Exhibit 99.1
IMS Health Reports Second-Quarter 2004 Results;
Revenues up 12 Percent and Earnings Per Share up 17 Percent;
Company Raises Guidance for the Year
FAIRFIELD, Conn.--(BUSINESS WIRE)--July 20, 2004--IMS Health (NYSE: RX)
today announced second-quarter 2004 revenues of $379.6 million, up 12 percent (9
percent on a constant-dollar basis) compared with revenues of $337.8 million for
the second quarter of 2003. SEC-reported diluted earnings per share in the 2004
second quarter was $0.27, an increase of 17 percent compared with $0.23 in the
prior-year period. Adjusted diluted earnings per share for the second quarter of
2004 was $0.29, up 16 percent compared with $0.25 in the 2003 second quarter.
Net income for the second quarter of 2004 was $65.1 million on an SEC-reported
basis and $69.5 million on an adjusted basis, compared with net income of $55.4
million on an SEC-reported basis and $60.4 million on an adjusted basis in the
year-earlier quarter, up 15 percent on an adjusted basis. The company's
operating income was $102.5 million in the 2004 second quarter, up 5 percent (3
percent constant dollar) from $97.3 million for the year-ago period.
The company also announced that it is raising its 2004 guidance. IMS now
expects 2004 constant-dollar revenue growth to be within a range of 8 - 10
percent, versus its previously stated estimate of 7 - 9 percent. Adjusted
diluted earnings per share for 2004 is now expected to be in the $1.15 - $1.20
range, up from $1.12 - $1.17. See Note (l) for an explanation of the
reconciliation between expected SEC-reported and adjusted full-year diluted
earnings per share.
"Once again, we delivered a strong quarter, with our business around the
world showing solid growth and momentum," said David Thomas, IMS chairman and
CEO. "Our new offerings increasingly combine our data assets with consulting and
services skills to generate opportunities for us with new and existing
customers. Demand for our solutions remains strong. We are particularly pleased
with our Global Consulting and Services revenue performance, which grew 50
percent in the first half."
Adjusted results for the second quarter of 2004 exclude certain net pre-tax
expense items totaling approximately $0.4 million, as well as certain net tax
provisions of approximately $4.0 million. See Tables 5 and 7 for a
reconciliation between SEC and adjusted results for the quarters ended June 30,
2004 and 2003, respectively.
First-Half 2004 Results
For the first half of 2004, revenues were $741.2 million, up 14 percent (8
percent constant dollar) over the first six months of 2003. SEC-reported diluted
earnings per share for the 2004 first half was $0.61, compared with $1.99 in the
year-earlier period. Adjusted diluted earnings per share in the 2004 first half
was $0.54, a 20 percent increase over the $0.45 reported in the prior-year
period. Net income for the first half of this year was $146.2 million on an
SEC-reported basis and $131.0 million on an adjusted basis, compared with net
income of $500.0 million on an SEC-reported basis and $112.0 million on an
adjusted basis for the year-ago period, up 17 percent on an adjusted basis.
Operating income was $198.7 million in the first half of 2004, compared
with $138.4 million on an SEC-reported basis and $175.7 million on an adjusted
basis in the year-earlier period. Operating income in the 2004 first half rose
44 percent on an SEC-reported basis and was up 13 percent on an adjusted basis
(9 percent constant dollar) from the year-earlier period.
Adjusted results for the 2004 first half exclude certain net pre-tax income
items totaling approximately $11.3 million, as well as certain net tax benefits
of approximately $3.9 million. Adjusted results for the first half of 2003
exclude a one-time net gain of $495.1 million resulting from the divestiture of
IMS's equity interest in Cognizant Technology Solutions via a split-off, as well
as certain pre-tax charges totaling approximately $47.1 million, consisting
primarily of severance, impairment and other charges. In addition, adjusted
first-half 2003 results exclude a $14.8 million after-tax impairment charge
taken on IMS's equity investment in The TriZetto Group (Nasdaq: TZIX) and $45.0
million of tax provision, related to a number of items, including a Dun &
Bradstreet legacy tax transaction and subsequent related transactions. See
Tables 6 and 8 for a reconciliation between SEC and adjusted results for the six
months ended June 30, 2004 and 2003, respectively.
Balance Sheet Highlights
IMS's cash, cash equivalents and short-term marketable securities as of
June 30, 2004 was $399.7 million, compared with $384.5 million on December 31,
2003. Total debt as of June 30, 2004 was $634.6 million, up from $562.0 million
at the end of 2003. See Table 9 for selected consolidated balance sheet items.
Share Repurchase Program, Shares Outstanding
IMS repurchased approximately 2.6 million shares in the second quarter at a
total cost of $64.4 million. Year-to-date, the company has repurchased 8.1
million shares at a total cost of $204.3 million. Approximately 7.5 million
shares remain available for repurchase in the company's current authorization.
The number of shares outstanding as of June 30, 2004 was approximately
233.9 million compared with 239.1 million the same period a year ago.
About IMS
Operating in more than 100 countries, IMS Health is the world's leading
provider of information solutions to the pharmaceutical and healthcare
industries. With $1.4 billion in 2003 revenue and 50 years of industry
experience, IMS offers leading-edge business intelligence products and services
that are integral to clients' day-to-day operations, including portfolio
optimization capabilities; launch and brand management solutions; sales force
effectiveness innovations; managed care and over-the-counter offerings; and
consulting and services solutions that improve ROI and the delivery of quality
healthcare worldwide. Additional information is available at
http://www.imshealth.com.
Conference Call and Webcast Details
IMS will host a conference call at 4:30 p.m. (EDT) today to discuss its
second-quarter 2004 financial results. To participate, please dial
1-888-937-3422 (U.S. and Canada) and 1-212-231-6006 (outside the United States
and Canada) approximately 15 minutes before the scheduled start of the call. The
conference call also will be accessible live on the Investor Relations section
of the IMS Website at www.imshealth.com.
A replay of the conference call will be available online on the Investor
Relations section of the IMS Website and via telephone by dialing 1-800-633-8284
(U.S. and Canada) or 1-402-977-9140 (outside the United States and Canada), and
entering access code 21173773 beginning one hour after the call through 11:59
p.m. (EDT) Tuesday, July 27.
Forward-Looking Statements
This press release includes statements that may constitute forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Although IMS Health believes the expectations
contained in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove correct. This information may
involve risks and uncertainties that could cause actual results of IMS Health to
differ materially from the forward-looking statements. Factors that could cause
or contribute to such differences include, but are not limited to (i) the risks
associated with operating on a global basis, including fluctuations in the value
of foreign currencies relative to the U.S. dollar, and the ability to
successfully hedge such risks, (ii) to the extent IMS Health seeks growth
through acquisitions and joint ventures, the ability to identify, consummate and
integrate acquisitions and ventures on satisfactory terms, (iii) the ability to
develop new or advanced technologies and systems for its businesses on time and
on a cost-effective basis, and the ability to implement cost-containment
measures, (iv) regulatory, legislative and enforcement initiatives, particularly
in the areas of medical privacy and tax, (v) to the extent unforeseen cash needs
arise, the ability to obtain financing on favorable terms, and (vi)
deterioration in economic conditions, particularly in the pharmaceutical,
healthcare or other industries in which IMS Health's customers operate.
Additional information on factors that may affect the business and financial
results of the Company can be found in filings of the Company made from time to
time with the Securities and Exchange Commission and in note (l) of this press
release.
Table 1
IMS Health
SEC Income Statement (a)
Three Months Ended June 30
(unaudited, in millions except per share)
2004 2003 % Fav
SEC SEC (Unfav)
---------------------
Revenue
Sales Force Effectiveness $172.7 $159.6 8 %
Portfolio Optimization 109.7 99.5 10
Brand, Launch and Other 52.4 48.5 8
Consulting and Services 44.8 30.1 49
--------------
Total 379.6 337.8 12
Operating Expenses (b)
Operating Costs (162.4)(141.5) (15)
Selling and Administrative (92.4) (79.1) (17)
Depreciation and Amortization (22.3) (19.8) (13)
--------------
Total (277.1)(240.5) (15)
Operating Income 102.5 97.3 5
Interest expense, net (2.1) (2.7) 23
Gains from investments, net (e) 2.1 0.0 NM
Gain (loss) on issuance of investees' stock,
net (f) (0.1) 0.1 NM
Other (expense), net (g) (1.6) (9.8) 84
--------------
Pretax Income 100.8 84.9 19
Provision for Income Taxes (h) (35.4) (29.5) (20)
TriZetto Equity Loss, net (c) (0.3) (0.1) (359)
--------------
Net Income 65.1 55.4 18
Diluted EPS:
Total Diluted EPS $0.27 $0.23 17 %
Shares Outstanding:
Weighted Average Diluted 240.3 242.8 1 %
End-of-Period Actual 233.9 239.1 2
The accompanying notes are an integral part of these financial
tables.
Table 2
IMS Health
SEC Income Statement (a)
Six Months Ended June 30
(unaudited, in millions except per share)
2004 2003 % Fav
SEC SEC (Unfav)
---------------------
Revenue
Sales Force Effectiveness $339.8 $312.0 9 %
Portfolio Optimization 222.8 199.9 11
Brand, Launch and Other 101.2 88.2 15
Consulting and Services 77.4 51.6 50
--------------
Total 741.2 651.7 14
Operating Expenses (b)
Operating Costs (311.9)(278.8) (12)
Selling and Administrative (186.5)(160.6) (16)
Depreciation and Amortization (44.0) (36.6) (20)
Severance, Impairment & other charges (i) 0.0 (37.2) 100
--------------
Total (542.5)(513.2) (6)
Operating Income 198.7 138.4 44
Interest expense, net (5.4) (5.5) 2
Gains (losses) from investments, net (e) 8.5 (0.8) NM
Loss on issuance of investees' stock, net (f) (0.1) (0.3) 65
Other income (expense), net (g) 1.2 (20.6) NM
--------------
Pretax Income 202.9 111.3 82
Provision for Income Taxes (h) (55.5) (93.8) 41
TriZetto Equity Loss, net (c) (1.3) (0.4) (218)
TriZetto impairment charge, net (j) 0.0 (14.8) 100
--------------
Net Income from continuing operations 146.2 2.2 NM
Income from discontinued operations - CTS (d) 0.0 2.8 (100)
Gain on discontinued operations - CTS (k) 0.0 495.1 (100)
--------------
Net Income $146.2 $500.0 (71)
Diluted EPS:
Income from continuing operations 0.61 0.01
Income from discontinued operations - CTS
(d) 0.00 0.01
Gain on discontinued operations - CTS (k) 0.00 1.97
--------------
Total Diluted EPS $0.61 $1.99 (69)%
Shares Outstanding:
Weighted Average Diluted 240.3 251.3 4 %
End-of-Period Actual 233.9 239.1 2
The accompanying notes are an integral part of these financial
tables.
Table 3
IMS Health
Adjusted Income Statement (a)
Three Months Ended June 30
(unaudited, in millions except per share)
2004 2003 % Fav Constant $
Adjusted Adjusted (Unfav) Growth
-------------------------------------
Revenue
Sales Force Effectiveness $172.7 $159.6 8 % 5 %
Portfolio Optimization 109.7 99.5 10 6
Brand, Launch and Other 52.4 48.5 8 4
Consulting and Services 44.8 30.1 49 44
-------------------
Total 379.6 337.8 12 9
Operating Expenses (b)
Operating Costs (162.4) (141.5) (15)
Selling and Administrative (92.4) (79.1) (17)
Depreciation and
Amortization Operating Costs (22.3) (19.8) (13)
-------------------
Total (277.1) (240.5) (15)
Operating Income 102.5 97.3 5 3
Interest expense, net (2.1) (2.7) 23
Other income (expense), net (g) 0.8 (7.3) NM
-------------------
Pretax Income 101.2 87.3 16
Provision for Income Taxes (h) (31.4) (26.9) (17)
TriZetto Equity Loss, net (c) (0.3) (0.1) (359)
-------------------
Net Income 69.5 60.4 15 %
Diluted EPS:
Total Diluted EPS $0.29 $0.25 16 %
Shares Outstanding:
Weighted Average Diluted 240.3 242.8 1 %
End-of-Period Actual 233.9 239.1 2
The accompanying notes are an integral part of these financial
tables.
Table 4
IMS Health
Adjusted Income Statement (a)
Six Months Ended June 30
(unaudited, in millions except per share)
2004 2003 % Fav Constant $
Adjusted Adjusted (Unfav) Growth
------------------------------------
Revenue
Sales Force Effectiveness $339.8 $312.0 9 % 4 %
Portfolio Optimization 222.8 199.9 11 6
Brand, Launch and Other 101.2 88.2 15 8
Consulting & Services 77.4 51.6 50 44
-------------------
Total 741.2 651.7 14 8
Operating Expenses (b)
Operating Costs (311.9) (278.8) (12)
Selling and Administrative (186.5) (160.6) (16)
Depreciation and Amortization (44.0) (36.6) (20)
-------------------
Total (542.5) (476.0) (14)
Operating Income 198.7 175.7 13 9
Interest expense, net (5.4) (5.5) 2
Other expense, net (g) (1.7) (11.9) 86
-------------------
Pretax Income 191.6 158.4 21
Provision for Income Taxes (h) (59.4) (48.8) (22)
TriZetto Equity Loss, net (c) (1.3) (0.4) (218)
-------------------
Net Income from continuing
operations 131.0 109.2 20 %
Income from discontinued
operations - CTS (d) 0.0 2.8 (100)
-------------------
Net Income $131.0 $112.0 17 %
Diluted EPS:
Income from continuing
operations 0.54 0.43 26
Income from discontinued
operations - CTS (d) 0.00 0.01 (100)
-------------------
Total Diluted EPS $0.54 $0.45 20 %
Shares Outstanding:
Weighted Average Diluted 240.3 251.3 4 %
End-of-Period Actual 233.9 239.1 2
The accompanying notes are an integral part of these financial
tables.
Table 5
IMS Health
Reconciliation from SEC to Adjusted Income Statement (a)
Three Months Ended June 30, 2004
(unaudited, in millions except per share)
Adjusted
SEC Q2 Adjustments Q2
---------------------------
Revenue
Sales Force Effectiveness $172.7 $0.0 $172.7
Portfolio Optimization 109.7 0.0 109.7
Brand, Launch and Other 52.4 0.0 52.4
Consulting and Services 44.8 0.0 44.8
---------------------------
Total 379.6 0.0 379.6
Operating Expenses (b)
Operating Costs (162.4) 0.0 (162.4)
Selling and Administrative (92.4) 0.0 (92.4)
Depreciation and Amortization (22.3) 0.0 (22.3)
---------------------------
Total (277.1) 0.0 (277.1)
Operating Income 102.5 0.0 102.5
Interest expense, net (2.1) 0.0 (2.1)
Gains from investments, net (e) 2.1 (2.1) 0.0
Loss on issuance of investees' stock,
net (f) (0.1) 0.1 0.0
Other income (expense), net (g) (1.6) 2.4 0.8
---------------------------
Pretax Income 100.8 0.4 101.2
Provision for Income Taxes (h) (35.4) 4.0 (31.4)
TriZetto Equity Loss, net (c) (0.3) 0.0 (0.3)
---------------------------
Net Income 65.1 4.4 69.5
Diluted EPS $0.27 0.02 $0.29
Shares Outstanding:
Weighted Average Diluted 240.3 0.0 240.3
End-of-Period Actual 233.9 0.0 233.9
The accompanying notes are an integral part of these financial
tables.
Table 6
IMS Health
Reconciliation from SEC to Adjusted Income Statement (a)
Six Months Ended June 30, 2004
(unaudited, in millions except per share)
Adjusted
SEC Q2 Adjustments Q2
---------------------------
Revenue
Sales Force Effectiveness $339.8 $0.0 $339.8
Portfolio Optimization 222.8 0.0 222.8
Brand, Launch and Other 101.2 0.0 101.2
Consulting and Services 77.4 0.0 77.4
---------------------------
Total 741.2 0.0 741.2
Operating Expenses (b)
Operating Costs (311.9) 0.0 (311.9)
Selling and Administrative (186.5) 0.0 (186.5)
Depreciation and Amortization (44.0) 0.0 (44.0)
---------------------------
Total (542.5) 0.0 (542.5)
Operating Income 198.7 0.0 198.7
Interest expense, net (5.4) 0.0 (5.4)
Gains from investments, net (e) 8.5 (8.5) 0.0
Loss on issuance of investees' stock, net
(f) (0.1) 0.1 0.0
Other income (expense), net (g) 1.2 (2.9) (1.7)
---------------------------
Pretax Income 202.9 (11.3) 191.6
Provision for Income Taxes (h) (55.5) (3.9) (59.4)
TriZetto Equity Loss, net (c) (1.3) 0.0 (1.3)
---------------------------
Net Income 146.2 (15.2) 131.0
Diluted EPS $0.61 (0.07) $0.54
Shares Outstanding:
Weighted Average Diluted 240.3 0.0 240.3
End-of-Period Actual 233.9 0.0 233.9
The accompanying notes are an integral part of these financial
tables.
Table 7
IMS Health
Reconciliation from SEC to Adjusted Income Statement (a)
Three Months Ended June 30, 2003
(unaudited, in millions except per share)
Adjusted
SEC Q2 Adjustments Q2
---------------------------
Revenue
Sales Force Effectiveness $159.6 $0.0 $159.6
Portfolio Optimization 99.5 0.0 99.5
Brand, Launch and Other 48.5 0.0 48.5
Consulting and Services 30.1 0.0 30.1
---------------------------
Total 337.8 0.0 337.8
Operating Expenses (b)
Operating Costs (141.5) 0.0 (141.5)
Selling and Administrative (79.1) 0.0 (79.1)
Depreciation and Amortization (19.8) 0.0 (19.8)
---------------------------
Total (240.5) 0.0 (240.5)
Operating Income 97.3 0.0 97.3
Interest expense, net (2.7) 0.0 (2.7)
Gains from investments, net (e) 0.0 0.0 0.0
Gain on issuance of investees' stock,
net (f) 0.1 (0.1) 0.0
Other expense, net (g) (9.8) 2.5 (7.3)
---------------------------
Pretax Income 84.9 2.4 87.3
Provision for Income Taxes (h) (29.5) 2.6 (26.9)
TriZetto Equity Loss, net (c) (0.1) 0.0 (0.1)
---------------------------
Net Income 55.4 5.0 60.4
Diluted EPS:
Total Diluted EPS $0.23 0.02 $0.25
Shares Outstanding:
Weighted Average Diluted 242.8 0.0 242.8
End-of-Period Actual 239.1 0.0 239.1
The accompanying notes are an integral part of these financial
tables.
Table 8
IMS Health
Reconciliation from SEC to Adjusted Income Statement (a)
Six Months Ended June 30, 2003
(unaudited, in millions except per share)
Adjusted
SEC Q2 Adjustments Q2
---------------------------
Revenue
Sales Force Effectiveness $312.0 $0.0 $312.0
Portfolio Optimization 199.9 0.0 199.9
Brand, Launch and Other 88.2 0.0 88.2
Consulting and Services 51.6 0.0 51.6
---------------------------
Total 651.7 0.0 651.7
Operating Expenses (b)
Operating Costs (278.8) 0.0 (278.8)
Selling and Administrative (160.6) 0.0 (160.6)
Depreciation and Amortization (36.6) 0.0 (36.6)
Severance, Impairment & other charges
(i) (37.2) 37.2 0.0
---------------------------
Total (513.2) 37.2 (476.0)
Operating Income 138.4 37.2 175.7
Interest expense, net (5.5) 0.0 (5.5)
Losses from investments, net (e) (0.8) 0.8 0.0
Loss on issuance of investees' stock,
net (f) (0.3) 0.3 0.0
Other expense, net (g) (20.6) 8.8 (11.9)
---------------------------
Pretax Income 111.3 47.1 158.4
Provision for Income Taxes (h) (93.8) 45.0 (48.8)
TriZetto Equity Loss, net (c) (0.4) 0.0 (0.4)
TriZetto impairment charge, net (j) (14.8) 14.8 0.0
---------------------------
Net Income from continuing operations 2.2 107.0 109.2
Income from discontinued operations - CTS
(d) 2.8 0.0 2.8
Gain on discontinued operations - CTS (k) 495.1 (495.1) 0.0
---------------------------
Net Income $500.0 (388.1) $112.0
Diluted EPS:
Income from continuing operations 0.01 0.42 0.43
Income from discontinued operations -
CTS (d) 0.01 0.00 0.01
Gain on discontinued operations - CTS
(k) 1.97 (1.97) 0.00
---------------------------
Total Diluted EPS $1.99 (1.54) $0.45
Shares Outstanding:
Weighted Average Diluted 251.3 0.0 251.3
End-of-Period Actual 239.1 0.0 239.1
The accompanying notes are an integral part of these financial
tables.
Table 9
IMS Health
Selected Consolidated Balance Sheet Items
(unaudited, in millions)
June 30, 2004 Dec. 31, 2003
------------- -------------
Cash and cash equivalents $371.9 $344.4
Short-term marketable securities 27.8 40.1
Accounts receivable, net 293.7 271.3
Short-term debt 233.4 409.9
Long-term debt 401.2 152.1
The accompanying notes are an integral part of these financial
tables.
IMS Health
NOTES
(a) "SEC Income Statement" (Tables 1 and 2) differs from the "Adjusted
Income Statement" (Tables 3 and 4) by amounts that are detailed on
Tables 5, 6, 7 and 8. Adjusted results generally exclude from
corresponding U.S. GAAP measures items that are not related to the
core business of IMS (such as gains/losses on non-core
transactions, gains/losses on issuance of investees' stock, a tax
provision related to D&B legacy and related subsequent tax
transactions, etc.) and from time to time also have excluded items
that are related to the core business of IMS but that management
does not expect to be relevant to the business going forward (such
as special restructuring, severance, impairment and other
charges), together with the tax effect of these items. Severance,
impairment and other charges were recorded in 2000, 2001 and 2003,
and there can be no assurance that such charges will not be
recorded in the future. Management uses these adjusted results to
evaluate its financial results for business decision-making, to
develop budgets and to manage expenditures with respect to its
core business. Management believes that the adjusted results are
useful to investors as a supplement to historical U.S. GAAP
information because they facilitate comparisons across periods,
more clearly indicate trends and add insight into the Company's
performance by focusing on the results generated by the Company's
core operations. However, the fact that an item has been excluded
from adjusted results does not mean that similar items will not be
recorded in the future. The method IMS uses to prepare adjusted
results differs in significant respects from U.S. GAAP and is
likely to differ from the methods used by other companies.
Adjusted results should not be regarded as a replacement for
corresponding U.S. GAAP measures, which provide more comprehensive
information about the financial results of IMS. Investors are
urged to review the detailed reconciliations of the adjusted
measures to the comparable U.S. GAAP results.
(b) Operating expenses in 2003 reflect a reclassification between
operating costs and selling and administrative expenses to make
them comparable with the 2004 presentation.
(c) TriZetto Equity Loss in the second quarter of 2004 is based on an
estimate of TriZetto's results and includes IMS's share of such
estimated TriZetto results as well as purchase accounting
amortization expenses.
(d) IMS divested its equity interest in CTS on February 6, 2003 via a
split-off transaction. Income from discontinued operations
includes IMS's share of CTS income on an after-tax basis for the
portion of the first quarter of 2003 prior to the split-off.
Previously CTS had been consolidated into the IMS Health financial
statements.
(e) Gains from investments, net were $2.1 million in the second
quarter of 2004, relating primarily to an earn-out payment from
the sale of an Enterprise investment. This is compared with a gain
of less than $0.1 million in the second quarter of 2003. Gains
from investments, net were $8.5 million for the first six months
of 2004, primarily from the sale of a security in the first
quarter and the items discussed above. This is compared with a
loss of $0.8 million in the first six months of 2003. These gains
and losses are excluded from adjusted results because they relate
to non-strategic investments and are not related to IMS's core
business operations.
(f) Loss on issuance of investees' stock, net was $0.1 million in the
second quarter and the first six months of 2004 compared with a
gain of $0.1 million in the second quarter of 2003 and a loss of
$0.3 million in the first six months of 2003. These SAB 51 losses
relate to the exercise of stock options by TriZetto employees and
TriZetto share repurchases. They are excluded from adjusted
results because they are not related to IMS's core business
operations.
(g) Other expense, net includes $1.2 million and $(2.2) million of
expenses for legal fees in the second quarter of 2004 and 2003,
respectively, related to the IRI litigation. For the first six
months, IRI litigation legal fees were $1.6 million and $(1.8)
million in 2004 and 2003, respectively. These expenses are
excluded from adjusted results because they relate to a D&B legacy
matter and are not related to IMS's core business operations. In
addition, other expense, net excludes a quarterly phasing
adjustment of foreign currency hedge gains (losses), net of $1.2
million in the second quarter and $(4.5) million for the first six
months of 2004, and $4.8 million in the second quarter and $10.6
million for the first six months of 2003. This phasing adjustment
is made to adjusted results in order to more closely match the
timing of foreign exchange hedge gains (losses) with the operating
income being hedged. For the full year, there will be no
difference between the hedge gains (losses) in adjusted and SEC
results.
(h) The tax provision for the second quarter and first six months of
2004 includes a tax benefit of $0.2 million and tax provision of
$4.0 million, respectively, related to the items described in
notes (e), (f) and (g). The tax provision for the second quarter
and first six months of 2003 includes a tax benefit of $0.9
million and $3.5 million, respectively, for the items described in
notes (e), (f) and (g), and a tax benefit of $13.2 million for the
item in note (i). These tax provisions and benefits are excluded
from adjusted results because the related charges are excluded
from adjusted results. In addition, the first-quarter 2004 tax
provision also includes a $15.6 million tax benefit related to a
favorable audit resolution in the U.S. of the 1998 and 1999 tax
years. Adjusted results include a phasing adjustment to recognize
it ratably throughout 2004. The second quarter phasing adjustment
was $4.2 million and the phasing adjustment for the first six
months was $(7.9) million. This phasing adjustment allows the
full-year effective rate to be applied in each quarter to adjusted
pretax results. Similarly, the tax provision for the first quarter
of 2003 included a $13.9 million tax benefit; adjusted results
included a phasing adjustment to recognize it ratably throughout
2003. The second-quarter 2003 phasing adjustment was $3.4 million
and the phasing adjustment for the first six months of 2003 was
$(7.9) million.
(i) IMS incurred $37.2 million of expense in the first quarter of 2003
for severance, impairment and other charges, including severance
for approximately 80 employees, contract cancellations and
impairments, idle real estate facilities and software writedowns.
These amounts are excluded from adjusted results because
management does not expect them to be relevant to the business
going forward. Severance, impairment and other charges were
recorded in 2000, 2001 and 2003, and there can be no assurances
that such charges will not be recorded in the future.
(j) The TriZetto Impairment Charge, net recorded in the first quarter
of 2003 reduced the book value per share of IMS's investment in
TriZetto shares ($6.14 per share) down to the March 31, 2003
market value per share ($4.13). This charge is excluded from
adjusted results because it relates to a non-strategic investment
and is not related to IMS's core business operations.
(k) The split-off of CTS described in note (d) generated a net gain of
$495.1 million in the first quarter of 2003. This gain is
calculated as the proceeds from the split-off less the book value
of IMS's investment in CTS and transaction costs. No tax provision
is provided as the split-off is expected to be a tax-free
transaction. This gain is excluded from adjusted results as it
relates to the divestiture of the business and is not related to
IMS's ongoing core business operations.
(l) IMS expects SEC-reported full-year diluted earnings per share
("EPS") to differ from adjusted diluted EPS. For the first six
months of 2004, the SEC-reported diluted EPS of $0.61 was $0.07
higher than adjusted diluted EPS of $0.54. See Table 6. This
difference was due to net gains from IMS investments, legal fees
relating to the IRI litigation, phasing adjustments of foreign
currency hedge gains (losses) and phasing adjustments relating to
a tax benefit. By year-end, it is expected that the $0.01 foreign
currency hedge gain difference and $0.03 phasing adjustments for a
tax benefit difference between SEC-reported and adjusted diluted
EPS for the first six months of 2004 will reverse, resulting in no
difference in these items between SEC-reported and adjusted
diluted EPS for the full year. Additional items that could cause
full-year 2004 SEC-reported diluted EPS to differ from adjusted
diluted EPS include, but are not limited to, additional IRI legal
fees and gains or losses resulting from strategic actions with
respect to IMS's investments. IMS is unable to predict at this
time the occurrence or amount of these as well as other items that
could cause full-year 2004 SEC-reported diluted EPS to differ from
adjusted diluted EPS.
Statements relating to guidance are based on current expectations
as of the date of this release. These statements are
forward-looking, and actual results may differ materially. IMS
does not undertake to update these targets in any way or for any
reason prior to discussing actual results.
Amounts presented in the financial tables may not add due to rounding.
These financial tables should be read in conjunction with IMS Health's
filings previously made or to be made with the Securities and Exchange
Commission.
CONTACT: IMS Health
Corporate Communications:
Bill Hughes, 203/319-4732
bhughes@imshealth.com
or
Investor Relations:
Darcie Peck, 203/319-4766
dpeck@imshealth.com