EXHIBIT 99.2
MATRIA HEALTHCARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements are
based on the historical financial statements of Matria Healthcare, Inc.
("Matria" or the "Company") and CorSolutions Medical, Inc. ("CorSolutions")
after giving effect to Matria's acquisition of CorSolutions, pursuant to the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of December 14,
2005, by and among Matria, Coral Acquisition Corp. ("Merger Sub"), an indirect
wholly owned subsidiary of Matria, and CorSolutions. Pursuant to the Merger
Agreement, on January 19, 2006, Merger Sub merged with and into CorSolutions
(the "Merger"), with CorSolutions continuing as the surviving corporation and as
an indirect wholly owned subsidiary of Matria.
Matria funded the Merger with the proceeds of term loans and revolving credit
loans pursuant to a credit agreement with Bank of America, N.A., as
administrative agent and collateral agent, as amended, (the "First Lien Credit
Facility"), and with the proceeds of a second lien term loan facility pursuant
to a term loan agreement, with Bank of America, N.A., as administrative agent
and collateral agent, as amended, (the "Second Lien Credit Facility" and,
together with the First Lien Credit Facility, the "New Credit Facilities"). As
required by the terms of the New Credit Facilities, Matria is required to use
the proceeds from the sale of Facet Technologies and its foreign diabetes
division to repay a portion of this debt. Accordingly, the Company will allocate
a portion of the interest on the New Credit Facilities to these operations held
for sale. This allocation of interest is in accordance with Emerging Issues Task
Force No. 87-24 Allocation of Interest to Discontinued Operations.
The unaudited pro forma condensed combined balance sheet as of December 31,
2005, is presented as if the Merger and borrowings under the New Credit
Facilities occurred on December 31, 2005. The unaudited pro forma condensed
combined statement of operations of Matria and CorSolutions for the year ended
December 31, 2005, is presented as if the Merger and borrowings under the New
Credit Facilities had taken place on January 1, 2005, and were carried forward
through December 31, 2005.
The preliminary allocation of the purchase price used in the unaudited pro forma
condensed combined financial statements is based upon a preliminary valuation.
The estimated fair values of certain assets and liabilities have been determined
with the assistance of an independent third-party valuation firm and such firm's
preliminary work. The Company's estimates and assumptions are subject to change
upon the finalization of the valuation. The primary areas of the purchase price
allocation that are not yet finalized relate to identifiable intangible assets
and goodwill, the fair value of unearned revenues, the fair value of consulting
contract obligations assumed and the deferred tax assets and liabilities. The
purchase price allocation presented herein is preliminary; accordingly, the
actual purchase accounting adjustments may differ from the pro forma adjustments
reflected herein.
1
The unaudited pro forma condensed combined financial statements do not reflect
any operating efficiencies and cost savings that we may achieve with respect to
the combined companies. The unaudited pro forma condensed combined financial
statements are not intended to represent or be indicative of the consolidated
results of operations or financial position of Matria that would have been
reported had the Merger and borrowings under the New Credit Facilities been
completed as of the dates presented, and should not be taken as representative
of the future consolidated results of operations or financial position of
Matria. The unaudited pro forma condensed combined financial statements should
be read in conjunction with the historical consolidated financial statements and
accompanying notes of Matria included in our 2005 annual report on Form 10-K.
Also, the unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
accompanying notes of CorSolutions included as Exhibit 99.1 of this Amendment
No. 1 to Form 8-K.
2
MATRIA HEALTHCARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of December 31, 2005
(in thousands)
Historical as of
December 31, 2005
--------------------------- Pro Forma Pro Forma
Matria CorSolutions Adjustments (1) Combined
--------- ------------ --------------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 22,758 $ 44,598 $ (50,756) (a) $ 16,600
Restricted cash 550 - - 550
Trade accounts receivables, net 33,996 14,205 - 48,201
Assets held for sale 132,455 - - 132,455
Prepaid expenses and other current assets 6,588 5,765 - 12,353
Deferred income taxes 8,629 9,470 (4,273) (f) 13,826
--------- --------- --------- -----------
Total current assets 204,976 74,038 (55,029) 223,985
Property and equipment, net 26,430 15,360 (3,023) (b) 38,767
Goodwill 69,248 222 391,554 (c) 461,024
Other intangibles, net 6,935 140 55,960 (d) 63,035
Deferred income taxes, net 10,666 - 8,890 (f) 19,556
Other assets 4,952 198 11,019 (g) 16,169
--------- --------- --------- -----------
Total assets $ 323,207 $ 89,958 $ 409,371 $ 822,536
========= ========= ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term borrowings and current
portion of long-term debt $ 1,021 $ - $ 127,650 (g) $ 128,671
Accounts payable 10,702 3,449 - 14,151
Liabilities related to assets held for
sale and other discontinued operations 31,042 - - 31,042
Accrued liabilities 20,617 22,162 18,404 (e) 61,183
--------- --------- --------- -----------
Total current liabilities 63,382 25,611 146,054 235,047
Long-term debt, excluding current installments 2,099 - 327,350 (g) 329,449
Deferred income taxes - 2,157 (2,157) (f) -
Other long-term liabilities 5,788 314 - 6,102
--------- --------- --------- -----------
Total liabilities 71,269 28,082 471,247 570,598
Shareholders' equity 251,938 61,876 (61,876) (h) 251,938
--------- --------- --------- -----------
Total liabilities and shareholders' equity $ 323,207 $ 89,958 $ 409,371 $ 822,536
========= ========= ========= ===========
(1) See Note 3 to the unaudited pro forma condensed combined financial
statements.
See accompanying notes to unaudited pro forma condensed combined consolidated
financial statements.
3
MATRIA HEALTHCARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2005
(in thousands, except per share data)
Historical
For the Year Ended
December 31, 2005
------------------------------- Pro Forma Pro Forma
Matria CorSolutions (1) Adjustments (2) Combined
------------ ---------------- --------------- ---------
Revenues $ 179,231 $ 124,272 $ - $ 303,503
Cost of sales 72,972 24,056 - 97,028
General and administrative 94,656 72,811 2,482(b)(d)(i) 169,949
Provision of doubtful accounts 3,493 (46) - 3,447
------------ ---------------- --------------- ---------
Total costs and operating expenses 171,121 96,821 2,482 270,424
------------ ---------------- --------------- ---------
Operating earnings from continuing operations 8,110 27,451 (2,482) 33,079
Interest (expense) income, net (1,589) 919 (25,274)(g) (25,944)
Other income 226 - - 226
------------ ---------------- --------------- ---------
Earnings (loss) from continuing operations before
income taxes 6,747 28,370 (27,756) 7,361
Income tax (expense) benefit (2,733) (10,961) 10,797(f) (2,897)
------------ ---------------- --------------- ---------
Earnings (loss) from continuing operations $ 4,014 $ 17,409 $ (16,959) $ 4,464
============ ================ =============== =========
Earnings per share:
Basic $ 0.21 $ 0.24
============ =========
Diluted $ 0.20 $ 0.22
============ =========
Weighted average common shares outstanding
Basic 18,795 18,795
Diluted 19,874 19,874
(1) Certain reclassifications have been made to conform CorSolutions' historical
amounts to Matria's presentation.
(2) See Note 3 to the unaudited pro forma condensed combined financial
statements.
See accompanying notes to unaudited pro forma condensed combined consolidated
financial statements.
4
MATRIA HEALTHCARE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(in thousands)
1. BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma condensed combined financial statements included
in this Amendment No. 1 to Form 8-K are based on the historical financial
statements of Matria Healthcare, Inc. ("Matria" or the "Company") and
CorSolutions Medical, Inc. ("CorSolutions") after giving effect to the
Company's acquisition of CorSolutions, pursuant to the Agreement and Plan
of Merger (the "Merger Agreement"), dated as of December 14, 2005, by and
among Matria, Coral Acquisition Corp. ("Merger Sub"), an indirect wholly
owned subsidiary of Matria, and CorSolutions. Pursuant to the Merger
Agreement, on January 19, 2006, Merger Sub merged with and into
CorSolutions (the "Merger"), with CorSolutions continuing as the surviving
corporation and as an indirect wholly owned subsidiary of Matria.
Matria funded the Merger with the proceeds of term loans and revolving
credit loans pursuant to a credit agreement with Bank of America, N.A., as
administrative agent and collateral agent, as amended, (the "First Lien
Credit Facility"), and with the proceeds of a second lien term loan
facility pursuant to a term loan agreement, with Bank of America, N.A., as
administrative agent and collateral agent, as amended, (the "Second Lien
Credit Facility" and, together with the First Lien Credit Facility, the
"New Credit Facilities"). As required by the terms of the New Credit
Facilities, Matria is required to use the proceeds from the sale of Facet
Technologies and its foreign diabetes division to repay a portion of this
debt. Accordingly, the Company will allocate a portion of the interest on
the New Credit Facilities to these operations held for sale. This
allocation of interest is in accordance with Emerging Issues Task Force
No. 87-24 Allocation of Interest to Discontinued Operations.
The unaudited pro forma financial statements do not reflect any operating
efficiencies and cost savings that we may achieve with respect to the
combined companies. The unaudited pro forma condensed combined financial
statements are not intended to represent or be indicative of the
consolidated results of operations or financial position of Matria that
would have been reported had the Merger and borrowings under the New
Credit Facilities been completed as of the dates presented, and should not
be taken as representative of the future consolidated results of
operations or financial position of Matria.
The unaudited pro forma condensed combined balance sheet as of December
31, 2005, is presented as if the Merger and borrowings under the New
Credit Facilities occurred on December 31, 2005. The unaudited pro forma
condensed combined statement of operations of Matria and CorSolutions for
the year ended December 31, 2005, is presented as if the Merger and
borrowings under the New Credit Facilities had taken place on January 1,
2005, and were carried forward through December 31, 2005. In accordance
with regulations promulgated by the Securities and Exchange Commission,
the unaudited pro forma condensed combined statement of operations
excludes the results of discontinued operations.
5
The estimated total purchase price of CorSolutions is as follows:
Purchase price consideration, excluding cash acquired $ 445,000
Acquisition related transaction costs 5,139
---------
Total estimated preliminary purchase price $ 450,139
=========
Under business combination accounting, the total preliminary purchase
price will be allocated to CorSolutions' net tangible and identifiable
intangible assets based on their estimated fair values. The excess of the
purchase price over the net tangible and identifiable intangible assets
will be recorded as goodwill. The preliminary allocation of the purchase
price used in the unaudited pro forma condensed combined financial
statements is based upon a preliminary valuation. The estimated fair
values of certain assets and liabilities have been determined with the
assistance of an independent third-party valuation firm and such firm's
preliminary work. The Company's estimates and assumptions are subject to
change upon the finalization of the valuation. The primary areas of the
purchase price allocation which are not yet finalized relate to
identifiable intangible assets and goodwill, the fair value of unearned
revenues, the fair value of consulting contract obligations assumed and
the deferred tax assets and liabilities. The purchase price allocation
presented herein is preliminary; accordingly, the actual purchase
accounting adjustments may differ from the pro forma adjustments reflected
herein.
Based upon a preliminary valuation, the total preliminary purchase price
was allocated as follows:
Preliminary estimated purchase price allocation (excluding cash acquired):
Net tangible liabilities $ (11,824)
Amortizable intangible assets 56,100
Goodwill 391,776
Net deferred tax asset 14,087
-----------
Total preliminary estimated purchase price allocation $ 450,139
===========
Goodwill represents the excess of the purchase price over the fair value
of tangible and identifiable intangible assets acquired. Goodwill amounts
are not amortized, but rather are tested for impairment at least annually.
In the event that we determine that the value of goodwill has become
impaired, we will incur an accounting charge for the amount of impairment
during the fiscal quarter in which such determination is made.
Amortizable identifiable intangible assets acquired consist of customer
contracts, developed technologies and tradenames. Matria expects to
amortize these identifiable intangible assets on a straight-line basis
over seven to ten years. The preliminary estimated fair value of
identifiable intangible assets was determined based on an independent
third-party preliminary valuation.
6
Except for adjustments to property and equipment, and accrued liabilities,
net tangible liabilities were valued at their respective carrying amounts,
as we believe that these amounts approximate their current fair values.
Property and equipment was recorded at its current estimated fair values
based on a third-party preliminary valuation. The depreciation related to
the fair value adjustment is reflected in the pro forma condensed combined
statement of operations.
Accrued liabilities adjustments include adjustments to unearned revenues,
restructuring reserves and transaction costs incurred by CorSolutions.
Unearned revenue represents billings in excess of revenues earned.
Unearned revenues are primarily due to performance-based fees subject to
refund that have not been recognized as revenues because either 1) data
from the customer is insufficient to measure performance; or 2) interim
performance measures indicate that certain financial cost savings and
clinical performance criteria have not been met. The preliminary fair
value of unearned revenues primarily represents an amount for which
certain financial cost savings and clinical performance criteria currently
are not being met or are anticipated not to be met. In accordance with
business purchase accounting, unearned revenues were reduced by
approximately $3.0 million for unearned revenues that had not been
recognized as revenue because data from the customer was insufficient or
incomplete to measure performance. Had the Merger not taken place, these
revenues would have been recognized in future periods when sufficient data
was received and such performance criteria were met.
Restructuring reserves include the severance costs related to certain
CorSolutions' employees, and costs associated with terminating certain
procurement and service agreements of CorSolutions.
Transaction costs incurred by CorSolutions include costs incurred by
CorSolutions as a direct result of the Merger.
Net deferred income taxes include tax effects of fair value adjustments
related to identifiable intangible assets, property and equipment,
unearned revenues, restructuring reserves and stock option deductions
resulting from the Merger. Upon the finalization of the combined Company's
legal entity structure and the restructuring plans, additional adjustments
to deferred income taxes may be required.
2. NEW CREDIT FACILITIES
In conjunction with the acquisition of CorSolutions, the Company closed
the New Credit Facilities with Bank of America, N.A., as administrative
agent and collateral agent, and the lenders from time to time party
thereto. The New Credit Facilities provide for borrowings of up to an
aggregate of $485,000, which includes both term loans and a revolving
credit facility and is comprised of a First Lien Credit Facility and a
Second Lien Credit Facility. The New Credit Facilities replaced the
Company's existing revolving credit facility.
7
The First Lien Credit Facility consists of a $265,000 Term Loan B facility
(the "Term B Facility"), a $125,000 Term Loan C facility (the "Term C
Facility"), and a $30,000 revolving credit facility (the "Revolving Credit
Facility"). The maturity date for the Term B Facility is January 19, 2012;
the maturity date for the Term C Facility is January 19, 2007, and the
maturity date for the Revolving Credit Facility is January 19, 2011.
Amounts borrowed under the Term B Facility and the Term C Facility accrue
interest at a fixed spread over the Eurodollar Rate or the prime rate, at
the Company's option. Amounts borrowed under the Revolving Credit Facility
accrue interest at a variable spread over the Eurodollar Rate or the prime
rate, at the Company's option, with the applicable spread determined by
reference to Matria's consolidated leverage ratio.
The Second Lien Credit Facility consists of an $65,000 second lien term
loan facility. The maturity date for the Second Lien Credit Facility is
July 19, 2012. Amounts borrowed under the Second Lien Credit Facility
accrue interest at a fixed spread over the Eurodollar Rate or the prime
rate, at the Company's option.
Amounts borrowed under the New Credit Facilities are fully and
unconditionally guaranteed on a joint and several basis by substantially
all of the subsidiaries of the Company. Amounts borrowed under the First
Lien Credit Facility are secured by a first priority lien on substantially
all of the assets of the Company and the subsidiary guarantors, and
amounts borrowed under the Second Lien Credit Facility are secured by a
second priority lien on such assets.
The New Credit Facilities contain various representations, warranties and
affirmative, negative and financial covenants customary for financings of
this type. The negative covenants include, without limitation, certain
limitations on transactions with affiliates, liens, making investments,
the incurrence of debt, sales of assets, and changes in business. The
financial covenants contained in both of the New Credit Facilities include
a consolidated leverage ratio and a consolidated fixed charges coverage
ratio. The First Lien Credit Facility also contains a consolidated first
lien leverage ratio.
The New Credit Facilities also contain customary events of default,
including, without limitation, events of default arising out of nonpayment
of principal, interest, or fees; material misrepresentations; default in
the performance of any negative or financial covenant; default in the
performance of any other term or covenant if uncured for 30 days;
bankruptcy or insolvency; unstayed judgments; or cross-defaults to
monetary default of other indebtedness. If an event of default occurs, the
lenders may terminate the commitment to make revolving credit loans under
the First Lien Credit Facility and declare the amounts outstanding under
the New Credit Facilities, including all principal, accrued interest and
unpaid fees, payable immediately.
The Company intends to use the net proceeds from the sales of two of its
subsidiaries, Facet Technologies, LLC and its German diabetes supply
business, to repay a portion of this debt, as required by certain terms of
the New Credit Facilities.
8
See note 3(g) for pro forma adjustments to reflect the issuance of debt
and related debt issuance costs.
3. PRO FORMA ADJUSTMENTS
Pro forma adjustments are necessary to reflect the estimated purchase
price, to adjust amounts related to CorSolutions' net tangible and
intangible assets to a preliminary estimate of their fair values, to
reflect the amortization expense related to the estimated amortizable
intangible assets, to reflect changes in depreciation and amortization
expense resulting from the estimated fair value adjustments to net
tangible assets and to reflect the income tax effect related to the pro
forma adjustments. In addition, pro forma adjustments are necessary to
reflect the amount of debt used to finance the Merger and to reflect the
related interest expense and amortization of the debt underwriting fees.
No pro forma adjustments were required to conform CorSolutions' accounting
policies to Matria's accounting policies. Certain reclassifications have
been made to conform CorSolutions' historical amounts to Matria's
presentation.
9
The following table summarizes the pro forma adjustments for (1) the
purchase price allocation and (2) the issuance of debt.
<Table>
<Caption>
Pro Forma Adjustments
-----------------------------------------------------------------------
Purchase Price Issuance of
Allocation Debt Total
Adjustments Adjustments Adjustments
-------------------- ------------------ ----------------------
ASSETS
Current assets:
Cash and cash equivalents $ (494,737) (a) $ 443,981 (a) $ (50,756) (a)
Deferred income taxes (4,273) (f) - (4,273) (f)
---------- ----------- ----------
Total current assets (499,010) 443,981 (55,029)
Property and equipment, net (3,023) (b) - (3,023) (b)
Goodwill 391,554 (c) - 391,554 (c)
Other intangibles, net 55,960 (d) - 55,960 (d)
Deferred income taxes, net 8,890 (f) - 8,890 (f)
Other assets - 11,019 (g) 11,019 (g)
---------- ----------- ----------
Total assets $ (45,629) $ 455,000 $ 409,371
========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term borrowings and current
portion of long-term debt $ - $ 127,650 (g) $ 127,650 (g)
Accrued liabilities 18,404 (e) - 18,404 (e)
---------- ----------- ----------
Total current liabilities 18,404 127,650 146,054
Long-term debt, excluding current installments - 327,350 (g) 327,350 (g)
Deferred income taxes (2,157) (f) - (2,157) (f)
---------- ----------- ----------
Total liabilities 16,247 455,000 471,247
Shareholders' equity (61,876) (h) - (61,876) (h)
---------- ----------- ----------
Total liabilities and shareholders' equity $ (45,629) $ 455,000 $ 409,371
========== =========== ==========
STATEMENT OF OPERATIONS
Revenues $ - $ - $ -
Cost of sales - - -
General and administrative 2,482 (b)(d)(i) - 2,482 (b)(d)(i)
Provision of doubtful accounts - - -
---------- ----------- ----------
Total costs and operating expenses 2,482 - 2,482
---------- ----------- ----------
Operating earnings from continuing operations (2,482) - (2,482)
Interest (expense) income, net - (25,274) (g) (25,274) (g)
Other income - - -
---------- ----------- ----------
Earnings (loss) from continuing operations
before income taxes (2,482) (25,274) (27,756)
Income tax (expense) benefit 965 (f) 9,832 (f) 10,797 (f)
---------- ----------- ----------
Earnings (loss) from continuing operations $ (1,517) $ (15,442) $ (16,959)
========== =========== ==========
</Table>
10
The pro forma adjustments included in the unaudited pro forma condensed combined
financial statements are as follows:
a. Adjustments to record the estimated preliminary purchase price and
issuance of debt:
<Table>
<Caption>
Increase
(Decrease)
----------
Cash proceeds from issuance of debt $ 455,000
Payment of debt underwriting fees and other debt issuance costs (11,019)
Payment of estimated preliminary purchase price (450,139)
Payment for cash acquired (44,598)
---------
Total change in cash $ (50,756)
=========
</Table>
b. Adjustments to record the difference between the preliminary estimate of
the fair value and the historical amount of CorSolutions' property and
equipment and the resulting adjustment to depreciation expense:
<Table>
<Caption>
Historical Preliminary Decrease in Useful
Amount, Fair Annual Life
Net Value Decrease Depreciation (Years)
----------- ----------- ---------- ------------ -------
Property and equipment $ 15,360 $ 12,337 $ 3,023 $ 2,163 1 - 7
</Table>
c. Adjustments to reflect the preliminary estimate of fair value of goodwill:
<Table>
<Caption>
Historical Preliminary
Amount, Fair
Net Value Increase
---------- ----------- ---------
Goodwill $ 222 $ 391,776 $ 391,554
</Table>
d. Adjustments to reflect the preliminary estimate of the fair value of
amortizable intangible assets and the resulting increase in amortization
expense:
<Table>
<Caption>
Increase
Historical Preliminary (Decrease) in Useful
Amount, Fair Increase Annual Life
Net Value (Decrease) Amortization (Years)
----------- ----------- ------------ ------------- -------
Customer contracts $ - $ 46,900 $ 46,900 $ 4,690 10
Developed technology - 7,700 7,700 1,100 7
Tradename - 1,500 1,500 214 7
Other 140 - (140) (186) -
----------- ----------- ------------ ------------
$ 140 $ 56,100 $ 55,960 $ 5,818
=========== =========== ============ ============
</Table>
11
e. Adjustments to accrued liabilities:
<Table>
<Caption>
Preliminary
Historical Fair
Amount Value Change
---------- ----------- --------
Unearned revenue $ 11,641 $ 7,731 $ (3,910)
Transaction costs incurred by CorSolutions 12,182
Restructuring costs associated with CorSolutions 10,132
--------
Total adjustments to accrued liabilities $ 18,404
========
</Table>
f. Adjustments to deferred income taxes:
<Table>
Decrease to current asset portion of "Deferred income taxes" $ (4,273)
Increase to long-term asset portion of "Deferred income taxes" $ 8,890
Decrease to long-term liability portion of "Deferred income taxes" $ (2,157)
Income tax benefit of pro forma adjustments $ 10,797
</Table>
g. Adjustments to reflect issuance of debt, underwriting fees and related
interest and amortization expense:
<Table>
Increase to "other assets" for debt underwriting fees $ 11,019
Increase to "current installments of long-term debt" for debt issuance $ 127,650
Increase to "long-term debt, excluding current installments" for debt issuance $ 327,350
Increase in annual interest and amortization expense due to issuance of debt (1) $ 25,274
</Table>
(1) Does not include the portion of interest that has been allocated to
discontinued operations under Emerging Issues Task Force (EITF) 87-24
Allocation of Interest to Discontinued Operations. EITF 87-24 permits
interest on debt that is required to be repaid as a result of a disposal
transaction to be allocated to discontinued operations.
h. Adjustments to shareholders' equity:
<Table>
<Caption>
Decrease
--------
To eliminate CorSolutions' historical shareholders' equity $ 61,876
</Table>
i. Adjustment to eliminate CorSolutions' transaction costs directly related
to the Merger:
<Table>
<Caption>
Decrease
--------
To eliminate CorSolutions' transaction costs directly related to the Merger $ 1,173
</Table>
12
4. NON-GAAP FINANCIAL MEASURES
Included in CorSolutions' statement of operations for the year ended
December 31, 2005, are certain non-recurring expenses totaling
approximately $5.8 million. These expenses are primarily related to
transaction costs of $1.2 million directly related to the Merger,
severance costs of approximately $1.4 million, legal expenses of
approximately $3.5 million and other nonrecurring items of $(0.3). The
non-recurring severance costs relate to the termination of two executives.
The non-recurring legal expenses relate to the defense and settlement of
certain litigation.
In connection with Matria's announcement of the acquisition of
CorSolutions on December 15, 2005, Matria included forecasts for
CorSolutions' 2005 operating profits and EBITDA of $32 million and $38
million, respectively. These forecasted amounts excluded the non-recurring
expenses above which Matria believes are related to unusual amounts that
are not likely to recur regularly or in predictable amounts. In order to
reconcile these projected amounts to the results reported in CorSolutions'
statement of operations for the year ended December 31, 2005, Matria has
included the following reconciliations of such non-GAAP financial measures
to the applicable GAAP measures:
RECONCILIATION OF CORSOLUTIONS' OPERATING INCOME TO OPERATING INCOME
EXCLUDING NON-RECURRING COSTS
2005
------------
Operating income $ 27,451
Non-recurring costs 5,843
------------
Operating income excluding non-recurring costs $ 33,294
============
RECONCILIATION OF CORSOLUTIONS' NET INCOME TO EBITDA EXCLUDING
NON-RECURRING COSTS
2005
------------
Net income $ 17,409
Income tax expense 10,961
Interest income (919)
Depreciation and amortization 6,576
Non-recurring costs 5,843
------------
EBITDA excluding non-recurring costs $ 39,870
============
13