May 31, 2019
Neil E. de Crescenzo
President and Chief Executive Officer
Change Healthcare Inc.
3055 Lebanon Pike, Suite 1000
Nashville, Tennessee 37214
Re: Change Healthcare Inc.
Amendment No. 3 to Registration Statement on Form S-1
Filed May 24, 2019
File No. 333-230345
Dear Mr. de Crescenzo:
We have reviewed your amended registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Amendment No. 3 to Form S-1 filed May 24, 2019
Capitalization, page 93
1. Given that the Units are to be sold under a separate prospectus and in
order to enhance
transparency and clarity between the common stock offering and the
tangible equity units
offering, please revise to present the allocable amount of purchase
contracts included
within additional paid-in capital as a separate line item within your
table.
2. Please revise to provide a footnote explaining how you determined the
members' deficit as
shown in the Change Healthcare LLC capitalization table on page 94.
3. Please revise to describe how you determined the percentage of the
amount of the Units to
allocate to the amortizing notes and to the purchase contracts, as
described in footnotes 2
and 4, including any assumptions used. Further, please explain how you
calculated the
Neil E. de Crescenzo
Change Healthcare Inc.
May 31, 2019
Page 2
allocated amounts disclosed. To this extent, when the percentages
provided are applied to
the net proceeds expected from the tangible equity units offering, we
are not able to
calculate the amounts provided.
Dilution, page 96
4. We note you refer to the Offering Transactions in the introductory
paragraph here.
However, it appears this disclosure only reflects the common stock
offering and not the
tangible equity offering. Please revise to clearly disclose which
transaction(s) are
reflected here.
Unaudited Pro Forma Condensed Financial Information, page 98
5. Please revise to more clearly describe the transactions reflected and
entities involved in
the pro forma information presented. Alternatively, you may
cross-reference to this
information elsewhere in your filing. Refer to Rule 11-02(b)(2) of
Regulation S-X.
6. Please clarify when you refer to "this offering" both here and within
the notes to your pro
forma information whether you are referring only to the common stock
offering, only to
the tangible equity units offering, or to both offerings. Please
revise accordingly.
Notes to Unaudited Pro Forma Condensed Financial Information, page 103
7. Please revise note (1)a to describe the assumptions and inputs that
will be used to
determine the relative fair value basis on which you will allocate the
proceeds between the
purchase contract and amortizing note components of the Units.
Further, please clarify
where these amounts are reflected on the pro forma balance sheet
(e.g., in current
maturities of long-term debt or long-term debt).
8. Please explain why the third-party costs referred to in note (2)d were
reclassified directly
to members' deficit. Refer to guidance in Rule 11-02(b)(6) of
Regulation S-X.
9. Please revise notes (3)c and (3)d on page 105, and note (4)c on page
106, to disclose the
interest rate on these financial instruments.
10. Please revise note (3)e on page 105 and note 4(d) on page 106 to
disclose the applicable
income tax rate used.
Tangible Equity Units Offering, page 237
11. We note from your disclosure here that either you or the purchase
contract holders have
FirstName option to settle thede Crescenzo
the LastNameNeil E. contracts before the mandatory settlement date in
2022. Please
Comapany NameChange Healthcare Inc.
revise to explain the terms and conditions surrounding the circumstance
when you would
May 31, 2019 Page 2these contracts early.
elect to settle
FirstName LastName
Neil E. de Crescenzo
FirstName LastNameNeil E. de Crescenzo
Change Healthcare Inc.
Comapany NameChange Healthcare Inc.
May 31, 2019
Page 3
May 31, 2019 Page 3
FirstName LastName
Notes to Financial Statements of Change Healthcare, Inc.
8. Incentive Compensation Plans
Contingent Awards, page F-18
12. Please revise to state the number of awards you committed to issue to
Joint Venture
employees and, therefore, the total amount of compensation expense you
expect to incur.
In addition, please revise to describe the method by which these
awards will be valued
(i.e., the IPO price or some other basis). Similarly, please also
revise your disclosures on
page F-64.
Notes to Consolidated Financial Statements of Change Healthcare LLC
16. Incentive Compensation Plans
Valuation Assumptions, page F-64
13. We note you granted both time-vesting options and exit-vesting options
during fiscal year
2019. For each issuance during 2019 and into fiscal 2020, to date,
please provide us with
the dates, number of options issued, and the fair value of the
underlying common stock.
Further, we note the weighted-average fair value of the underlying
common stock for
these issuances is disclosed in your table here. Giving effect to the
forward stock split
which will occur prior to your IPO, it appears that these values may
decrease significantly
to below the expected midpoint of your IPO price range. Accordingly,
please provide us
with your cheap stock analysis as support for the stock-based
compensation expense
recorded for these options.
General
14. Please revise to include a general definition of terms used throughout
your filing. To this
extent, you now refer to two transactions, the common stock offering
and the tangible
equity units offering, as well as multiple entities (e.g., the
Company, the Joint Venture, the
LLC, etc.) in your disclosures. Accordingly, please consider including
a centralized
glossary where you clearly define certain terms used repeatedly
throughout your filing,
such as "Concurrent Offering," "Common Stock Offering," "Units," "LLC
Units," "Offering Transactions," etc..
Neil E. de Crescenzo
FirstName LastNameNeil E. de Crescenzo
Change Healthcare Inc.
Comapany NameChange Healthcare Inc.
May 31, 2019
Page 4
May 31, 2019 Page 4
FirstName LastName
You may contact Brittany Ebbertt, Senior Staff Accountant, at (202)
551-3572 or Craig
Wilson, Senior Assistant Chief Accountant, at (202) 551-3226 if you have
questions regarding
comments on the financial statements and related matters. Please contact
Matthew Crispino,
Staff Attorney, at (202) 551-3456 or Barbara C. Jacobs, Assistant Director, at
(202) 551-3735
with any other questions.
Sincerely,
Division of
Corporation Finance
Office of
Information Technologies
and Services