributable to noncontrolling interest in S2S Global

 

210

 

305

 

210

 

305

 

Less: Net income attributable to noncontrolling interest in Premier LP

 

(113,214

)

(83,116

)

(51,030

)

(48,398

)(d)

Net income attributable to noncontrolling interest

 

(113,004

)

(82,811

)

(50,820

)

(48,093

)

Net (loss) income attributable to PHSI/Premier, Inc. shareholders

 

$

(278

)

$

2,256

 

$

14,448

 

$

13,890

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

5,627

 

6,090

 

32,375

 

32,375

 

Diluted

 

5,627

 

6,090

 

32,401

 

32,375

 

(Loss) earnings per share attributable to PHSI/Premier, Inc.:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.05

)

$

0.37

 

$

0.45

 

$

0.43

 

Diluted

 

$

(0.05

)

$

0.37

 

$

0.45

 

$

0.43

 

 


(a) - Reflects the payment of revenue share to each member owner equal to 30% of all gross administrative fees collected, resulting in a decrease in net administrative fees revenue of $41.3 million and $17.5 million, respectively.

(b) - Reflects stock compensation expense of $325 with an associated income tax benefit of $127.

(c) - Reflects income taxes on additional allocable share of taxable income at an estimated effective income tax rate of 39%, resulting in additional income taxes of $6.0 million and $5.6 million, respectively.

(d) - Reflects a reduction in the noncontrolling interest attributable to the limited partners from 99% to approximately 78%, and the impact of adjustments (a) and (b), resulting in a decrease in noncontrolling interests of $62.2 million and $34.7 million, respectively.

 

9



 

Premier Healthcare Solutions, Inc.

Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

September 30, 2013

 

June 30, 2013

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

75,351

 

$

198,296

 

Marketable securities

 

57,500

 

57,323

 

Accounts receivable

 

61,968

 

62,162

 

Inventories

 

13,029

 

12,741

 

Prepaid expenses and other current assets

 

34,576

 

25,466

 

Due from related party

 

788

 

1,650

 

Deferred tax assets

 

7,691

 

8,403

 

Total current assets

 

250,903

 

366,041

 

Investments

 

10,773

 

6,676

 

Property and equipment

 

119,538

 

115,587

 

Restricted cash

 

5,000

 

5,000

 

Deferred tax assets

 

13,328

 

15,077

 

Goodwill

 

84,626

 

61,410

 

Intangible assets

 

9,262

 

4,292

 

Other assets

 

28,410

 

24,833

 

Total assets

 

$

521,840

 

$

598,916

 

 

 

 

 

 

 

Liabilities, redeemable limited partners’ capital and stockholders’ equity

 

 

 

 

 

Accounts payable

 

$

16,899

 

$

21,788

 

Accrued expenses

 

25,486

 

28,883

 

Revenue share obligations

 

5,085

 

10,532

 

Accrued compensation and benefits

 

22,374

 

51,359

 

Deferred revenue

 

17,492

 

18,880

 

Current portion of notes payable

 

7,438

 

4,441

 

Current portion of line of credit

 

60,000

 

7,708

 

Other current liabilities

 

2,402

 

1,557

 

Total current liabilities

 

157,176

 

145,148

 

Notes payable, less current portion

 

20,293

 

22,468

 

Lines of credit, less current portion

 

11,508

 

 

Deferred compensation plan obligations

 

27,653

 

24,081

 

Deferred rent

 

15,841

 

15,779

 

Other long-term liabilities

 

5,387

 

6,037

 

Total liabilities

 

237,858

 

213,513

 

 

 

 

 

 

 

Redeemable limited partners’ capital

 

207,066

 

307,635

 

Stockholders’ equity:

 

 

 

 

 

Series A Preferred stock, par value $0.01, 400,000 shares authorized; no shares issued and outstanding

 

 

 

Common stock, par value $0.01, 12,250,000 shares authorized; 5,626,784 and 5,653,390 shares issued and outstanding at September 30, 2013 and June 30, 2013, respectively

 

56

 

57

 

Additional paid-in-capital

 

28,503

 

28,866

 

Common stock subscribed, 0 and 23,266 shares at September 30, 2013 and June 30, 2013, respectively

 

 

300

 

Subscriptions receivable

 

 

(300

)

Retained earnings

 

50,321

 

50,599

 

Noncontrolling interest

 

(1,964

)

(1,754

)

Total stockholders’ equity

 

76,916

 

77,768

 

Total liabilities, redeemable limited partners’ capital and stockholders’ equity

 

$

521,840

 

$

598,916

 

 

10



Premier, Inc.

Pro Forma Consolidated Balance Sheet

September 30, 2013

(In thousands, except share data)

 

 

 

PHSI

 

Pro Forma 
Adjustments

 

Premier, Inc. 
Pro Forma

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

75,351

 

$

277,814

 

$

353,165

(a)

Marketable securities

 

57,500

 

 

57,500

 

Accounts receivable

 

61,968

 

 

61,968

 

Inventories

 

13,029

 

 

13,029

 

Prepaid expenses and other current assets

 

34,576

 

(5,428

)

29,148

(b)(g)

Due from related party

 

788

 

 

788

 

Deferred tax assets

 

7,691

 

 

7,691

 

Total current assets

 

250,903

 

272,386

 

523,289

 

Investments

 

10,773

 

 

10,773

 

Property and equipment

 

119,538

 

 

119,538

 

Restricted cash

 

5,000

 

 

5,000

 

Deferred tax assets

 

13,328

 

294,823

 

308,151

(c)

Goodwill

 

84,626

 

 

84,626

 

Intangible assets

 

9,262

 

 

9,262

 

Other assets

 

28,410

 

 

28,410

 

Total assets

 

$

521,840

 

$

567,209

 

$

1,089,049

 

 

 

 

 

 

 

 

 

Liabilities, redeemable limited partners’ capital and stockholders’ equity

 

 

 

 

 

 

 

Accounts payable

 

$

16,899

 

$

 

$

16,899

 

Accrued expenses

 

25,486

 

 

25,486

 

Revenue share obligations

 

5,085

 

 

5,085

 

Accrued compensation and benefits

 

22,374

 

 

22,374

 

Deferred revenue

 

17,492

 

 

17,492

 

Current portion of notes payable

 

7,438

 

 

7,438

 

Current portion of line of credit

 

60,000

 

 

60,000

 

Payable pursuant to tax receivable agreement

 

 

10,142

 

10,142

(c)

Income tax payable

 

 

8,425

 

8,425

(d)

Other current liabilities

 

2,402

 

 

2,402

 

Total current liabilities

 

157,176

 

18,567

 

175,743

 

Notes payable, less current portion

 

20,293

 

 

20,293

 

Lines of credit, less current portion

 

11,508

 

 

11,508

 

Deferred compensation plan obligations

 

27,653

 

 

27,653

 

Deferred rent

 

15,841

 

 

15,841

 

Payable pursuant to tax receivable agreement, less current portion

 

 

194,651

 

194,651

(c)

Other long-term liabilities

 

5,387

 

 

5,387

 

Total liabilities

 

237,858

 

213,218

 

451,076

 

 

 

 

 

 

 

 

 

Redeemable limited partners’ capital

 

207,066

 

212,595

 

419,661

(e)

Stockholders’ equity:

 

 

 

 

 

 

 

Series A Preferred stock, par value $0.01, 400,000 shares authorized; no shares issued and outstanding

 

 

 

 

Common stock, par value $0.01, 12,250,000 shares authorized; 5,626,784 and 5,653,390 shares issued and outstanding at September 30, 2013 and June 30, 2013, respectively

 

56

 

(56

)

(f)

Class A common stock, par value $0.01, 500,000,000 shares authorized; 32,374,751 shares issued and outstanding on a pro forma basis

 

 

324

 

324

(f)

Class B common stock, par value $0.000001, 600,000,000 shares authorized; 112,607,832 shares issued and outstanding on a pro forma basis

 

 

 

(f)

Additional paid-in-capital

 

28,503

 

149,748

 

178,251

(h)

Retained earnings

 

50,321

 

(8,623

)

41,698

(d)(g)

Noncontrolling interest

 

(1,964

)

 

(1,964

)

Accumulated other comprehensive income

 

 

3

 

3

(e)

Total stockholders’ equity

 

76,916

 

141,396

 

218,312

 

Total liabilities, redeemable limited partners’ capital and stockholders’ equity

 

$

521,840

 

$

567,209

 

$

1,089,049

 

 


(a) - Reflects the effect of the receipt of net IPO proceeds of $821.7 million, less the purchase of units from the member owners of $543.9 million.

(b) - Reflects the reduction of prepaid expenses related to the IPO, with an offset to the IPO proceeds in additional paid-in capital.

(c) - Reflects the effect of the adjustments to the tax basis of the assets of Premier LP and the tax receivable agreement with the member owners.

(d) - Reflects taxes payable as a result of the purchase of Class B common units of Premier LP from PHSI.

(e) - Reflects the increase in the noncontrolling interest held by the limited Partners in Premier LP as a result of the IPO, less the reduction in the noncontrolling interest attributable to the limited partners from 99% to approximately 78%.

(f) - Reflects the exchange of the existing PHSI shares of common stock, common stock subscribed and related subscriptions receivable for Class B common units of Premier LP, the issuance of Class B common stock in connection with the Reorganization and the issuance of Class A common stock in connection with the IPO.

(g) - Reflects adjustments related to stock-based compensation.

(h) - Reflects the adjustments to additional paid-in capital in (a), (b), (c), (e), (f) and (g) above.

 

11



 

Premier Healthcare Solutions, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net income

 

$

112,726

 

$

85,067

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

8,957

 

6,775

 

Equity in net income of unconsolidated affiliates

 

(4,114

)

(2,781

)

Deferred taxes

 

2,461

 

1,059

 

Amortization of discounts on investments, net

 

26

 

5

 

Gain on disposal of assets

 

(4

)

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable, inventories, prepaid expenses and other current assets

 

(11,277

)

(1,481

)

Other assets

 

(10

)

(3,480

)

Accounts payable, accrued expenses and other current liabilities

 

(44,205

)

(33,208

)

Long-term liabilities

 

(590

)

5,380

 

Net cash provided by operating activities

 

63,970

 

57,336

 

Investing activities

 

 

 

 

 

Purchase of marketable securities

 

(19,151

)

(6,522

)

Proceeds from sale of marketable securities

 

18,974

 

46,977

 

Acquisition of SYMMEDRx, net of cash acquired

 

(28,740

)

 

Distributions received on equity investment

 

 

3,235

 

Purchases of property and equipment

 

(12,299

)

(12,255

)

Net cash (used in) provided by investing activities

 

(41,216

)

31,435

 

Financing activities

 

 

 

 

 

Payments made on notes payable

 

(1,475

)

(2,200

)

Proceeds from lines of credit

 

63,800

 

2,070

 

Proceeds from issuance of common stock

 

300

 

 

Distributions to limited partners of Premier LP

 

(208,324

)

(182,613

)

Net cash used in financing activities

 

(145,699

)

(182,743

)

Net decrease in cash and cash equivalents

 

(122,945

)

(93,972

)

Cash and cash equivalents at beginning of year

 

198,296

 

140,822

 

Cash and cash equivalents at end of period

 

$

75,351

 

$

46,850

 

 

 

 

 

 

 

Supplemental schedule of noncash investing and financing activities:

 

 

 

 

 

Issuance of limited partnership interest for notes receivable

 

$

7,860

 

$

2,120

 

Payable to member owners incurred upon repurchase of ownership interest

 

$

1,652

 

$

2,315

 

Reduction in redeemable limited partners’ capital to reduce outstanding receivable

 

$

28,009

 

$

101

 

Distributions utilized to reduce subscriptions, notes, interest and accounts receivable from member owners

 

$

6,186

 

$

3,677

 

 

12



 

Supplemental Financial Information

(Unaudited)

(In thousands)

 

Reconciliation of Adjusted EBITDA to Net Income and Operating Income:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

PHSI

 

Pro forma - Premier, Inc.

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

112,726

 

$

85,067

 

$

65,268

 

$

61,983

 

Interest and investment income, net

 

(220

)

(224

)

(220

)

(224

)

Income tax expense

 

891

 

2,517

 

6,761

 

8,144

 

Depreciation and amortization

 

8,356

 

6,390

 

8,356

 

6,390

 

Amortization of purchased intangible assets

 

601

 

385

 

601

 

385

 

EBITDA

 

122,354

 

94,135

 

80,766

 

76,678

 

Stock-based compensation

 

 

 

325

 

 

Acquisition related expenses

 

142

 

 

142

 

 

Strategic and financial restructuring expenses

 

1,842

 

554

 

1,842

 

554

 

Gain on disposal of assets

 

(4

)

 

(4

)

 

Adjusted EBITDA

 

$

124,334

 

$

94,689

 

$

83,071

 

$

77,232

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

124,334

 

$

94,689

 

$

83,071

 

$

77,232

 

Depreciation and amortization

 

(8,356

)

(6,390

)

(8,356

)

(6,390

)

Amortization of purchased intangible assets

 

(601

)

(385

)

(601

)

(385

)

Stock-based compensation

 

 

 

(325

)

 

Acquisition related expenses

 

(142

)

 

(142

)

 

Strategic and financial restructuring expenses

 

(1,842

)

(554

)

(1,842

)

(554

)

Equity in net income of unconsolidated affiliates

 

(4,114

)

(2,781

)

(4,114

)

(2,781

)

 

 

109,279

 

84,579

 

67,691

 

67,122

 

Stock-based compensation in Premier, Inc.

 

 

 

325

 

 

Pro forma adjustment for revenue share post-IPO

 

 

 

41,263

 

17,457

 

Operating income

 

$

109,279

 

$

84,579

 

$

109,279

 

$

84,579

 

 

13



 

Supplemental Financial Information

(Unaudited)

(In thousands)

 

Reconciliation of Non-GAAP Pro Forma Adjusted Fully Distributed Net Income:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

Pro forma - Premier, Inc.

 

Pro Forma Adjusted Fully Distributed Net Income:

 

 

 

 

 

Net income attributable to Premier, Inc. shareholders

 

$

14,448

 

$

13,890

 

Income tax expense

 

6,761

 

8,144

 

Stock-based compensation

 

325

 

 

Acquisition related expenses

 

142

 

 

Strategic and financial restructuring expenses

 

1,842

 

554

 

Net income attributable to noncontrolling interest in Premier LP

 

51,030

 

48,398

 

Pro forma adjusted fully distributed income before income taxes

 

74,548

 

70,986

 

Income tax expense on fully distributed income before income taxes

 

30,565

 

29,104

 

Pro forma adjusted fully distributed net income

 

$

43,983

 

$

41,882

 

 

 

 

 

 

 

Weighted average fully distributed shares outstanding:

 

 

 

 

 

Basic

 

144,983

 

144,983

 

Diluted

 

145,009

 

144,983

 

 

 

 

 

 

 

Non-GAAP earnings per share on pro forma adjusted fully distributed net income:

 

 

 

 

 

Basic

 

$

0.30

 

$

0.29

 

Diluted

 

$

0.30

 

$

0.29

 

 

# # #

 

14