Exhibit 99.1
Per-Se Technologies Reports Third Quarter 2006 Financial Results
ALPHARETTA, Ga.--(BUSINESS WIRE)--Nov. 6, 2006--Per-Se
Technologies, Inc. (Nasdaq: PSTI), the leader in Connective Healthcare
solutions that help physicians, pharmacies, hospitals and healthcare
organizations realize their financial goals, today reported its
financial results for the three and nine-month periods ended September
30, 2006. The financial results of the NDCHealth Corporation
businesses acquired on January 6, 2006, are included in the Company's
current year results.
Financial Highlights
The following highlights include non-GAAP measures that are
reconciled to their most directly comparable GAAP measures later in
this press release:
-- Revenue increased 58.4% to $148.9 million from $94.0 million a
year ago, driven primarily by the addition of acquired
businesses.
-- Adjusted operating income more than doubled to $24.4 million,
or 16.4% of revenue, from $11.0 million, or 11.7% of revenue,
a year ago.
-- Adjusted earnings per share were $0.22, compared to guidance
of $0.18 to $0.21.
-- Adjusted cash flow from continuing operations increased 150%
to $89.3 million in the first nine months of 2006, compared to
cash flow from continuing operations of $35.5 million in the
same period last year.
On a GAAP basis, the Company reported revenue of $148.9 million,
operating income of $21.4 million, or 14.3% of revenue, and income
from continuing operations of $7.0 million, or $0.16 per diluted
share, for the three months ended September 30, 2006. On a non-GAAP
basis, excluding non-cash stock-based compensation expense of
approximately $1.8 million and NDCHealth transition and
integration-related expenses of approximately $1.2 million, the
Company reported third quarter adjusted operating income of $24.4
million, or 16.4% of revenue, and adjusted income from continuing
operations of $9.4 million, or $0.22 per diluted share.
For the nine months ended September 30, 2006, on a GAAP basis, the
Company reported revenue of $447.8 million, operating income of $42.9
million, or 9.6% of revenue, and income from continuing operations of
$6.3 million, or $0.14 per share. On a non-GAAP basis, excluding
non-cash stock-based compensation expense, NDCHealth transition and
integration-related expenses, write-off of in-process research and
development, and the non-cash tax benefit from the partial release of
the tax asset valuation allowance, the Company had adjusted operating
income of $68.6 million, or 15.3% of revenue, and adjusted income from
continuing operations of $26.1 million, or $0.60 per diluted share.
The adjusted income from continuing operations for the three and
nine-month periods ended September 30, 2006, included an income tax
provision at a rate of approximately 41%. The cash paying income tax
rate for 2006 is expected to be approximately 5% to 6%.
For comparison purposes, in the three months ended September 30,
2005, the Company reported revenue of $94.0 million, operating income
of $11.0 million, or 11.7% of revenue, and income from continuing
operations of $9.8 million, or $0.29 per diluted share, and in the
nine months ended September 30, 2005, the Company reported revenue of
$279.3 million, operating income of $30.7 million, or 11.0% of
revenue, and income from continuing operations of $26.8 million, or
$0.81 per diluted share.
The three and nine-month periods ended September 30, 2005,
included an income tax provision at a cash paying tax rate of
approximately 2%.
Cash flow from continuing operations for the nine-month period
ended September 30, 2006, was $60.9 million. During this nine-month
period, the Company used approximately $28.4 million in operating cash
for NDCHealth transition and integration-related activities. Excluding
these transition and integration costs, adjusted cash flow from
continuing operations was $89.3 million for the nine months ended
September 30, 2006, compared to $35.5 million in the same period last
year.
"All three business divisions continued to execute well during the
third quarter, which contributed to strong cash flow and margin
improvement in our third quarter and year-to-date results," said
Philip M. Pead, chairman, president and chief executive officer of
Per-Se Technologies.
Business Segment Performance
The following business segment review references adjusted
operating income for the third quarter of 2006, which excludes
non-cash stock-based compensation expense.
Physician Solutions Division
The Physician Solutions division reported revenue of $77.8 million
and adjusted operating income of $12.6 million, or 16.2% of revenue,
for the third quarter of 2006, compared to revenue and operating
income of $69.8 million and $8.4 million, or 12.0% of revenue,
respectively, for the same quarter of 2005.
Revenue growth in the division was attributable to the acquired
NDCHealth software business. Revenue in the physician outsourcing
business was flat year-over-year. Margin expansion in the division
year-over-year was due to the NDCHealth business as well as cost
structure improvements, primarily in the division's ASP-based software
product.
Previously, the Company had expected third quarter revenue in the
physician outsourcing business to be impacted by the timing of
Medicare reimbursement payments. The federal government had announced
that they would hold Medicare reimbursement payments that should be
funded during the last nine days of September until October as
mandated by the Deficit Reduction Act of 2005. The Company had
anticipated the negative revenue impact of these actions would be
approximately $1.5 million, or approximately $0.02 in diluted earnings
per share, in the third quarter 2006 results with a corresponding
positive impact in the fourth quarter 2006 results. However, the
actual revenue impact in the third quarter was approximately $0.4
million, or approximately $0.00 per diluted share. As a result, third
quarter results were higher than expected by approximately $1.1
million, or approximately $0.02 per diluted share. This revenue and
income was previously expected to be recognized in the fourth quarter
of 2006.
This division's outsourced receivables management business had net
new business sold in the third quarter of 2006 of approximately $9
million, which compares to net new business sold of approximately $2
million in the same quarter a year ago. Total net new business sold
through September 30, 2006, was approximately $18 million. Net backlog
for the division at September 30, 2006, was approximately $16 million
compared to $12 million at June 30, 2006, and $7 million at September
30, 2005.
Hospital Solutions Division
The Hospital Solutions division reported revenue of $44.1 million
and adjusted operating income of $12.1 million, or 27.5% of revenue,
for the third quarter of 2006. This compares to revenue of $27.9
million and operating income of $6.1 million, or 22.0% of revenue, in
the same quarter of 2005. Year-over-year revenue growth and margin
expansion in the division is due to the acquisition of NDCHealth.
New business sold in the Hospital Solutions division was
approximately $8 million in the third quarter of 2006, compared to new
business sold of approximately $4 million in the same quarter a year
ago. Total new business sold year to date through September 30, 2006,
was approximately $24 million.
Pharmacy Solutions Division
The Pharmacy Solutions division reported revenue of $31.0 million
and adjusted operating income of $5.2 million, or 16.8% of revenue,
for the third quarter of 2006. Pharmacy Solutions' new business sold
in the third quarter was approximately $7 million, and approximately
$25 million year to date through September 30, 2006. Margins in the
division declined on a sequential basis as compared to the second
quarter of 2006. Sequential margin improvement in the division's
network services business, which continues to benefit from higher
transaction volume and new product introductions, was offset by a
slight decline in revenue in the division's system business due to the
timing of certain implementations of its high volume MailRx product.
The Company will not host an investor conference call to discuss
its financial and operating results.
Per-Se to be Acquired by McKesson Corporation
Per-Se separately announced that it has signed a merger agreement
with McKesson Corporation (NYSE: MCK) pursuant to which McKesson will
acquire all of the outstanding shares of Per-Se for $28 per share in
cash. McKesson will also assume Per-Se's outstanding debt. In total,
the transaction is valued at approximately $1.8 billion. The
transaction is expected to be completed in the first quarter of 2007,
and is subject to customary conditions, including regulatory and
shareholder approval.
Additional Information
In connection with the proposed merger and required stockholder
approval, Per-Se Technologies, Inc. will file a proxy statement with
the U.S. Securities and Exchange Commission (SEC). INVESTORS AND
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER
RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT PER-SE AND THE MERGER. The final
proxy statement will be mailed to the stockholders of Per-Se.
Investors and security holders may obtain free copies of these
documents (when they are available) and other documents filed with the
SEC at the SEC's web site at www.sec.gov. In addition, the documents
filed by Per-Se with the SEC may be obtained free of charge by
contacting Per-Se Technologies, Inc., Attn: Investor Relations and
Corporate Communications, 1145 Sanctuary Parkway, Suite 200,
Alpharetta, Georgia 30004, Telephone: 770-237-7539. Per-Se's filings
with the SEC are also available from Per-Se's website (www.per-se.com)
under the tab "Investor Relations" through the "SEC Filings" link.
Participants in This Transaction
Per-Se Technologies and its directors, executive officers, and
other members of management may be deemed participants in the
solicitation of proxies from stockholders in connection with this
transaction. Information about the directors and executive officers of
Per-Se Technologies and information about other persons who may be
deemed participants in this transaction will be included in the proxy
statement. Information regarding Per-Se's directors and executive
officers is available in Per-Se's proxy statement for its 2006 annual
meeting of stockholders, which was filed with the SEC on April 19,
2006. Additional information regarding the interests of such potential
participants will be included in the proxy statement and other
relevant documents filed with the SEC when they become available.
About Per-Se Technologies
Per-Se Technologies is the leader in Connective Healthcare,
providing solutions that enable physicians, pharmacies and hospitals
to achieve their income potential by streamlining and simplifying the
complex administrative burden of providing healthcare. Per-Se's
Connective Healthcare solutions help reduce administrative expenses,
increase revenue and accelerate the movement of funds to benefit
providers, payers and patients. More information is available at
www.per-se.com.
Safe Harbor Statement
This Press Release contains statements that constitute
forward-looking statements within the meaning of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended by the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements contained in this Press Release include the intent, belief
or current expectations of the Company and members of its management
team with respect to the Company's future business operations as well
as the assumptions upon which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are
not guarantees of future performance, and involve risks and
uncertainties, and that actual results may differ materially from
those contemplated by such forward-looking statements. Important
factors currently known to management that could cause actual results
to differ materially from those contemplated by the forward-looking
statements in this Press Release include, but are not limited to: the
failure to obtain appropriate approvals for, or the failure to
otherwise complete, the transaction with McKesson, failure to realize
improvements in performance, efficiency and profitability; failure to
complete anticipated sales under negotiations; failure to successfully
implement sales backlog; lack of revenue growth; client losses;
technical issues in processing claims through the Company's
clearinghouses; failure to gain integration synergies from the
NDCHealth acquisition; any benefit from an additional release of the
tax valuation allowance; outcome of pending legal matters; and adverse
developments with respect to the operation or performance of the
Company's business units or the market price of its common stock.
Additional factors that could cause actual results to differ
materially from those contemplated within this Press Release can also
be found in the Company's Risk Factor disclosures in its Form 10-K for
the year ended December 31, 2005 and its Form 10-Q for the period
ended June 30, 2006. The Company disclaims any responsibility to
update any forward-looking statements.
PER-SE TECHNOLOGIES, INC.
CONDENSED SEGMENT REPORTING
(unaudited) ($ in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenue
Physician Solutions $77,835 $69,805 $235,344 $206,063
Hospital Solutions 44,083 27,860 132,173 84,032
Pharmacy Solutions 31,015 n/a 92,482 n/a
Eliminations (4,062) (3,659) (12,214) (10,759)
--------- --------- --------- ---------
Consolidated $148,871 $94,006 $447,785 $279,336
========= ========= ========= =========
Adjusted Operating Income (a
non-GAAP measure)(a)
Physician Solutions $12,614 $8,375 $35,343 $24,430
Hospital Solutions 12,144 6,140 35,068 17,830
Pharmacy Solutions 5,207 n/a 16,302 n/a
Corporate (5,558) (3,516) (18,064) (11,552)
--------- --------- --------- ---------
Consolidated $24,407 $10,999 $68,649 $30,708
========= ========= ========= =========
(a) Operating income for the third quarter and nine months of 2006 is
adjusted to exclude NDCHealth integration and transition-related
expenses, the write-off of in-process research & development, and
stock-based compensation expense. See the reconciliation of adjusted
operating income to GAAP operating income by business segment
provided in this release for further information.
PER-SE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) ($ in thousands)
September 30, 2006 December 31, 2005
------------------ ------------------
Assets
Cash and cash equivalents $52,453 $61,161
Accounts receivable, net 96,768 54,397
Other current assets 20,545 6,559
Property and equipment, net 40,726 16,843
Goodwill 380,656 38,199
Other intangible assets, net 298,496 21,946
Deferred income taxes, net 33,658 30,294
Other 18,036 10,124
------------------ ------------------
$941,338 $239,523
================== ==================
Liabilities and Stockholders'
Equity
Current liabilities $87,416 $38,249
Deferred revenue 49,755 25,821
Long-term debt, including
current portion 510,620 125,625
Other long-term obligations 21,419 5,312
Stockholders' equity 272,128 44,516
------------------ ------------------
$941,338 $239,523
================== ==================
PER-SE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) ($ in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenue $148,871 $94,006 $447,785 $279,336
--------- --------- --------- ---------
Cost of services 86,007 63,089 274,358 185,596
Selling, general and
administrative 41,514 19,918 130,504 63,032
--------- --------- --------- ---------
Operating income 21,350 10,999 42,923 30,708
Interest, net 8,390 1,004 24,351 3,285
--------- --------- --------- ---------
Income before income taxes 12,960 9,995 18,572 27,423
Income tax expense 5,984 172 12,305 623
--------- --------- --------- ---------
Income from continuing
operations 6,976 9,823 6,267 26,800
Loss from discontinued
operations, net of tax 218 -- 292 --
--------- --------- --------- ---------
Net income $6,758 $9,823 $5,975 $26,800
========= ========= ========= =========
Diluted net income per common
share:
Adjusted income from
continuing operations $0.22 $0.29 $0.60 $0.81
Stock-based compensation
expense, net of tax (0.03) -- (0.06) --
Write-off of in-process
research & development -- -- (0.31) --
NDCHealth transition and
integration-related
expenses, net of tax (0.02) -- (0.11) --
Partial release of
deferred tax valuation
allowance (0.01) -- 0.02 --
--------- --------- --------- ---------
Income from continuing
operations 0.16 0.29 0.14 0.81
Loss from discontinued
operations, net of tax -- -- -- --
--------- --------- --------- ---------
Net income - diluted $0.16 $0.29 $0.14 $0.81
========= ========= ========= =========
Weighted average shares used
in computing diluted
earnings per share 43,203 33,792 43,535 32,917
========= ========= ========= =========
PER-SE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) ($ in thousands)
Nine Months Ended September 30,
--------------------------------
2006 2005
--------------- ---------------
Cash Flows From Operating Activities:
Net income $5,975 $26,800
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 49,310 11,233
Stock-based compensation expense 4,525 --
Amortization of deferred
financing costs 1,655 1,011
Loss from discontinued operations 292 --
Deferred income taxes 11,009 --
Changes in assets and
liabilities, excluding effects
of acquisitions and divestitures (11,910) (3,507)
--------------- ---------------
Net cash provided by continuing
operations 60,856 35,537
Net cash used for discontinued
operations (484) --
--------------- ---------------
Net cash provided by operating
activities 60,372 35,537
--------------- ---------------
Cash Flows From Investing Activities:
Acquisitions, net of cash acquired (429,834) --
Purchases of property and equipment (8,802) (6,098)
Software development costs (12,540) (4,544)
Other -- (1,700)
--------------- ---------------
Net cash used for investing
activities (451,176) (12,342)
--------------- ---------------
Cash Flows From Financing Activities:
Proceeds from the exercise of stock
options 4,312 5,967
Proceeds from borrowings 435,000 --
Treasury stock purchase -- (15,404)
Payments of debt (50,202) (32)
Deferred financing costs (7,662) --
Other 648 (18)
--------------- ---------------
Net cash provided by (used for)
financing activities 382,096 (9,487)
--------------- ---------------
Cash and Cash Equivalents:
Net change in cash (8,708) 13,708
Balance at beginning of period 61,161 42,422
--------------- ---------------
Balance at end of period $52,453 $56,130
=============== ===============
PER-SE TECHNOLOGIES, INC.
RECONCILIATION OF ADJUSTED OPERATING INCOME (A NON-GAAP MEASURE)
TO GAAP OPERATING INCOME BY BUSINESS SEGMENT
(unaudited) ($ in thousands)
Three months Nine months
ended Operating ended Operating
Sept. 30, 2006 Margin Sept. 30, 2006 Margin
-------------- --------- -------------- ---------
Physician Solutions:
Adjusted operating
income (a non-
GAAP measure) $12,614 16.2% $35,343 15.0%
Non-cash stock-
based
compensation
expense (357) (759)
NDCHealth
transition and
integration-
related expenses -- (83)
Non-cash write-off
of in-process
research &
development -- (1,900)
-------------- --------- -------------- ---------
Operating income $12,257 15.7% $32,601 13.9%
-------------- --------- -------------- ---------
Hospital Solutions:
Adjusted operating
income (a non-
GAAP measure) $12,144 27.5% $35,068 26.5%
Non-cash stock-
based
compensation
expense (278) (565)
NDCHealth
transition and
integration-
related expenses -- (146)
Non-cash write-off
of in-process
research &
development -- (2,800)
-------------- --------- -------------- ---------
Operating income $11,866 26.9% $31,557 23.9%
-------------- --------- -------------- ---------
Pharmacy Solutions:
Adjusted operating
income (a non-
GAAP measure) $5,207 16.8% $16,302 17.6%
Non-cash stock-
based
compensation
expense (282) (588)
NDCHealth
transition and
integration-
related expenses -- --
Non-cash write-off
of in-process
research &
development -- (8,600)
-------------- --------- -------------- ---------
Operating income $4,925 15.9% $7,114 7.7%
-------------- --------- -------------- ---------
Corporate:
Adjusted operating
loss (a non-GAAP
measure) $(5,558) $(18,064)
Non-cash stock-
based
compensation
expense (905) (2,613)
NDCHealth
transition and
integration-
related expenses (1,235) (7,672)
-------------- --------- -------------- ---------
Operating loss $(7,698) $(28,349)
-------------- --------- -------------- ---------
Consolidated:
Adjusted operating
income (a non-
GAAP measure) $24,407 16.4% $68,649 15.3%
Non-cash stock-
based
compensation
expense (1,822) (4,525)
NDCHealth
transition and
integration-
related expenses (1,235) (7,901)
Non-cash write-off
of in-process
research &
development -- (13,300)
-------------- --------- -------------- ---------
Operating income $21,350 14.3% $42,923 9.6%
============== ========= ============== =========
The Company believes adjusted operating income, which excludes non-
cash write-off of in-process research & development, non-cash stock-
based compensation expense and NDCHealth acquisition-related expenses
is a meaningful measure of operating performance and facilitates
comparisons to previously issued guidance that excluded these items.
Internally, the Company uses these measures to evaluate its
operational performance. The presentation of such non-GAAP measures
enables investors to focus on expected period-over-period operating
performance, without the impact of these items, and thereby enhances
the user's overall understanding of the Company's current financial
performance and provides a better baseline for modeling future
earnings expectations. The Company believes the inclusion of such
non-GAAP measures provides consistency and comparability in its
financial reporting and is provided in order to enable investors to
evaluate how management views its business and to more thoroughly
evaluate its current performance compared to past performance.
However, this information may be different from comparable
information provided by other companies and should not be used in
isolation or as an alternative to the Company's operating and other
financial information as determined under U.S. generally accepted
accounting principles.
PER-SE TECHNOLOGIES, INC.
RECONCILIATION OF ADJUSTED INCOME AND EPS FROM CONTINUING OPERATIONS
(A NON-GAAP MEASURE) TO GAAP INCOME AND EPS FROM CONTINUING OPERATIONS
(unaudited) ($ in thousands, except per share data)
Three months Nine months
ended ended
Sept. 30, 2006 EPS Sept. 30, 2006 EPS
-------------- ------ -------------- ------
Adjusted income from
continuing operations (a
non-GAAP measure) $9,356 $0.22 $26,067 $0.60
Non-cash write-off of
in-process research &
development -- -- (13,300) (0.31)
Non-cash stock-based
compensation expense,
net of tax (1,133) (0.03) (2,794) (0.06)
NDCHealth transition and
integration-related
expenses, net of tax (726) (0.02) (4,700) (0.11)
Tax benefit from partial
release of deferred tax
asset valuation
allowance (521) (0.01) 994 0.02
-------------- ------ -------------- ------
Income from continuing
operations $6,976 $0.16 $6,267 $0.14
============== ====== ============== ======
The Company believes adjusted income and adjusted earnings per share
from continuing operations, which excludes NDCHealth transition and
integration-related expenses, non-cash stock-based compensation
expense and non-cash write-off of in-process research & development
are additional meaningful measures of operating performance and
facilitate comparisons to previously issued guidance that excluded
these items. Internally, the Company uses these measures to evaluate
its operational performance. The presentation of such non-GAAP
measures enables investors to focus on period-over-period operating
performance, without the impact of these items, and thereby enhances
the user's overall understanding of the Company's financial
performance and provides a better baseline for modeling future
earnings expectations. The Company believes the inclusion of such
non-GAAP measures provides consistency and comparability in its
financial reporting and is provided in order to enable investors to
evaluate how management views its business and to more thoroughly
evaluate its current performance compared to past performance.
However, this information may be different from comparable
information provided by other companies and should not be used in
isolation or as an alternative to the Company's operating and other
financial information as determined under U.S. generally accepted
accounting principles.
PER-SE TECHNOLOGIES, INC.
RECONCILIATION OF ADJUSTED CASH FLOW FROM CONTINUING OPERATIONS
(A NON-GAAP MEASURE) TO GAAP CASH FLOW FROM CONTINUING OPERATIONS
(unaudited) ($ in millions)
Nine Months
ended
Sept. 30, 2006
--------------
Adjusted cash flow from continuing operations (a non-
GAAP measure) $89.3
Cash used for non-recurring acquisition-related costs (28.4)
--------------
Cash flow from continuing operations $60.9
==============
The Company believes adjusted cash flow from continuing operations,
which excludes NDCHealth acquisition-related costs, is a meaningful
measure of operating cash flow generated from the "base business" and
facilitates comparisons to previously issued guidance that excluded
these items. Internally, the Company uses these measures to evaluate
its operational performance. The presentation of such non-GAAP
measures enables investors to focus on expected period-over-period
operating performance, without the impact of these non-recurring
items, and thereby enhances the user's overall understanding of the
Company's expected financial performance and provides a better
baseline for modeling future cash flow expectations. The Company
believes the inclusion of such non-GAAP measures provides consistency
and comparability in its financial reporting and is provided in order
to enable investors to evaluate how management views its business and
to more thoroughly evaluate its expected performance compared to past
performance. However, this information may be different from
comparable information provided by other companies and should not be
used in isolation or as an alternative to the Company's operating and
other financial information as determined under U.S. generally
accepted accounting principles.
CONTACT: Per-Se Technologies, Inc.
Robert P. Borchert, 770-237-7539
VP, Investor Relations & Corporate Communications
investors@per-se.com