![]() Catalyst SXC + Health Solutions Catalyst SXC + Health Solutions CREATING A LEADING NATIONAL PROVIDER OF PBM SERVICES AND HEALTHCARE INFORMATION TECHNOLOGY SOLUTIONS April 18, 2012 Exhibit 99.2 |
![]() Forward-Looking Statements Forward-Looking Statements 2 Certain statements included in this communication, including those that express management’s expectations or estimates of SXC’s or the combined company’s future performance, constitute “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies. SXC cautions that such forward-looking statements involve known and unknown risks, uncertainties and other risks that may cause SXC’s actual financial results, performance, or achievements to be materially different from SXC’s estimated future results, performance or achievements expressed or implied by those forward-looking statements. Numerous factors could cause actual results to differ materially from those in the forward-looking statements, including without limitation, SXC’s ability to achieve increased market acceptance for SXC’s product offerings and penetrate new markets; consolidation in the healthcare industry; the existence of undetected errors or similar problems in SXC’s software products; SXC’s ability to identify and complete acquisitions, manage SXC’s growth and integrate acquisitions; SXC’s ability to compete successfully; potential liability for the use of incorrect or incomplete data; the length of the sales cycle for SXC’s healthcare software solutions; interruption of SXC’s operations due to outside sources; SXC’s dependence on key customers; maintaining SXC’s intellectual property rights and litigation involving intellectual property rights; SXC’s ability to obtain, use or successfully integrate third-party licensed technology; compliance with existing laws, regulations and industry initiatives and future change in laws or regulations in the healthcare industry; breach of SXC’s security by third parties; SXC’s dependence on the expertise of SXC’s key personnel; SXC’s access to sufficient capital to fund SXC’s future requirements; and potential write-offs of goodwill or other intangible assets. This list is not exhaustive of the factors that may affect any of SXC’s forward-looking statements. Other factors that should be considered are discussed from time to time in SXC’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including the risks and uncertainties discussed under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in SXC’s 2011 Annual Report on Form 10-K and subsequent Form 10-Qs, which are available at www.sec.gov. Investors are cautioned not to put undue reliance on forward- looking statements. All subsequent written and oral forward-looking statements attributable to SXC or persons acting on SXC’s behalf are expressly qualified in their entirety by this cautionary statement. SXC disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise. Certain of the assumptions made in preparing forward-looking information and management’s expectations include: maintenance of SXC’s existing customers and contracts, SXC’s ability to market SXC’s products successfully to anticipated customers, the impact of increasing competition, the growth of prescription drug utilization rates at predicted levels, the retention of SXC’s key personnel, SXC’s customers continuing to process transactions at historical levels, that SXC’s systems will not be interrupted for any significant period of time, that SXC’s products will perform free of major errors, SXC’s ability to obtain financing on acceptable terms and that there will be no significant changes in the regulation of SXC’s business. SXC Forward-Looking Statements Catalyst Forward-Looking Statements Certain statements included herein may contain certain forward-looking statements including, without limitation, statements concerning Catalyst's operations, economic performance and financial condition. The words "believe," "expect," "anticipate," "will," "could," "would," "should," "may," "plan," "estimate," "intend," "predict," "potential," "continue," and the negatives of these words and other similar expressions generally identify forward- looking statements. In addition to Catalyst's expectations or estimates of a combined company's future performance or matters relating to the proposed transaction, these forward-looking statements may include statements addressing Catalyst's operations and Catalyst's financial performance. Readers are cautioned not to place undue reliance on these forward-looking statements, which, among other things, speak only as of their dates. These forward-looking statements are based largely on Catalyst's current expectations and are based on a number of risks and uncertainties, including, without limitation, (i) general adverse economic conditions, (ii) changes in governmental laws and regulations, (iii) Catalyst's ability to compete effectively in the pharmacy benefit management industry, (iv) Catalyst's relationships with key clients, pharmacy network affiliations and various pharmaceutical manufacturers and rebate intermediaries, (v) changes in industry pricing benchmarks, (vi) uncertainties relating to the transition and integration of completed and future acquisitions and/or expansion opportunities, (vii) Catalyst's current level of indebtedness and any future indebtedness Catalyst may incur; (viii) disruption in Catalyst's operations, (ix) unanticipated changes in Catalyst's ability to execute its growth strategy, (x) generic utilization levels, (xi) insufficient insurance coverage to cover costs associated with litigation, (xii) Catalyst's ability to accurately estimate how much future revenue Catalyst will generate, as well as the level of implementation and transaction costs that Catalyst will incur, under newly commenced PBM agreements and other risks and uncertainties discussed in Catalyst's filings with the SEC, including Catalyst's Annual Report on Form 10-K and quarterly reports on Form 10-Q. Actual results could differ materially from results referred to in the forward-looking statements. In light of these risks and uncertainties, there can be no assurances that the results referred to in the forward-looking statements contained herein will, in fact, occur. Catalyst undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date hereof. Readers are urged to carefully review and consider the various disclosures made in Catalyst's other filings with the SEC that attempt to advise interested parties of the risks and factors that may affect Catalyst's business. |
![]() Forward-Looking Statements cont. Forward-Looking Statements cont. Transaction Forward-Looking Statements In addition, numerous factors could cause actual results with respect to the proposed transaction to differ materially from those in the forward-looking statements, including without limitation, the possibility that the expected efficiencies and cost savings from the proposed transaction will not be realized, or will not be realized within the expected time period; the risk that the SXC and Catalyst businesses will not be integrated successfully; the ability to obtain governmental approvals of the proposed transaction on the proposed terms and schedule contemplated by the parties; the failure of shareholders of SXC or Catalyst to approve the proposed transaction; disruption from the proposed transaction making it more difficult to maintain business and operational relationships; the risk of customer attrition; the possibility that the proposed transaction does not close, including, but not limited to, due to the failure to satisfy the closing conditions; and the ability to obtain the financing contemplated to fund a portion of the consideration to be paid in the proposed transaction and the terms of such financing. Important Additional Information This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication is being made in respect of the proposed transaction involving Catalyst and SXC. The proposed transaction will be submitted to the shareholders of Catalyst and the shareholders of SXC for their consideration. In connection therewith, the parties intend to file relevant materials with the SEC, including a joint proxy statement/prospectus that will be mailed to shareholders. Such documents, however, are not currently available. BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS, INVESTORS AND SECURITY HOLDERS OF CATALYST AND/OR SXC ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of the proxy statement/prospectus and other documents containing important information about Catalyst and SXC, once such documents are filed with the SEC, through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by SXC will be available free of charge on SXC’s website at www.sxc.com under the heading “Investor Information” or by contacting SXC’s Investor Relations Department at 630-577-3100. Copies of the documents filed with the SEC by Catalyst will be available free of charge on Catalyst’s website at www.catalysthealthsolutions.com under the heading “Investor Information” or by contacting Catalyst’s Investor Relations Department at 301-548-2900. SXC, Catalyst and certain of their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of SXC is set forth in its proxy statement for its 2012 annual meeting of stockholders, which was filed with the SEC on April 2, 2012. Information about the directors and executive officers of Catalyst is set forth in its proxy statement for its 2011 annual meeting of shareholders, which was filed with the SEC on April 28, 2011. These documents can be obtained free of charge from the sources indicated above. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. 3 |
![]() Strategically and Financially Compelling Transaction Strategically and Financially Compelling Transaction Combines two fast-growing complementary businesses to create a $13 billion leader in PBM services and healthcare information technology solutions Complementary products, services and solutions Distinct market segments served; combination will serve a larger addressable market Creates a market-leading PBM with strengthened capabilities, improved market visibility and additional scale Leverages Catalyst’s industry-leading client services model and award-winning clinical capabilities Leverages SXC’s industry leading PBM tools and services Increased operating size and scale delivers value for clients and members Improved purchasing leverage for prescription drugs to drive lower costs Unique PBM model well-positioned to serve evolving market needs Ability to serve large employers, health plans and government clients with industry-leading innovation and flexible offerings Strengthened financial profile Expected to be highly accretive to SXC’s non-GAAP earnings in 2013 Strong balance sheet and significant free cash flow post closing Low integration risk Low integration risk given SXC’s proven integration experience, shared IT platform, and overall familiarity with Catalyst 4 |
![]() Transaction Summary Transaction Summary Structure and Consideration Accretion Synergies Governance Merged Company Path To Completion • $28.00 in cash and 0.6606 shares of SXC stock • Implied premium of approximately 28% as of 4/17/12 • SXC shareholders expected to own 65%; Catalyst shareholders expected to own 35% • Catalyst shareholders to receive $81.02 per share in cash and stock (based on the closing price of SXC’s stock on 4/17/12) • Transaction expected to be highly accretive to SXC’s non-GAAP earnings in 2013 • Expect to achieve approximately $125 million of annual cost synergies • SXC Chairman and CEO will lead the combined company • SXC CFO will remain CFO of the combined company • SXC Board will include two current Catalyst directors • SXC (NASDAQ: SXCI, TSX: SXC) • Headquarters in Lisle, IL • SXC and Catalyst shareholder votes • Regulatory approvals and customary closing conditions • Expected closing in the second half of 2012 5 |
![]() Significant Benefits to Catalyst Shareholders Significant Benefits to Catalyst Shareholders Strategic premium delivers immediate value to Catalyst shareholders 28% premium to closing price as of 4/17/12 Pro forma company expected to be owned 35% by Catalyst shareholders Enhanced growth potential Combination aligns core competencies, strengthens capabilities, and provides opportunity for synergy realization Leverages SXC’s tools and technology to provide additional value to Catalyst’s client base Accelerates revenues, earnings, and free cash flow growth 6 Participation in upside potential of combined company |
![]() Complementary Businesses Compelling Strategic Fit Complementary Businesses Compelling Strategic Fit 7 Comprehensive suite of best-in-class services and solutions Increased client diversity including large employers, managed care organizations, state and local governments, hospice, FFS Medicaid, long-term care, and workers’ compensation clients Enhanced scale and scope to drive down healthcare costs for clients and members Flexible, customizable solutions to reduce costs and manage complexity Strengthened offering in mail, retail and specialty pharmacy |
![]() Additional Size, Scale, and Broadened Scope Additional Size, Scale, and Broadened Scope Greater scale and scope increase purchasing efficiency and ability to drive lower costs to members Leading independent provider of flexible PBM solutions offers strong alternative to traditional PBMs SXC technology platform provides unlimited scalability Increased breadth of client verticals served 8 Employers Health Plans PBMs Medicare Part D FFS Medicaid Unions Long-Term Care Workers’ Compensation State and Local Governments Hospice |
![]() Capitalizing on the Opportunity Capitalizing on the Opportunity Plan sponsors increasingly focused on cost containment Recent transaction activity further elevates the need for scale to better serve clients Shift by MCOs toward integrated care models and hybrid PBM structures thus creating the need for an “unbundled” PBM offering Increased client RFP activity creates new opportunities for well- positioned competitors Positive industry trends around generics, specialty pharmaceuticals and healthcare reform support longer-term growth opportunity 9 Combined company well positioned to benefit from rapidly evolving healthcare industry |
![]() Financially Compelling Transaction Financially Compelling Transaction Combination creates an organization with $13 billion in revenue Expected to be highly accretive to SXC’s non-GAAP earnings in 2013 Combined company will have strong balance sheet and cash flow Creates flexibility to continue investing in growth initiatives while paying down debt 10 |
![]() Expected Transaction Metrics Expected Transaction Metrics Integration expected to be completed 18 to 24 months following closing SXC expects $125 million in synergies achieved primarily through improved scale and operating leverage SXC expects $40-$45 million of integration expenses over the integration timeframe SXC expects the transaction to result in $200 million in annual deal- related amortization upon closing, which will be backed-out in the adjusted EPS calculation SXC expects $25 million in one-time transaction-related expenses, which should be realized in 2012 SXC expects $70 million in annual interest expense upon closing due to the $1.7 billion in debt used to finance the transaction 11 |
![]() An Ideal Partnership An Ideal Partnership Combines two fast-growing, complementary businesses focused on lowering the cost of healthcare and improving patient outcomes Long history of working closely together to deliver value to clients Shared vision regarding customer-centered approach to client service Impressive track record for growth and value creation in the PBM space Tremendous opportunity for combined company to compete in the rapidly evolving PBM market and deliver additional value to shareholders 12 |
![]() Summary of Non-GAAP Financial Measures Summary of Non-GAAP Financial Measures SXC reports its financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). SXC’s management also evaluates and makes operating decisions using various other measures. Such measures are adjusted earnings per share, EBITDA, and adjusted EBITDA, which are non-GAAP financial measures. SXC’s management believes that these measures provide useful supplemental information regarding the performance of SXC’s business operations. Adjusted earnings per share is a non-GAAP measure which takes earnings per share and adds back the impact of amortization of intangible assets, net of tax. Amortization of intangible assets arises from the acquisition of intangible assets in connection with the Company’s acquisitions. SXC excludes amortization of intangible assets from non-GAAP adjusted earnings per share because it believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of SXC business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired intangible assets. Investors should note that the use of these intangible assets will contribute to revenue in the future period presented and periods beyond that and should also note that such expense will recur in future periods. EBITDA is a non-GAAP measure that management believes is a useful supplemental measure of operating performance prior to net interest income (expense), income taxes, depreciation, and amortization. Adjusted EBITDA is a non-GAAP measure that management believes is a useful supplemental measure of operating performance prior to net interest income (expense), income taxes, depreciation, amortization, and stock-based compensation. Management believes it is useful to exclude depreciation, amortization and net interest income (expense) as these are essentially fixed amounts that cannot be influenced by management in the short term. Management believes that adjusted earnings per share, EBITDA, and adjusted EBITDA provide useful supplemental information to management and investors regarding the performance of the Company’s business operations and facilitate comparisons to its historical operating results. Management also uses this information internally for forecasting and budgeting as it believes that the measures are indicative of the Company’s core operating results. Note however, that both items are performance measures only, and do not provide any measure of the Company’s cash flow or liquidity. Non-GAAP financial measures should not be considered as a substitute for measures of financial performance in accordance with GAAP, and investors and potential investors are encouraged to review the reconciliation of adjusted earnings per share adjusted EBITDA on SXC’s website (www.sxc.com). Adjusted earnings per share, EBITDA, and adjusted EBITDA do not have standardized meanings prescribed by GAAP. The Company's method of calculating adjusted earnings per share, EBITDA, and adjusted EBITDA may differ from the methods used by other companies and, accordingly, it may not be comparable to similarly titled measures used by other companies. Reconciliation of adjusted EPS, EBITDA, and adjusted EBITDA to net income is available on SXC’s website (www.sxc.com). 13 |