Exhibit 99.1
Premier Inc. Reports Fiscal 2019 First-Quarter Results
CHARLOTTE, NC, Nov. 6, 2018 – Premier Inc. (NASDAQ: PINC) today reported financial results for the fiscal 2019 first quarter ended Sept. 30, 2018.
The company adopted new revenue recognition standard ASC 606 on July 1, 2018 using the modified retrospective approach and did not restate prior periods. Accordingly, the year-over-year comparisons in this press release compare fiscal 2019 first-quarter results under ASC 606 to fiscal 2018 first-quarter results under the previous revenue recognition standard ASC 605. A reconciliation of fiscal 2019 first-quarter results from ASC 606 to ASC 605 is provided in the tables included in this press release.
Q1 2019 Highlights:
| • | GAAP net revenue increased to $401.5 million from $390.6 million a year ago; Supply Chain Services segment revenue of $315.8 million increased from $305.8 million and Performance Services segment revenue of $85.7 million increased from $84.8 million. |
| • | GAAP net income of $82.0 million increased from $60.6 million and diluted loss per share totaled $12.80, compared with net income of $0.30 per diluted share a year ago. |
| • | Non-GAAP adjusted EBITDA* increased to $138.6 million from $119.2 million a year ago. |
| • | Non-GAAP adjusted fully distributed net income* increased to $86.9 million, representing $0.65 per diluted share, compared with $61.7 million, or $0.44 per diluted share a year ago. |
| • | Premier is adjusting its full fiscal-year 2019 financial guidance ranges to reflect the impact of the new revenue recognition standard ASC 606. |
* Descriptions of adjusted EBITDA, adjusted fully distributed net income and othernon-GAAP financial measures are provided in “Use and Definition ofNon-GAAP Measures,” and reconciliations are provided in the tables at the end of this release.
“Premier delivered a successful fiscal first quarter, exceeding management’s revenue and profit growth expectations for our individual segments and for the company as a whole under the new revenue recognition standard,” said Susan DeVore, president and chief executive officer. “We delivered steady revenue growth in our Supply Chain Services and Performance Services segments, driven by our group purchasing, consulting and technology businesses.
“Our financial outlook for the year remains intact,” DeVore said. “We continue to view fiscal 2019 as a year of steady growth and are adjusting our previously issued guidance solely to reflect the impact of our adoption of the new revenue recognition standard.
Premier, Inc. FY’19 Q1 Results
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“We believe Premier remains uniquely well-positioned in this evolving environment as we continue to build and expand our comprehensive total-value proposition aligned with the growing needs of our healthcare providers,” DeVore continued. “Our strong balance sheet and cash flow allow us to continue to execute our strategies as we strive to deliver lasting value for our stockholders.”
Results of Operations for the First Quarter of Fiscal 2019
Consolidated First-Quarter Financial Highlights
| Three Months Ended September 30, | ||||||||
| (in thousands, except per share data) | 2018 New revenue standard | 2017 Previous revenue standard | ||||||
Net Revenue(a): | ||||||||
Supply Chain Services: | ||||||||
Net administrative fees | $ | 162,000 | $ | 150,991 | ||||
Other services and support | 2,344 | 2,149 | ||||||
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Services | 164,344 | 153,140 | ||||||
Products | 151,470 | 152,662 | ||||||
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Total Supply Chain Services(a) | 315,814 | 305,802 | ||||||
Performance Services(a) | 85,732 | 84,762 | ||||||
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Total(a) | $ | 401,546 | $ | 390,564 | ||||
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Net income | $ | 81,973 | $ | 60,616 | ||||
Net income (loss) attributable to stockholders | $ | (681,333) | $ | 336,430 | ||||
Adjusted net income (loss)(b) | $ | (681,333) | $ | 42,460 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 53,221 | 52,909 | ||||||
Diluted | 53,221 | 140,046 | ||||||
Earnings (loss) per share attributable to stockholders: | ||||||||
Basic | $ | (12.80 | ) | $ | 6.36 | |||
Diluted(b) | $ | (12.80 | ) | $ | 0.30 | |||
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NON-GAAP FINANCIAL MEASURES: | ||||||||
Adjusted EBITDA (a) (c): | ||||||||
Supply Chain Services | $ | 135,403 | $ | 125,620 | ||||
Performance Services | 30,575 | 21,221 | ||||||
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Total segment adjusted EBITDA | 165,978 | 146,841 | ||||||
Corporate | (27,357 | ) | (27,670 | ) | ||||
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Total (a) | $ | 138,621 | $ | 119,171 | ||||
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Adjusted fully distributed net income(c) | $ | 86,895 | $ | 61,713 | ||||
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Earnings per share on adjusted fully distributed net income - diluted(a) (c) | $ | 0.65 | $ | 0.44 | ||||
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| (a) | Bolded measures correspond to company guidance. |
| (b) | Earnings per share attributable to stockholders excludes the adjustment of redeemable limited partners’ capital to redemption amount and the net income attributable tonon-controlling interest in Premier LP if Class B common stock is determined to be dilutive. Likewise, earnings per share attributable to stockholders includes the adjustment of redeemable limited partners’ capital to redemption amount and the net income attributable tonon-controlling interest in Premier LP if Class B common stock is determined to be antidilutive. The company has corrected prior period information within the current period financial statements related to a specific component used in calculating the tax effect on Premier Inc. net income for purposes of diluted earnings (loss) per share. Diluted earnings (loss) per share for the first quarter of fiscal 2018 was previously stated at $0.36 per share and has been corrected to $0.30 per share. The company believes the correction is immaterial and the amount had no impact on the company’s overall financial condition, results of operations or cash flows. |
| (c) | See attached supplemental financial information for reconciliation of reported GAAP results toNon-GAAP results. |
Premier, Inc. FY’19 Q1 Results
Page 3 of 14
For the fiscal first quarter ended Sept. 30, 2018, Premier generated GAAP net revenue of $401.5 million, an increase of $10.9 million from net revenue of $390.6 million for the same period a year ago.
GAAP net income for the fiscal first quarter was $82.0 million, compared with $60.6 million a year ago. In accordance with GAAP, fiscal 2019 and 2018 first-quarter net income attributable to stockholders includednon-cash adjustments of $(708.2) million and $320.4 million, respectively, to reflect the change in the redemption value of limited partners’ Class B common unit ownership at the end of each period. Thesenon-cash adjustments result primarily from changes in the number of Class B common shares outstanding and the company’s stock price between periods and do not reflect results of the company’s business operations. After thesenon-cash adjustments, the company reported a net loss attributable to stockholders of $681.3 million, compared with net income of $336.4 million for the same period a year ago. The first-quarter net loss of $12.80 per diluted share compared with net income of $0.30 per diluted share for the same period a year ago.See “Calculation of GAAP Earnings per Share” in the income statement section of this press release.
Fiscal first-quarternon-GAAP adjusted EBITDA increased to $138.6 million from $119.2 million for the same period the prior year.
Non-GAAP adjusted fully distributed net income for the fiscal first quarter of $86.9 million increased $25.2 million from $61.7 million for the same period a year ago. Adjusted fully distributed earnings per share totaled $0.65, compared with $0.44 for the same period a year ago.Adjusted fully distributed earnings per share is anon-GAAP financial measure that represents net income, adjusted fornon-recurring andnon-cash items, attributable to all stockholders as if all Class B stockholders exchanged their Class B common units and associated Class B common shares for Class A common shares.
Segment Results
Supply Chain Services
For the fiscal first quarter ended Sept. 30, 2018, the Supply Chain Services segment net revenue of $315.8 million increased $10.0 million from $305.8 million a year ago. Net administrative fees revenue of $162.0 million increased by $11.0 million, or 7%, from the prior year primarily driven by further contract penetration of new and existing members. Net administrative fees in the fiscal 2019 first quarter under the previous revenue recognition standard totaled $146.8 million by comparison, reflecting the impact of higher cash collections and revenue recoveries in the fiscal 2018 fourth quarter as a result of an increased focus on specific timing of cash collections under the previous revenue recognition standard.
Product revenue for the fiscal first quarter totaled $151.5 million, compared with $152.7 million a year ago. Growth in oncology and respiratory-related drug revenue, as well as sales growth in the direct sourcing business, was offset by the $12.0 million impact of revenue recognition under the new standard related primarily to the company’s 340B federal discount prescription drug program, and to a lesser extent to the direct sourcing business. More specifically, 340B revenue, as well as direct sourcing revenue associated with distributor fees, were historically recognized on a gross basis under the previous revenue recognition standard, but are now recognized on a net basis under the new revenue recognition standard.
Supply Chain Services segmentnon-GAAP adjusted EBITDA was $135.4 million for the fiscal 2019 first quarter, an increase of $9.8 million from $125.6 million for the same period a year ago. The difference was primarily driven by growth in net administrative fees revenue and lower selling, general and administrative expenses.
Premier, Inc. FY’19 Q1 Results
Page 4 of 14
Performance Services
For the fiscal first quarter ended Sept. 30, 2018, the Performance Services segment net revenue of $85.7 million increased $0.9 million from $84.8 million for the same quarter last year, primarily driven by cost management consulting services and applied sciences, as under the new standard revenue is now recognized proportionally to when services are provided. The growth was partially offset by a decrease in license revenue for the company’s safety related technology solutions under the new standard, which shifted recognition of some licensing revenue to apoint-in-time versus ratablyover-the-subscription-period under the previous revenue standard. This resulted in some licensing revenue attributed to prior periods, which is reflected in accumulated deficit upon adoption of the new standard.
Performance Services segmentnon-GAAP adjusted EBITDA totaled $30.6 million for the fiscal 2019 first quarter, a $9.4 million increase from $21.2 million for the same quarter last year. The increase was primarily the result of higher revenue as well as diligent cost management and the continuing realization of expense savings initiatives implemented in the prior year.
Cash Flows and Liquidity
Cash provided by operating activities was $60.3 million for the fiscal first quarter ended Sept. 30, 2018, compared with $75.0 million for the same quarter last year. The decrease in cash flow from operations was primarily driven by the impact of an increase in annual incentive payments on working capital, partially offset by decreased cost of services revenue and selling, general and administrative expenses. At Sept. 30, 2018, the company’s cash and cash equivalents totaled $142.4 million, compared with $152.4 million at June 30, 2018. At Sept. 30, 2018, the company had an outstanding balance of $100.0 million on its five-year $750.0 million revolving credit facility.
Non-GAAP free cash flow for the fiscal first quarter ended Sept. 30, 2018 was $1.8 million, compared with $33.4 million for the same period a year ago. The decrease in free cash flow results from the increased working capital needs, as well as growth in our internally developed software initiatives, partially offset by a decrease in distributions to limited partners. Given the company’s fiscal year end in June and payment of certain expenses including annual incentives in the fiscal first quarter, free cash flow is generally lower in this period than in subsequent quarters of the fiscal year. Fiscal 2019 first-quarter free cash flow was further impacted by an $18.0 million tax receivable agreement payment to member owners, as timing of the payment shifted to July in the current year from June in previous years due to a change in the company’s federal tax filing deadline. The company defines free cash flow as cash provided by operating activities less quarterly tax distributions and annual TRA payments to limited partners and purchases of property and equipment(see free cash flow reconciliation to net cash provided by operating activities in the tables section of this press release).
Fiscal 2019 Outlook and Guidance
Premier is adjusting its fiscal-year 2019 financial guidance ranges to reflect the impact of the adoption of the new revenue recognition standard ASC 606. All assumptions are consistent with guidance introduced August 21, 2018 under the previous revenue recognition standard, except where they have been adjusted in accordance with the new revenue recognition standard as set forth below.
Premier, Inc. FY’19 Q1 Results
Page 5 of 14
Based on the new revenue recognition standard:
| • | Management continues to expectlow- tomid-single-digit growth in net administrative fees revenue. |
| • | Products revenue growth is projected at 0% to 4%, due to a $50 milliongross-to- net revenue recognition adjustment. |
| • | Performance Services revenue is impacted by $16.0 million, including approximately $11 million due to the impact of adoption of the new standard on the safety technology business, which resulted in licensing revenue attributed to prior periods reflected in accumulated deficit upon adoption of the new standard, and approximately $5 million due to the impact on recognition of certain third-party reseller revenue, which was historically recognized on a gross basis and is now recognized on a net basis. |
| • | Non-GAAP adjusted EBITDA is impacted by $9.0 million, due to the reduction in Performance Services revenue associated with safety technology license offerings, which has a corresponding impact of $0.05 onnon-GAAP adjusted fully distributed earnings per share. |
| • | The company’s consolidatednon-GAAP adjusted EBITDA margin is now expected to range from 32% to 35%, primarily as a result of thegross-to-net revenue recognition changes. |
Fiscal 2019 Financial Guidance *
Premier, Inc. adjusts full-year fiscal 2019 financial guidance under ASC 606, as follows:
(in millions, except per share data) | ASC 606 | Impact of ASC 606 | ASC 605 | |||||||||
Net Revenue: | ||||||||||||
Supply Chain Services segment | $ | 1,305.0 - $1,357.0 | ($ | 50.0 | ) | $ | 1,355.0 - $1,407.0 | |||||
Performance Services segment | $ | 350.0 - $364.0 | ($ | 16.0 | ) | $ | 366.0 - $380.0 | |||||
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Total Net Revenue | $ | 1,655.0 - $1,721.0 | ($ | 66.0 | ) | $ | 1,721.0 - $1,787.0 | |||||
Non-GAAP adjusted EBITDA | $ | 550.0 - $572.0 | ($ | 9.0 | ) | $ | 559.0 - $581.0 | |||||
Non-GAAP adjusted fully distributed EPS | $ | 2.55 - $2.67 | ($ | 0.05 | ) | $ | 2.60 - $2.72 | |||||
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| * | The company does not meaningfully reconcile guidance fornon-GAAP adjusted EBITDA andnon-GAAP adjusted fully distributed earnings per share to net income attributable to stockholders or earnings per share attributable to stockholders because the company cannot provide guidance for more significant reconciling items between net income attributable to stockholders and adjusted EBITDA and between earnings per share attributable to stockholders andnon-GAAP adjusted fully distributed earnings per share without unreasonable effort. This is due to two primary reasons: |
| • | Reasonable guidance cannot be provided for reconciling the adjustment of redeemable limited partners’ capital to redemption amount – historically the largest adjustment in the reconciliation fromnon-GAAP to GAAP amounts – due to the fact that the increase or decrease in this item is based on the change in the number of shares of Class B stock outstanding and change in stock price between quarters, which the company cannot predict, control or reasonably estimate. |
| • | Reasonable guidance cannot be provided for earnings per share attributable to stockholders because the ongoing quarterly member-owner exchange of Class B common stock and corresponding Class B units into shares of Class A common stock impacts the number of shares of Class A common stock outstanding each quarter, which the company cannot predict, control or reasonably estimate. Member owners have the right, but not the obligation, to exchange shares on a quarterly basis, and the company has the discretion to settle any exchanged shares for Class A common stock, cash, or a combination thereof, neither of which can be predicted, controlled or reasonably estimated at this time. |
Conference Call
Premier management will host a conference call and live audio webcast on Tuesday, Nov. 6, 2018, at 8:00 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 atinvestors.premierinc.com. Those wanting to participate by phone may do so by dialing 844.296.7719 and providing the operator with conference ID number: 4293948. International callers should dial 574.990.1041 and provide the same passcode. The company encourages callers to dial in at least five minutes before the start of the call to register. The archived webcast will be accessible on Premier’s investor relations page.
Premier, Inc. FY’19 Q1 Results
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About Premier Inc.
Premier Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of more than 4,000 U.S. hospitals and health systems and approximately 165,000 other providers and organizations to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and consulting 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 toco-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 onwww.premierinc.com; as well asTwitter,Facebook,LinkedIn,YouTube,Instagram andPremier’s blog for more information about the company.
Use and Definition ofNon-GAAP Measures
Premier uses EBITDA, adjusted EBITDA, segment adjusted EBITDA, adjusted fully distributed net income, adjusted fully distributed earnings per share, and free cash flow to facilitate a comparison of the company’s operating performance on a consistent basis from period to period and to provide measures that, when viewed in combination with its results prepared in accordance with GAAP, allow for 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 by removing the impact of the company’s asset base (primarily depreciation and amortization) and items outside the control of management (taxes), as well as othernon-cash (impairment of intangible assets and purchase accounting adjustments) andnon-recurring items, from operating results.
In addition, adjusted fully distributed net income and adjusted fully distributed earnings per share eliminate the variability ofnon-controlling 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 and other potentially dilutive equity transactions which are outside of management’s control. Adjusted fully distributed net income is defined as net income attributable to Premier (i) excluding income tax expense, (ii) excluding the impact of adjustment of redeemable limited partners’ capital to redemption amount, (iii) excluding the effect ofnon-recurring andnon-cash items, (iv) assuming the exchange of all the Class B common units for shares of Class A common stock, which results in the elimination ofnon-controlling interest in Premier LP, and (v) reflecting an adjustment for income tax expense onnon-GAAP fully distributed net income before income taxes at the company’s estimated effective income tax rate. We define adjusted fully distributed earnings per share as adjusted fully distributed net income divided by diluted weighted average shares. These measures assist our board of directors, management and investors in comparing our net income and earnings per share on a consistent basis from period to period because these measures removenon-cash andnon-recurring items, and eliminate the variability ofnon-controlling interest that results from member owner exchanges of Class B common units into shares of Class A common stock.
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 andnon-recurring,non-cash ornon-operating items, and including equity in net income (or loss) of unconsolidated affiliates. For allNon-GAAP
Premier, Inc. FY’19 Q1 Results
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financial measures, we considernon-recurring items to be income or expenses and other items that have not been earned or incurred within the prior two years and are not expected to recur within the next two years. Such items include certain strategic and financial restructuring expenses.Non-operating items include gains or losses on the disposal of assets and interest and investment income or expense.
Segment adjusted EBITDA is defined as the segment’s net revenue less cost of revenue and operating expenses directly attributable to the segment, excluding depreciation and amortization, amortization of purchased intangible assets, merger and acquisition related expenses andnon-recurring ornon-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.
Free cash flow is defined as net cash provided by operating activities less distributions and tax receivable agreement payments to limited partners and purchases of property and equipment. Free cash flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayments. Management believes free cash flow is an important measure because it represents the cash that the company generates after payment of tax distributions to limited partners and capital investment to maintain existing products and services and ongoing business operations, as well as development of new and upgraded products and services to support future growth. Free cash flow is important because it allows the company to enhance stockholder value through acquisitions, partnerships, joint ventures, investments in related or complimentary businesses and/or debt reduction.
To properly and prudently evaluate our business, readers are urged to review the reconciliation of thesenon-GAAP financial measures, as well as the other financial tables, included at the end of this release. Readers should not rely on any single financial measure to evaluate the company’s business. In addition, thenon-GAAP financial measures used in this release are susceptible to varying calculations and may differ from, and may therefore not be comparable to, similarly titled measures used by other companies.
Further information on Premier’s use ofnon-GAAP financial measures is available in the “Our Use ofNon-GAAP Financial Measures” section of Premier’s Form10-K for the year ended June 30, 2018.
Forward-Looking Statements
Statements made in this release that are not statements of historical or current facts, such as those related to expected financial performance, the impact of the new revenue recognition standards, growth trends and market uncertainty in our Supply Chain and Performance Services business segments and their respective business units, the impact of regulatory uncertainty and our ability to manage through these issues and the evolving environment, and the statements related to fiscal 2019 outlook and guidance and the assumptions underlying such guidance, are “forward-looking statements” within the meaning of the
Premier, Inc. FY’19 Q1 Results
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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 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 “Cautionary Note Regarding 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, including those discussed under the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” section of Premier’sForm 10-K for the year ended June 30, 2018 as well as theForm 10-Q for the quarter ended September 30, 2018, expected to be filed with the SEC shortly after the date of this release, and also made available on Premier’s website atinvestors.premierinc.com. Forward-looking statements speak only as of the date they are made, and Premier undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events that occur after that date, or otherwise.
| Contacts | ||
| Investor Relations contact: | Media contact: | |
| Jim Storey | Amanda Forster | |
| Vice President, Investor Relations | Vice President, Public Relations | |
| 704.816.5958 | 202.897.8004 | |
| jim_storey@premierinc.com | morgan_guthrie@premierinc.com |
(Tables Follow)
Premier, Inc. FY’19 Q1 Results
Page 9 of 14
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
| Three Months Ended September 30, | ||||||||||||||||
| 2018 New revenue standard | 2018 Impact of new revenue standard | 2018 Previous revenue standard | 2017 Previous revenue standard | |||||||||||||
Net revenue: | ||||||||||||||||
Net administrative fees | $ | 162,000 | $ | 15,184 | $ | 146,816 | $ | 150,991 | ||||||||
Other services and support | 88,076 | 5,379 | 82,697 | 86,911 | ||||||||||||
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Services | 250,076 | 20,563 | 229,513 | 237,902 | ||||||||||||
Products | 151,470 | (11,962 | ) | 163,432 | 152,662 | |||||||||||
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Net revenue | 401,546 | 8,601 | 392,945 | 390,564 | ||||||||||||
Cost of revenue: |
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Services | 43,372 | (1,933 | ) | 45,305 | 46,936 | |||||||||||
Products | 145,621 | (11,371 | ) | 156,992 | 144,440 | |||||||||||
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Cost of revenue | 188,993 | (13,304 | ) | 202,297 | 191,376 | |||||||||||
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Gross profit | 212,553 | 21,905 | 190,648 | 199,188 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 105,870 | (1,111 | ) | 106,981 | 114,321 | |||||||||||
Research and development | 340 | — | 340 | 489 | ||||||||||||
Amortization of purchased intangible assets | 13,638 | — | 13,638 | 13,898 | ||||||||||||
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Operating expenses | 119,848 | (1,111 | ) | 120,959 | 128,708 | |||||||||||
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Operating income | 92,705 | 23,016 | 69,689 | 70,480 | ||||||||||||
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Equity in net income (loss) of unconsolidated affiliates | 2,690 | — | 2,690 | 4,252 | ||||||||||||
Interest and investment loss, net | (688 | ) | — | (688 | ) | (1,495 | ) | |||||||||
Loss on disposal of long-lived assets | — | — | — | (1,320 | ) | |||||||||||
Other income (expense) | (1,941 | ) | — | (1,941 | ) | 1,463 | ||||||||||
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Other income (expense), net | 61 | — | 61 | 2,900 | ||||||||||||
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Income before income taxes | 92,766 | 23,016 | 69,750 | 73,380 | ||||||||||||
Income tax expense | 10,793 | 1,759 | 9,034 | 12,764 | ||||||||||||
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Net income | 81,973 | 21,257 | 60,716 | 60,616 | ||||||||||||
Net income attributable tonon-controlling interest in Premier LP | (55,113 | ) | (13,373 | ) | (41,740 | ) | (44,610 | ) | ||||||||
Adjustment of redeemable limited partners’ capital to redemption amount | (708,193 | ) | 10,572 | (718,765 | ) | 320,424 | ||||||||||
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Net income (loss) attributable to stockholders | $ | (681,333 | ) | $ | 18,456 | $ | (699,789 | ) | $ | 336,430 | ||||||
Calculation of GAAP Earnings (Loss) per Share | ||||||||||||||||
Numerator for basic earnings (loss) per share: | ||||||||||||||||
Net income (loss) attributable to stockholders | $ | (681,333 | ) | $ | 18,456 | $ | (699,789 | ) | $ | 336,430 | ||||||
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Numerator for diluted earnings (loss) per share: | ||||||||||||||||
Net income (loss) attributable to stockholders | $ | (681,333 | ) | $ | 18,456 | $ | (699,789 | ) | $ | 336,430 | ||||||
Adjustment of redeemable limited partners’ capital to redemption amount | — | — | — | (320,424 | ) | |||||||||||
Net income attributable tonon-controlling interest in Premier LP | — | — | — | 44,610 | ||||||||||||
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Net income (loss) | (681,333 | ) | 18,456 | (699,789 | ) | 60,616 | ||||||||||
Tax effect on Premier, Inc. net income | — | — | — | (18,156 | ) | |||||||||||
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Adjusted net income (loss) | $ | (681,333 | ) | $ | 18,456 | $ | (699,789 | ) | $ | 42,460 | ||||||
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Denominator for basic earnings (loss) per share: | ||||||||||||||||
Weighted average shares | 53,221 | — | 53,221 | 52,909 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Denominator for diluted earnings (loss) per share: | ||||||||||||||||
Weighted average shares | 53,221 | — | 53,221 | 52,909 | ||||||||||||
Effect of dilutive stock based awards | — | — | — | 655 | ||||||||||||
Class B shares outstanding | — | — | — | 86,482 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average shares and assumed conversions | 53,221 | — | 53,221 | 140,046 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Basic earnings (loss) per share | $ | (12.80 | ) | $ | 0.35 | $ | (13.15 | ) | $ | 6.36 | ||||||
Diluted earnings (loss) per share(1) | $ | (12.80 | ) | $ | 0.35 | $ | (13.15 | ) | $ | 0.30 | ||||||
| (1) | The company has corrected prior period information within the current period financial statements related to a specific component used in calculating the tax effect on Premier Inc. net income for purposes of diluted earnings (loss) per share. Diluted earnings (loss) per share for the first quarter of fiscal 2018 was previously stated at $0.36 per share and has been corrected to $0.30 per share. The company believes the correction is immaterial and the amount had no impact on the company’s overall financial condition, results of operations or cash flows. |
Premier, Inc. FY’19 Q1 Results
Page 10 of 14
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
| September 30, 2018 New revenue standard | September 30, 2018 Impact of new revenue standard | September 30, 2018 Previous revenue standard | June 30, 2018 Previous revenue standard | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 142,422 | $ | — | $ | 142,422 | $ | 152,386 | ||||||||
Accounts receivable (net of $4,867 and $1,841 allowance for doubtful accounts, respectively) | 182,254 | (8,381 | ) | 190,635 | 185,874 | |||||||||||
Contract assets | 202,961 | 202,961 | — | — | ||||||||||||
Inventory | 68,236 | — | 68,236 | 66,139 | ||||||||||||
Prepaid expenses and other current assets | 29,675 | (813 | ) | 30,488 | 23,325 | |||||||||||
Due from related parties | 654 | — | 654 | 894 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total current assets | 626,202 | 193,767 | 432,435 | 428,618 | ||||||||||||
Property and equipment (net of $318,098 and $297,591 accumulated depreciation, respectively) | 211,248 | — | 211,248 | 206,693 | ||||||||||||
Intangible assets (net of $167,273 and $153,635 accumulated amortization, respectively) | 308,477 | — | 308,477 | 322,115 | ||||||||||||
Goodwill | 906,545 | — | 906,545 | 906,545 | ||||||||||||
Deferred income tax assets | 301,267 | (6,177 | ) | 307,444 | 305,624 | |||||||||||
Deferred compensation plan assets | 43,343 | — | 43,343 | 44,577 | ||||||||||||
Investments in unconsolidated affiliates | 96,743 | — | 96,743 | 94,053 | ||||||||||||
Other assets | 22,727 | 15,248 | 7,479 | 3,991 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | $ | 2,516,552 | $ | 202,838 | $ | 2,313,714 | $ | 2,312,216 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities, redeemable limited partners’ capital and stockholders’ deficit | ||||||||||||||||
Accounts payable | $ | 53,452 | $ | — | $ | 53,452 | $ | 60,130 | ||||||||
Accrued expenses | �� | 87,366 | — | 87,366 | 64,257 | |||||||||||
Revenue share obligations | 119,578 | 50,448 | 69,130 | 78,999 | ||||||||||||
Limited partners’ distribution payable | 14,993 | 2,801 | 12,192 | 15,465 | ||||||||||||
Accrued compensation and benefits | 33,146 | — | 33,146 | 64,112 | ||||||||||||
Deferred revenue | 34,259 | (1,604 | ) | 35,863 | 39,785 | |||||||||||
Current portion of tax receivable agreements | 18,217 | — | 18,217 | 17,925 | ||||||||||||
Current portion of long-term debt | 101,771 | — | 101,771 | 100,250 | ||||||||||||
Other liabilities | 7,050 | 1,233 | 5,817 | 7,959 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total current liabilities | 469,832 | 52,878 | 416,954 | 448,882 | ||||||||||||
Long-term debt, less current portion | 5,447 | — | 5,447 | 6,962 | ||||||||||||
Tax receivable agreements, less current portion | 225,090 | — | 225,090 | 237,176 | ||||||||||||
Deferred compensation plan obligations | 43,343 | — | 43,343 | 44,577 | ||||||||||||
Deferred tax liabilities | 21,950 | 4,240 | 17,710 | 17,569 | ||||||||||||
Other liabilities | 68,083 | — | 68,083 | 63,704 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | 833,745 | 57,118 | 776,627 | 818,870 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Redeemable limited partners’ capital | 3,638,624 | — | 3,638,624 | 2,920,410 | ||||||||||||
Stockholders’ deficit: | ||||||||||||||||
Class A common stock, $0.01 par value, 500,000,000 shares authorized; 58,077,840 shares issued and 53,790,369 shares outstanding at September 30, 2018 and 57,530,733 shares issued and 52,761,177 shares outstanding at June 30, 2018 | 580 | — | 580 | 575 | ||||||||||||
Class B common stock, $0.000001 par value, 600,000,000 shares authorized; 79,519,233 and 80,335,701 shares issued and outstanding at September 30, 2018 and June 30, 2018, respectively | — | — | — | — | ||||||||||||
Treasury stock, at cost; 4,287,471 and 4,769,556 shares, respectively | (136,397 | ) | — | (136,397 | ) | (150,058 | ) | |||||||||
Additionalpaid-in-capital | — | — | — | — | ||||||||||||
Accumulated deficit | (1,820,000 | ) | 145,720 | (1,965,720 | ) | (1,277,581 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total stockholders’ deficit | (1,955,817 | ) | 145,720 | (2,101,537 | ) | (1,427,064 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities, redeemable limited partners’ capital and stockholders’ deficit | $ | 2,516,552 | $ | 202,838 | $ | 2,313,714 | $ | 2,312,216 | ||||||||
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| |||||||||
Premier, Inc. FY’19 Q1 Results
Page 11 of 14
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| Three Months Ended September 30, | ||||||||||||||||
| 2018 New revenue standard | 2018 Impact of new revenue standard | 2018 Previous revenue standard | 2017 Previous revenue standard | |||||||||||||
Operating activities | ||||||||||||||||
Net income | $ | 81,973 | $ | 21,257 | $ | 60,716 | $ | 60,616 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 34,145 | — | 34,145 | 30,405 | ||||||||||||
Equity in net income of unconsolidated affiliates | (2,690 | ) | — | (2,690 | ) | (4,252 | ) | |||||||||
Deferred income taxes | 4,588 | (290 | ) | 4,878 | 8,298 | |||||||||||
Stock-based compensation | 6,195 | — | 6,195 | 8,815 | ||||||||||||
Loss on disposal of long-lived assets | — | — | — | 1,320 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable, contract assets, prepaid expenses and other current assets | (41,427 | ) | (29,503 | ) | (11,924 | ) | (8,748 | ) | ||||||||
Other assets | (2,235 | ) | 144 | (2,379 | ) | 1,379 | ||||||||||
Inventories | (2,097 | ) | — | (2,097 | ) | (7,178 | ) | |||||||||
Accounts payable, accrued expenses, deferred revenue and other current liabilities | (21,776 | ) | 8,392 | (30,168 | ) | (21,933 | ) | |||||||||
Long-term liabilities | (14 | ) | — | (14 | ) | (111 | ) | |||||||||
Loss on FFF put and call rights | 3,283 | — | 3,283 | 20 | ||||||||||||
Other operating activities | 382 | — | 382 | 6,402 | ||||||||||||
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|
|
|
|
|
| |||||||||
Net cash provided by operating activities | 60,327 | — | 60,327 | 75,033 | ||||||||||||
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|
|
|
| |||||||||
Investing activities | ||||||||||||||||
Purchases of property and equipment | (25,062 | ) | — | (25,062 | ) | (16,646 | ) | |||||||||
|
|
|
|
|
|
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| |||||||||
Net cash used in investing activities | (25,062 | ) | — | (25,062 | ) | (16,646 | ) | |||||||||
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|
|
|
|
|
| |||||||||
Financing activities | ||||||||||||||||
Payments made on notes payable | — | — | — | (4,974 | ) | |||||||||||
Payments on credit facility | — | — | — | (50,000 | ) | |||||||||||
Proceeds from exercise of stock options under equity incentive plan | 7,472 | — | 7,472 | 2,652 | ||||||||||||
Repurchase of vested restricted units for employeetax-withholding | (6,948 | ) | — | (6,948 | ) | (5,729 | ) | |||||||||
Distributions to limited partners of Premier LP | (15,465 | ) | — | (15,465 | ) | (24,951 | ) | |||||||||
Payments to limited partners of Premier LP related to tax receivable agreements | (17,975 | ) | — | (17,975 | ) | — | ||||||||||
Repurchase of Class A common stock (held as treasury stock) | (12,313 | ) | — | (12,313 | ) | — | ||||||||||
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|
|
|
|
|
|
| |||||||||
Net cash used in financing activities | (45,229 | ) | — | (45,229 | ) | (83,002 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease in cash and cash equivalents | (9,964 | ) | — | (9,964 | ) | (24,615 | ) | |||||||||
Cash and cash equivalents at beginning of year | 152,386 | — | 152,386 | 156,735 | ||||||||||||
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|
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| |||||||||
Cash and cash equivalents at end of period | $ | 142,422 | $ | — | $ | 142,422 | $ | 132,120 | ||||||||
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| |||||||||
Premier, Inc. FY’19 Q1 Results
Page 12 of 14
Supplemental Financial Information
Reconciliation of Net Cash Provided by Operating Activities toNon-GAAP Free Cash Flow
(Unaudited)
(In thousands)
| Three Months Ended September 30, | ||||||||
| 2018 | 2017 | |||||||
Net cash provided by operating activities | $ | 60,327 | $ | 75,033 | ||||
Purchases of property and equipment | (25,062 | ) | (16,646 | ) | ||||
Distributions to limited partners of Premier LP | (15,465 | ) | (24,951 | ) | ||||
Payments to limited partners under tax receivable agreements * | (17,975 | ) | — | |||||
|
|
|
| |||||
Non-GAAP Free Cash Flow | $ | 1,825 | $ | 33,436 | ||||
|
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|
| |||||
| * | The timing of the annual tax receivable agreement payments has shifted to July from June due to the change in the company’s federal tax filing deadline. As a result, Premier did not make a tax receivable agreement payment in fiscal 2018, but made the payment in July and will make future annual payments in July. |
Premier, Inc. FY’19 Q1 Results
Page 13 of 14
Supplemental Financial Information
Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Operating Income to Segment Adjusted EBITDA
Reconciliation of Net Income Attributable to Stockholders toNon-GAAP Adjusted Fully Distributed Net Income
(Unaudited)
(In thousands)
| Three Months Ended September 30, | ||||||||||||||||
2018 New revenue | 2018 Impact of new | 2018 Previous revenue standard | 2017 Previous revenue standard | |||||||||||||
Net income | $ | 81,973 | $ | 21,257 | $ | 60,716 | $ | 60,616 | ||||||||
Interest and investment loss, net | 688 | — | 688 | 1,495 | ||||||||||||
Income tax expense | 10,793 | 1,759 | 9,034 | 12,764 | ||||||||||||
Depreciation and amortization | 20,507 | — | 20,507 | 16,507 | ||||||||||||
Amortization of purchased intangible assets | 13,638 | — | 13,638 | 13,898 | ||||||||||||
EBITDA | 127,599 | 23,016 | 104,583 | 105,280 | ||||||||||||
Stock-based compensation | 6,337 | — | 6,337 | 8,957 | ||||||||||||
Acquisition related expenses | 409 | — | 409 | 3,099 | ||||||||||||
ERP implementation expenses | 326 | — | 326 | 335 | ||||||||||||
Loss on disposal of long-lived assets | — | — | — | 1,320 | ||||||||||||
Loss on FFF put and call rights | 3,283 | — | 3,283 | 20 | ||||||||||||
Other expense | 667 | — | 667 | 160 | ||||||||||||
Adjusted EBITDA | $ | 138,621 | $ | 23,016 | $ | 115,605 | $ | 119,171 | ||||||||
Income before income taxes | $ | 92,766 | $ | 23,016 | $ | 69,750 | $ | 73,380 | ||||||||
Equity in net loss (income) of unconsolidated affiliates | (2,690 | ) | — | (2,690 | ) | (4,252 | ) | |||||||||
Interest and investment loss, net | 688 | — | 688 | 1,495 | ||||||||||||
Loss on disposal of long-lived assets | — | — | — | 1,320 | ||||||||||||
Other expense (income) | 1,941 | — | 1,941 | (1,463 | ) | |||||||||||
Operating income | 92,705 | 23,016 | 69,689 | 70,480 | ||||||||||||
Depreciation and amortization | 20,507 | — | 20,507 | 16,507 | ||||||||||||
Amortization of purchased intangible assets | 13,638 | — | 13,638 | 13,898 | ||||||||||||
Stock-based compensation | 6,337 | — | 6,337 | 8,957 | ||||||||||||
Acquisition related expenses | 409 | — | 409 | 3,099 | ||||||||||||
ERP implementation expenses | 326 | — | 326 | 335 | ||||||||||||
Equity in net income (loss) of unconsolidated affiliates | 2,690 | — | 2,690 | 4,252 | ||||||||||||
Deferred compensation plan income | 1,336 | — | 1,336 | 1,539 | ||||||||||||
Other expense | 673 | — | 673 | 104 | ||||||||||||
Adjusted EBITDA | $ | 138,621 | $ | 23,016 | $ | 115,605 | $ | 119,171 | ||||||||
Segment Adjusted EBITDA: | ||||||||||||||||
Supply Chain Services | $ | 135,403 | $ | 15,599 | $ | 119,804 | $ | 125,620 | ||||||||
Performance Services | 30,575 | 7,417 | 23,158 | 21,221 | ||||||||||||
Corporate | (27,357 | ) | — | (27,357 | ) | (27,670 | ) | |||||||||
Adjusted EBITDA | $ | 138,621 | $ | 23,016 | $ | 115,605 | $ | 119,171 | ||||||||
Net income (loss) attributable to stockholders | $ | (681,333 | ) | $ | 18,456 | $ | (699,789 | ) | $ | 336,430 | ||||||
Adjustment of redeemable limited partners’ capital to redemption amount | 708,193 | (10,572 | ) | 718,765 | (320,424 | ) | ||||||||||
Net income attributable tonon-controlling interest in Premier LP | 55,113 | 13,373 | 41,740 | 44,610 | ||||||||||||
Income tax expense | 10,793 | 1,759 | 9,034 | 12,764 | ||||||||||||
Amortization of purchased intangible assets | 13,638 | — | 13,638 | 13,898 | ||||||||||||
Stock-based compensation | 6,337 | — | 6,337 | 8,957 | ||||||||||||
Acquisition related expenses | 409 | — | 409 | 3,099 | ||||||||||||
ERP implementation expenses | 326 | — | 326 | 335 | ||||||||||||
Loss on disposal of long-lived assets | — | — | — | 1,320 | ||||||||||||
Loss on FFF put and call rights | 3,283 | — | 3,283 | 20 | ||||||||||||
Other expense | 667 | — | 667 | 160 | ||||||||||||
Non-GAAP adjusted fully distributed income before income taxes | 117,426 | 23,016 | 94,410 | 101,169 | ||||||||||||
Income tax expense on fully distributed income before income taxes | 30,531 | 5,984 | 24,547 | 39,456 | ||||||||||||
Non-GAAP Adjusted Fully Distributed Net Income | $ | 86,895 | $ | 17,032 | $ | 69,863 | $ | 61,713 | ||||||||
Premier, Inc. FY’19 Q1 Results
Page 14 of 14
Reconciliation of GAAP EPS toNon-GAAP EPS on Adjusted Fully Distributed Net Income
(Unaudited)
(In thousands, except per share data)
| Three Months Ended September 30, | ||||||||||||||||
2018 New revenue | 2018 Impact of new | 2018 Previous revenue | 2017 Previous revenue | |||||||||||||
Net income (loss) attributable to stockholders | $ | (681,333 | ) | $ | 18,456 | $ | (699,789 | ) | $ | 336,430 | ||||||
Adjustment of redeemable limited partners’ capital to redemption amount | 708,193 | (10,572 | ) | 718,765 | (320,424 | ) | ||||||||||
Net income attributable tonon-controlling interest in Premier LP | 55,113 | 13,373 | 41,740 | 44,610 | ||||||||||||
Income tax expense | 10,793 | 1,759 | 9,034 | 12,764 | ||||||||||||
Amortization of purchased intangible assets | 13,638 | — | 13,638 | 13,898 | ||||||||||||
Stock-based compensation | 6,337 | — | 6,337 | 8,957 | ||||||||||||
Acquisition related expenses | 409 | — | 409 | 3,099 | ||||||||||||
ERP implementation expenses | 326 | — | 326 | 335 | ||||||||||||
Loss on disposal of long-lived assets | — | — | — | 1,320 | ||||||||||||
Loss on FFF put and call rights | 3,283 | — | 3,283 | 20 | ||||||||||||
Other expense | 667 | — | 667 | 160 | ||||||||||||
Non-GAAP adjusted fully distributed income before income taxes | 117,426 | 23,016 | 94,410 | 101,169 | ||||||||||||
Income tax expense on fully distributed income before income taxes | 30,531 | 5,984 | 24,547 | 39,456 | ||||||||||||
Non-GAAP Adjusted Fully Distributed Net Income | $ | 86,895 | $ | 17,032 | $ | 69,863 | $ | 61,713 | ||||||||
Weighted Average: | ||||||||||||||||
Common shares used for basic and diluted earnings (loss) per share | 53,221 | — | 53,221 | 52,909 | ||||||||||||
Potentially dilutive shares | 1,067 | — | 1,067 | 655 | ||||||||||||
Conversion of Class B common units | 79,794 | — | 79,794 | 86,482 | ||||||||||||
Weighted average fully distributed shares outstanding - diluted | 134,082 | — | 134,082 | 140,046 | ||||||||||||
GAAP earnings (loss) per share | $ | (12.80 | ) | $ | 0.35 | $ | (13.15 | ) | $ | 6.36 | ||||||
Adjustment of redeemable limited partners’ capital to redemption amount | 13.31 | (0.20 | ) | 13.51 | (6.05 | ) | ||||||||||
Net income attributable tonon-controlling interest in Premier LP | 1.04 | 0.26 | 0.78 | 0.84 | ||||||||||||
Income tax expense | 0.20 | 0.03 | 0.17 | 0.24 | ||||||||||||
Amortization of purchased intangible assets | 0.26 | — | 0.26 | 0.26 | ||||||||||||
Stock-based compensation | 0.12 | — | 0.12 | 0.17 | ||||||||||||
Acquisition related expenses | 0.01 | — | 0.01 | 0.06 | ||||||||||||
ERP implementation expenses | 0.01 | — | 0.01 | 0.01 | ||||||||||||
Loss on disposal of long-lived assets | — | — | — | 0.02 | ||||||||||||
Loss on FFF put and call rights | 0.06 | — | 0.06 | — | ||||||||||||
Other expense | 0.01 | — | 0.01 | — | ||||||||||||
Impact of corporation taxes | (0.57 | ) | (0.11 | ) | (0.46 | ) | (0.74 | ) | ||||||||
Impact of dilutive shares | (1.00 | ) | (0.20 | ) | (0.80 | ) | (0.73 | ) | ||||||||
Non-GAAP EPS on Adjusted Fully Distributed Net Income | $ | 0.65 | $ | 0.13 | $ | 0.52 | $ | 0.44 | ||||||||
# # #