Exhibit 99.2
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated balance sheet at June 30, 2010 and the unaudited pro forma consolidated statement of operations for the six months ended June 30, 2010 give effect to the acquisition of Chamberlin Edmonds Holdings, Inc. and Chamberlin Edmonds & Associates, Inc. (collectively “CEA”) and the related financing of this acquisition as if the acquisition had occurred on June 30, 2010 for the unaudited pro forma consolidated balance sheet and January 1, 2009 for the unaudited pro forma consolidated statement of operations.
The unaudited pro forma consolidated statement of operations for the year ended December 31, 2009 gives effect to (i) the conversion of EBS Equity Plan Member’s Grant Units into EBS Units and options to purchase shares of our Class A common stock, (ii) the conversion of the EBS Phantom Awards into Class A common stock, restricted stock units and options to purchase shares of our Class A common stock, (iii) our 2009 initial public offering (the “IPO”) and the use of proceeds from the IPO (collectively, the “Pro Forma Offering Adjustments”), (iv) the acquisition of eRx Network LLC (“eRx”) and (v) the acquisition of CEA and the related financing of this acquisition as if each had occurred on January 1, 2009. The unaudited pro forma financial information has been prepared by our management and is based on our historical financial statements and the assumptions and adjustments described herein and in the notes to the unaudited pro forma financial information below. The presentation of the unaudited pro forma financial information is prepared in conformity with Article 11 of Regulation S-X.
The historical financial information of Emdeon Inc. (the “Company”) for the year ended December 31, 2009 and six months ended June 30, 2010 has been derived from the audited and unaudited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010, respectively. The historical financial information of CEA for the year ended December 31, 2009 and the six months ended June 30, 2010 has been derived from the audited and unaudited consolidated financial statements of CEA and the accompanying notes included in this Current Report on Form 8-K/A. The historical financial information of eRx for the six months ended June 30, 2009 has been derived from the unaudited consolidated financial statements of eRx and the accompanying notes included in our Current Report on Form 8-K dated September 11, 2009.
We based the pro forma adjustments on available information and on assumptions that we believe are reasonable under the circumstances. See “— Notes to Unaudited Pro Forma Financial Information” for a discussion of assumptions made. The unaudited pro forma financial information is presented for informational purposes and is based on management’s estimates. The unaudited pro forma consolidated statements of operations do not purport to represent what our results of operations actually would have been if the transactions set forth above had occurred on the dates indicated or what our results of operations will be for future periods.
The foregoing financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and 2010 Quarterly Reports on Form 10-Q, including capitalized terms not otherwise defined herein.
Emdeon Inc.
Unaudited Pro Forma Consolidated Balance Sheet
June 30, 2010
(amounts in thousands, except share and per share amounts)
CEA | CEA Pro Forma | Pro Forma | ||||||||||||||||||
Actual(1) | Historical(2) | Adjustments | Notes | Consolidated | ||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
$ | 97,764 | (3 | ) | |||||||||||||||||
(209,522 | ) | (4 | ) | |||||||||||||||||
Cash and cash equivalents | $ | 216,469 | $ | 2,794 | (44,804 | ) | (5 | ) | $ | 62,701 | ||||||||||
Accounts receivable, net of allowance for doubtful accounts | 156,906 | 14,402 | — | 171,308 | ||||||||||||||||
Deferred income tax assets | 4,237 | — | 689 | (14 | ) | 4,926 | ||||||||||||||
Prepaid expenses and other current assets | 14,910 | 16,240 | (15,206 | ) | (6 | ) | 15,944 | |||||||||||||
Total current assets | 392,522 | 33,436 | (171,079 | ) | 254,879 | |||||||||||||||
Property and equipment, net | 189,738 | 4,369 | 19,368 | (7 | ) | 213,475 | ||||||||||||||
Goodwill | 739,773 | 81,772 | 97,194 | (8 | ) | 918,739 | ||||||||||||||
Intangible assets, net | 977,208 | 30,513 | 46,617 | (9 | ) | 1,054,338 | ||||||||||||||
236 | (3 | ) | ||||||||||||||||||
Other assets, net | 4,332 | 928 | (825 | ) | (10 | ) | 4,671 | |||||||||||||
Total assets | $ | 2,303,573 | $ | 151,018 | $ | (8,489 | ) | $ | 2,446,102 | |||||||||||
Liabilities and equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 9,161 | $ | 854 | $ | — | $ | 10,015 | ||||||||||||
8,976 | (11 | ) | ||||||||||||||||||
Accrued expenses | 83,117 | 8,000 | (9,654 | ) | (5 | ) | 90,439 | |||||||||||||
Deferred income tax liabilities | — | 4,968 | (4,968 | ) | (14 | ) | — | |||||||||||||
Deferred revenues | 10,963 | — | — | 10,963 | ||||||||||||||||
1,000 | (3 | ) | ||||||||||||||||||
Current portion of long-term debt | 10,905 | 2,850 | (2,850 | ) | (5 | ) | 11,905 | |||||||||||||
Total current liabilities | 114,146 | 16,672 | (7,496 | ) | 123,322 | |||||||||||||||
97,000 | (3 | ) | ||||||||||||||||||
Long-term debt excluding current portion | 838,542 | 32,300 | (32,300 | ) | (5 | ) | 935,542 | |||||||||||||
Deferred income tax liabilities | 152,722 | 12,548 | 23,129 | (14 | ) | 188,399 | ||||||||||||||
Tax receivable agreement obligations due to related parties | 140,704 | — | — | 140,704 | ||||||||||||||||
Other long-term liabilities | 43,379 | 952 | (276 | ) | (12 | ) | 44,055 | |||||||||||||
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 90,861,910 shares outstanding | 1 | 1 | (1 | ) | (13 | ) | 1 | |||||||||||||
Class B convertible common stock, (par value, $0.00001), 52,000,000 shares authorized and 24,689,142 shares outstanding | — | — | — | — | ||||||||||||||||
Contingent consideration | 2,667 | — | — | 2,667 | ||||||||||||||||
Additional paid-in capital | 741,295 | 76,451 | (76,451 | ) | (13 | ) | 741,295 | |||||||||||||
Accumulated other comprehensive loss | (6,116 | ) | — | — | (6,116 | ) | ||||||||||||||
Retained earnings | 39,822 | 11,992 | (11,992 | ) | (13 | ) | 39,822 | |||||||||||||
Emdeon Inc. shareholders’ equity | 777,669 | 88,444 | (88,444 | ) | 777,669 | |||||||||||||||
Noncontrolling interest | 236,411 | 102 | (102 | ) | (13 | ) | 236,411 | |||||||||||||
Total equity | 1,014,080 | 88,546 | (88,546 | ) | 1,014,080 | |||||||||||||||
Total liabilities and equity | $ | 2,303,573 | $ | 151,018 | $ | (8,489 | ) | $ | 2,446,102 | |||||||||||
See accompanying notes to unaudited pro forma financial information.
2
Emdeon Inc.
Unaudited Pro Forma Consolidated Statement of Operations
(amounts in thousands, except share and per share amounts)
For the Six Months Ended June 30, 2010 | ||||||||||||||||||||
CEA Pro | ||||||||||||||||||||
CEA | Forma(15) | Pro Forma | ||||||||||||||||||
Actual(1) | Historical(2) | Adjustments | Notes | Consolidated | ||||||||||||||||
Revenue | $ | 480,568 | $ | 46,254 | $ | (187 | ) | (a | ) | $ | 526,635 | |||||||||
Costs and expenses: | ||||||||||||||||||||
8,388 | (b | ) | ||||||||||||||||||
381 | (c | ) | ||||||||||||||||||
Cost of operations (exclusive of depreciation and amortization below) | 292,430 | 17,637 | (176 | ) | (a | ) | 318,660 | |||||||||||||
Development and engineering | 17,248 | — | 295 | (b | ) | 17,543 | ||||||||||||||
Sales, marketing, general and administrative | 52,362 | 16,981 | (8,683 | ) | (b | ) | 60,660 | |||||||||||||
Depreciation and amortization | 57,053 | 2,432 | 2,701 | (d | ) | 62,186 | ||||||||||||||
Total costs and expenses | 419,093 | 37,050 | 2,906 | 459,049 | ||||||||||||||||
Operating income | 61,475 | 9,204 | (3,093 | ) | 67,586 | |||||||||||||||
Interest income | (8 | ) | — | — | (8 | ) | ||||||||||||||
Interest expense | 31,584 | 2,244 | 406 | (e | ) | 34,234 | ||||||||||||||
Other | (1,770 | ) | — | — | (1,770 | ) | ||||||||||||||
Income before income taxes | 31,669 | 6,960 | (3,499 | ) | 35,130 | |||||||||||||||
Income tax provision | 20,152 | 2,658 | (1,276 | ) | (f | ) | 21,534 | |||||||||||||
Net income | 11,517 | 4,302 | (2,223 | ) | 13,596 | |||||||||||||||
Net income attributable to noncontrolling interest | 5,399 | 1 | 379 | (g | ) | 5,779 | ||||||||||||||
Net income attributable to Emdeon Inc. | $ | 6,118 | $ | 4,301 | $ | (2,602 | ) | $ | 7,817 | |||||||||||
Net income per share Class A common stock: | ||||||||||||||||||||
Basic | $ | 0.07 | $ | 0.09 | ||||||||||||||||
Diluted | $ | 0.07 | $ | 0.09 | ||||||||||||||||
Weighted average common shares and equivalents | ||||||||||||||||||||
Basic | 88,879,916 | 88,879,916 | ||||||||||||||||||
Diluted | 90,648,401 | 90,648,401 | ||||||||||||||||||
See accompanying notes to unaudited pro forma financial information.
3
Emdeon Inc.
Unaudited Pro Forma Consolidated Statement of Operations
(amounts in thousands, except share and per share amounts)
For the Year Ended December 31, 2009
Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||||||
Offering | Pro Forma | eRx | Pro Forma eRx | Pro Forma | CEA | Pro Forma CEA | Pro Forma | |||||||||||||||||||||||||||||||||||||||||
Actual(1)(20) | Adjustments(16) | Notes | Offering | Historical(17) | Adjustments(18) | Notes | Offering and eRx | Historical(2) | Adjustments(19) | Notes | Consolidated | |||||||||||||||||||||||||||||||||||||
Revenues | $ | 918,448 | $ | — | $ | 918,448 | $ | 16,697 | $ | — | $ | 935,145 | 78,828 | (393 | ) | (a | ) | $ | 1,013,580 | |||||||||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||
16,586 | (b | ) | ||||||||||||||||||||||||||||||||||||||||||||||
(1,054 | ) | (c | ) | |||||||||||||||||||||||||||||||||||||||||||||
Cost of operations | 560,393 | 930 | (a | ) | 561,323 | 8,094 | — | 569,417 | 29,952 | (394 | ) | (a | ) | 614,507 | ||||||||||||||||||||||||||||||||||
Development and engineering | 32,978 | 357 | (a | ) | 33,335 | 1,711 | — | 35,046 | — | 558 | (b | ) | 35,604 | |||||||||||||||||||||||||||||||||||
Sales, marketing, general and administrative | 108,336 | 2,016 | (a | ) | 110,352 | 3,095 | — | 113,447 | 31,500 | (17,144 | ) | (b | ) | 127,803 | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | 105,321 | — | 105,321 | 509 | 1,334 | (a | ) | 107,164 | 4,939 | 5,327 | (d | ) | 117,430 | |||||||||||||||||||||||||||||||||||
Loss on abandonment of leased properties | 1,675 | — | 1,675 | — | — | 1,675 | — | — | 1,675 | |||||||||||||||||||||||||||||||||||||||
Total costs and expenses | 808,703 | 3,303 | 812,006 | 13,409 | 1,334 | 826,749 | 66,391 | 3,879 | 897,019 | |||||||||||||||||||||||||||||||||||||||
Operating income | 109,745 | (3,303 | ) | 106,442 | 3,288 | (1,334 | ) | 108,396 | 12,437 | (4,272 | ) | 116,561 | ||||||||||||||||||||||||||||||||||||
Interest income | (75 | ) | — | (75 | ) | (2 | ) | — | (77 | ) | — | — | (77 | ) | ||||||||||||||||||||||||||||||||||
Interest expense | 70,246 | — | 70,246 | 7 | — | 70,253 | 4,541 | 697 | (e | ) | 75,491 | |||||||||||||||||||||||||||||||||||||
Other income | (519 | ) | — | (519 | ) | — | — | (519 | ) | — | — | (519 | ) | |||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | 40,093 | (3,303 | ) | 36,790 | 3,283 | (1,334 | ) | 38,739 | 7,896 | (4,969 | ) | 41,666 | ||||||||||||||||||||||||||||||||||||
Income tax provision (benefit) | 20,523 | (1,240 | ) | (b | ) | 19,283 | 52 | 715 | (b | ) | 20,050 | 1,731 | (1,812 | ) | (f | ) | 19,969 | |||||||||||||||||||||||||||||||
Net income (loss) | 19,570 | (2,063 | ) | 17,507 | 3,231 | (2,049 | ) | 18,689 | 6,165 | (3,157 | ) | 21,697 | ||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interest | 6,295 | (916 | ) | (c | ) | 5,379 | 40 | 399 | (c | ) | 5,818 | — | 647 | (g | ) | 6,465 | ||||||||||||||||||||||||||||||||
Net income (loss) attributable to Emdeon Inc. | $ | 13,275 | $ | (1,147 | ) | $ | 12,128 | $ | 3,191 | $ | (2,448 | ) | $ | 12,871 | $ | 6,165 | $ | (3,804 | ) | $ | 15,232 | |||||||||||||||||||||||||||
Net income per share Class A common stock: | ||||||||||||||||||||||||||||||||||||||||||||||||
Basic | $ | 0.16 | $ | 0.15 | $ | 0.15 | $ | 0.18 | ||||||||||||||||||||||||||||||||||||||||
Diluted | $ | 0.16 | $ | 0.14 | $ | 0.15 | $ | 0.18 | ||||||||||||||||||||||||||||||||||||||||
Weighted average common shares and equivalents outstanding: | ||||||||||||||||||||||||||||||||||||||||||||||||
Basic | 82,459,169 | 82,459,169 | 83,584,374 | 83,584,374 | ||||||||||||||||||||||||||||||||||||||||||||
Diluted | 82,525,002 | 82,525,002 | 83,650,207 | 83,650,207 | ||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited pro forma financial information.
4
Emdeon Inc.
Notes to Unaudited Pro Forma Financial Information
Pro Forma Adjustments ($ in thousands)
(1) The amounts in this column represent our actual results for the date or periods reflected.
(2) The amounts in this column represent CEA’s actual results for the date or periods reflected.
(3) Represents net cash proceeds of $97,764, loan costs of $236 and discount and fees totaling $2,000 related to a $100,000 incremental term loan borrowing under the Company’s First Lien Credit Agreement.
(4) Represents consideration transferred to the former stockholders of CEA or their representatives in connection with the acquisition of CEA by the Company.
(5) Represents the payment of a CEA note payable of $35,150 and other obligations assumed at closing of $9,654 that were required to be paid under the terms of the CEA merger agreement.
(6) Represents an adjustment to conform CEA’s accounting policy for the deferral of costs to the Company’s policy of expensing such costs as incurred.
(7) Represents the adjustment to the carrying value of property and equipment of CEA to reflect fair values as follows:
Developed technology | 21,520 | |||
Fair value of other CEA property and equipment, net | 2,217 | |||
Purchase accounting adjustment | 23,737 | |||
Less: historical CEA property and equipment, net | (4,369 | ) | ||
Pro Forma adjustment | $ | 19,368 | ||
This adjustment is based upon a valuation of tangible and intangible assets that is preliminary in nature and subject to change upon the receipt of a final valuation.
(8) Represents an adjustment to record goodwill derived from the difference in the fair values of the consideration transferred and net assets acquired as follows:
Consideration transferred | $ | 209,522 | ||
Less: net assets acquired | (30,556 | ) | ||
Total goodwill acquired | 178,966 | |||
Less: historical CEA goodwill | (81,772 | ) | ||
Pro Forma adjustment | $ | 97,194 | ||
This adjustment is based upon a valuation of tangible and intangible assets that is preliminary in nature and subject to change upon the receipt of a final valuation and the outcome of a working capital settlement.
(9) Represents an adjustment to record the fair value of intangible assets acquired as follows:
5
Emdeon Inc.
Notes to Unaudited Pro Forma Financial Information (continued)
Customer List | $ | 72,180 | ||
Non-compete agreements | 1,330 | |||
Trade Name | 3,620 | |||
Total intangible assets acquired | 77,130 | |||
Less: historical CEA intangible assets | (30,513 | ) | ||
Pro Forma adjustment | $ | 46,617 | ||
This adjustment is based upon a valuation of tangible and intangible assets that is preliminary in nature and subject to change upon the receipt of a final valuation.
(10) Represents an adjustment to eliminate historical CEA deferred loan costs.
(11) Represents an adjustment to record accrued transaction costs arising in connection with the acquisition of CEA by the Company that were contingent upon the closing of the acquisition. Such amounts have been excluded from the pro forma consolidated statements of operations as the items are non recurring in nature and directly attributable to the transaction.
(12) Represents an adjustment to eliminate historical CEA deferred rent liabilities.
(13) Represents elimination of CEA’s common stock, paid-in capital, noncontrolling interest and retained earnings as the of date of acquisition.
(14) Represents an adjustment to deferred tax balances to reflect the allocation of the consideration transferred.
(15) The amounts in this column represent the pro forma adjustments made to reflect the CEA acquisition as if it occurred on January 1, 2009 as follows:
(a) | Represents the elimination of revenue and expenses associated with transactions between the Company and CEA. | |
(b) | Represents a reclassification of historical CEA expenses to conform to the Company’s accounting policy. | |
(c) | Represents an adjustment to conform CEA’s accounting policy for the deferral of costs to the Company’s policy of expensing such costs as incurred. | |
(d) | Represents impact to depreciation and amortization as a result of recording CEA fixed assets and identifiable intangible assets at fair value as of the date of acquisition as follows: |
Monthly | Six months ended | |||||||||||||||
Description | Amount | Assigned Life | Amortization | June 30, 2010 | ||||||||||||
Technology | $ | 21,520 | 10 | $ | 179 | $ | 1,076 | |||||||||
Equipment | 2,217 | 2 | 92 | 554 | ||||||||||||
Total depreciation | 1,630 | |||||||||||||||
Customer List | 72,180 | 12 | 501 | 3,008 | ||||||||||||
Non-compete agreements | 1,330 | 5 | 22 | 133 | ||||||||||||
Trade Name | 3,620 | 5 | 60 | 362 | ||||||||||||
Total amortization | 3,503 | |||||||||||||||
Total proforma expense | 5,133 | |||||||||||||||
Less: historical CEA depreciation and amortization expense | (2,432 | ) | ||||||||||||||
Pro Forma adjustment | $ | 2,701 | ||||||||||||||
6
Emdeon Inc.
Notes to Unaudited Pro Forma Financial Information (continued)
(e) | Represents interest expense (including amortization of loan costs and discount) related to the Company’s $100,000 incremental term loan borrowing under the Company’s First Lien Credit Agreement as if the borrowing (and the repayment of the CEA existing debt) occurred on January 1, 2009 as follows: |
Six Months | ||||
Ended June 30, | ||||
2010 | ||||
Interest related to incremental term loan borrowing | 2,225 | |||
Amortization of debt discount and deferred loan costs | 358 | |||
2,583 | ||||
Less: historical CEA note payable interest expense | (2,177 | ) | ||
Pro Forma adjustment | $ | 406 | ||
This adjustment assumes the interest rate on this borrowing at the date of acquisition (4.5%) was in effect for the entire period. A 125 basis point change in the assumed interest rate would have an impact of $618 on pro forma consolidated interest expense.
(f) | Reflects an adjustment to reduce income taxes due to the pro forma adjustments presented in note 15(a) — (e) above applying statutory tax rates for the applicable period. | |
(g) | Reflects an adjustment to noncontrolling interest (21.37%) related to net income of EBS Master as follows: |
Six Months | ||||
Ended June 30, | ||||
2010 | ||||
EBS Master Net Income | $ | 24,971 | ||
Add: CEA Historical Net Income contribution to EBS Master Net Income | 4,301 | |||
Pro forma CEA adjustments to EBS Master net income | (2,223 | ) | ||
Pro Forma EBS Master net income | 27,049 | |||
Multiplied by noncontrolling interest percentage in EBS Master | 21.37 | % | ||
Pro Forma income attributable to noncontrolling interest | 5,779 | |||
Less: historical income attributable to noncontrolling interest | (5,400 | ) | ||
Pro Forma adjustment | $ | 379 | ||
(16) The amounts in this column represent the pro forma adjustments made to reflect the reorganization transactions and IPO as if they occurred on January 1, 2009 as follows:
(a) | Reflects an adjustment to equity based compensation expense to give effect to the conversion of the EBS Phantom Awards into Class A common stock, restricted stock units and options to purchase shares of Class A common stock assuming such conversions occurred on January 1, 2009. This portion of the expense relates to unvested equity-based awards and will be recognized over the remaining vesting periods, which generally range from three to five years from the date of grant. | |
(b) | Reflects an adjustment to income taxes due to the pro forma adjustments presented in note 16(a) above applying statutory tax rates for the applicable period. | |
(c) | Reflects an adjustment to noncontrolling interest (21.49%) related to net income of EBS Master assuming the reorganization transactions and IPO occurred on January 1, 2009 calculated as follows: |
7
Emdeon Inc.
Notes to Unaudited Pro Forma Financial Information (continued)
Year Ended | ||||
December 31, | ||||
2009 | ||||
EBS Master Net Income | $ | 27,935 | ||
Add: Pro Forma Offering adjustments to EBS Master net income | (2,906 | ) | ||
Offering Pro Forma EBS Master net income | 25,029 | |||
Multiplied by noncontrolling interest percentage in EBS Master | 21.49 | % | ||
Pro Forma income attributable to noncontrolling interest | 5,379 | |||
Less: historical income attributable to noncontrolling interest | (6,295 | ) | ||
Pro Forma adjustment | $ | (916 | ) | |
(17) The amounts in this column represent eRx’s actual results for the period January 1, 2009 to July 2, 2009.
(18) The amounts in this column represent the pro forma adjustments made to reflect the eRx acquisition as if it occurred on January 1, 2009 as follows:
(a) | Represents impact to depreciation and amortization as a result of recording eRx fixed assets and identifiable intangible assets at fair value as of the date of acquisition as follows: |
Monthly | Year ended | |||||||||||||||
Description | Amount | Assigned Life | Amortization | December 31, 2009 | ||||||||||||
Technology | $ | 5,740 | 7 | $ | 68 | $ | 410 | |||||||||
Equipment | 1,274 | 3 | 35 | 456 | ||||||||||||
Total depreciation | 866 | |||||||||||||||
Customer List | 28,130 | 20 | 117 | 703 | ||||||||||||
Non-compete agreements | 320 | 5 | 5 | 32 | ||||||||||||
Trade Name | 9,660 | 20 | 40 | 242 | ||||||||||||
Total amortization | 977 | |||||||||||||||
Total Pro Forma expense | 1,843 | |||||||||||||||
Less: historical eRx depreciation and amortization expense | (509 | ) | ||||||||||||||
Pro Forma adjustment | $ | 1,334 | ||||||||||||||
(b) | Reflects an adjustment to reduce income taxes due to eRx historical adjustments presented in note 17 and the pro forma adjustments presented in note 18(a) above applying statutory tax rates for the applicable period. |
(c) | Reflects an adjustment to noncontrolling interest (21.49%) related to net income of EBS Master as follows: |
8
Emdeon Inc.
Notes to Unaudited Pro Forma Financial Information (continued)
Year Ended | ||||
December 31, | ||||
2009 | ||||
Offering Pro Forma EBS Master Net Income | $ | 25,029 | ||
Add: eRx Historical Net Income contribution to EBS Master Net Income | 3,191 | |||
Pro Forma eRx adjustments to EBS Master net income | (1,334 | ) | ||
Pro Forma EBS Master net income | 26,886 | |||
Multiplied by noncontrolling interest percentage in EBS Master | 21.49 | % | ||
Pro Forma income attributable to noncontrolling interest | 5,778 | |||
Less: Offering Pro Forma income attributable to noncontrolling interest | (5,379 | ) | ||
Pro Forma adjustment | $ | 399 | ||
(19) The amounts in this column represent the pro forma adjustments made to reflect the CEA acquisition as if it occurred on January 1, 2009 as follows:
(a) | Represents the elimination of revenue and expenses associated with transactions between the Company and CEA. | |
(b) | Represents a reclassification of historical CEA expenses to conform to the Company’s accounting policy. | |
(c) | Represents an adjustment to conform CEA’s accounting policy for the deferral of costs to the Company’s policy of expensing such costs as incurred. | |
(d) | Represents impact to depreciation and amortization as a result of recording CEA fixed assets and identifiable intangible assets at fair value as of the date of acquisition as follows: |
Monthly | Year ended | |||||||||||||||
Description | Amount | Assigned Life | Amortization | December 31, 2009 | ||||||||||||
Technology | $ | 21,520 | 10 | $ | 179 | $ | 2,152 | |||||||||
Equipment | 2,217 | 2 | 92 | 1,109 | ||||||||||||
Total depreciation | 3,261 | |||||||||||||||
Customer List | 72,180 | 12 | 501 | 6,015 | ||||||||||||
Non-compete agreements | 1,330 | 5 | 22 | 266 | ||||||||||||
Trade Name | 3,620 | 5 | 60 | 724 | ||||||||||||
Total amortization | 7,005 | |||||||||||||||
Total proforma expense | 10,266 | |||||||||||||||
Less: historical CEA depreciation and amortization expense | (4,939 | ) | ||||||||||||||
Pro Forma adjustment | $ | 5,327 | ||||||||||||||
(e) | Represents interest expense (including amortization of loan costs and discount) related to the Company’s $100,000 incremental term loan borrowing as if the borrowing (and the repayment of the CEA existing debt) occurred on January 1, 2009 as follows: |
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Emdeon Inc.
Notes to Unaudited Pro Forma Financial Information (continued)
Year Ended | ||||
December 31, | ||||
2009 | ||||
Interest related to incremental term loan borrowing | 4,483 | |||
Amortization of debt discount and deferred loan costs | 716 | |||
5,199 | ||||
Less: historical CEA note payable interest expense | (4,502 | ) | ||
Pro Forma adjustment | $ | 697 | ||
This adjustment assumes the interest rate on this borrowing at the date of acquisition (4.5%) was in effect for the entire period. A 125 basis point change in the assumed interest rate would have an impact of $1,245 on pro forma consolidated interest expense.
(f) | Reflects an adjustment to reduce income taxes due to the pro forma adjustments presented in note 19(a) — (e) above applying statutory tax rates for the applicable periods. |
(g) | Reflects an adjustment to noncontrolling interest (21.49%) related to net income of EBS Master as follows: |
Year Ended | ||||
December 31, | ||||
2009 | ||||
Offering and eRx Pro Forma EBS Master Net Income | $ | 26,886 | ||
Add: CEA Historical Net Income contribution to EBS Master Net Income | 6,165 | |||
Pro forma CEA adjustments to EBS Master net income | (3,157 | ) | ||
Pro Forma EBS Master net income | 29,894 | |||
Multiplied by noncontrolling interest percentage in EBS Master | 21.49 | % | ||
Pro Forma income attributable to noncontrolling interest | 6,425 | |||
Less: eRx Pro Forma income attributable to noncontrolling interest | (5,778 | ) | ||
Pro Forma adjustment | $ | 647 | ||
(20) Net income for the year ended December 31, 2009 excludes non recurring charges that are directly attributable to the Company’s reorganization and IPO that occurred in 2009 of $8,789 and the related tax impact of $3,222 and noncontrolling interest of $1,873.
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