Exhibit 99.1
Per-Se Technologies Reports Third Quarter 2004 Results
ALPHARETTA, Ga.--(BUSINESS WIRE)--Nov. 3, 2004--Per-Se
Technologies, Inc. (NASDAQ: PSTI), the leader in Connective Healthcare
solutions that help physicians and hospitals realize their financial
goals, today released its results for the third quarter ended
September 30, 2004.
On a GAAP basis, the Company reported revenue of $90.6 million,
operating income of $10.2 million, or 11.3% of revenue, and income
from continuing operations of $8.8 million, or $.27 per share on a
fully diluted basis during the third quarter. The Company recorded a
one-time gain of $1.5 million during the quarter in conjunction with
receiving the cash settlement related to its resolved litigation
against its former insurance underwriters, Lloyd's of London
(Lloyd's), and recorded a one-time, non-cash expense of $1.0 million
associated with the relocation of its corporate office in July. The
Company also recorded in the quarter a $0.1 million credit related to
the additional procedures requested by the Company's external auditors
as part of their year-end 2003 audit.
On a non-GAAP basis, excluding the gain related to the settlement
with Lloyd's, the expense related to the corporate office relocation,
and the additional procedures credit, the Company had operating income
of $9.6 million, or 10.6% of revenue, and income from continuing
operations of $8.2 million, or $.25 per share on a fully diluted
basis, for the third quarter.
For comparison purposes, in the third quarter of 2003 on a GAAP
basis, the Company reported revenue of $84.5 million and operating
income of $9.8 million, or 11.6% of revenue, and a loss from
continuing operations of $0.1 million, or $.00 per share. On a
non-GAAP basis, excluding expenses of approximately $6.0 million
associated with the Company's September 2003 refinancing of its
long-term debt, the Company had income from continuing operations of
$5.9 million, or $.18 per share on a fully diluted basis.
"Our operations performed in line with our expectations during the
third quarter," stated Philip M. Pead, Per-Se's chairman, president
and chief executive officer. "Our income from continuing operations
increased nearly 40% on a comparable basis over the prior year
quarter."
Year-To-Date Results
On a GAAP basis, the Company reported revenue of $263.4 million,
operating income of $20.4 million, or 7.7% of revenue, and income from
continuing operations of $9.0 million, or $.27 per share on a fully
diluted basis for the nine months ended September 30, 2004. On a
non-GAAP basis, excluding the gain on the settlement with Lloyd's of
$1.5 million, the non-cash expense of $1.0 million related to the
corporate office relocation, year-to-date additional procedures
expenses of $6.3 million, and second quarter expenses of $5.9 million
associated with the issuance of the Company's 3.25% convertible
debentures and the concurrent retirement of its Term Loan B debt, the
Company had operating income of $26.2 million, or 10.0% of revenue,
and income from continuing operations of $20.8 million, or $.62 per
share on a fully diluted basis, for the nine months ended September
30, 2004.
For comparison purposes, in the prior year period on a GAAP basis,
the Company had revenue of $252.0 million, operating income of $27.4
million, or 10.9% of revenue, and income from continuing operations of
$8.0 million, or $.25 per share on a fully diluted basis. On a
non-GAAP basis, excluding debt retirement expenses of $6.3 million,
the Company had income from continuing operations of $14.3 million, or
$.44 per share on a fully diluted basis.
Cash flow from continuing operations for the nine months ended
September 30, 2004, was $41.5 million compared to $17.1 million for
the nine months ended September 30, 2003. Cash flow from continuing
operations for 2004 includes an approximately $6.3 million use of cash
related to the additional procedures and $16.2 million cash received
related to the settlement with Lloyd's.
Segment Performance
The Physician Services division reported revenue and operating
income of $66.1 million and $7.2 million, or 10.9% of revenue,
respectively, for the third quarter of 2004, compared to revenue and
operating income of $63.5 million and $7.5 million, or 11.8% of
revenue, respectively, for the third quarter of 2003.
During the third quarter, the division deferred approximately $0.9
million in revenue related to a contract that has interim performance
goals. The current interim performance measurement period overlaps the
Company's third and fourth quarters. As such, the division deferred a
portion of its third quarter revenue related to the not-yet-completed
interim measurement period. All third quarter expenses related to the
contract were recorded during the third quarter. Cash flow related to
the contract was not impacted.
The division had net new business sold in the third quarter of $1
million, compared to net new business sold of negative $1 million in
the third quarter of 2003. On a year-to-date basis, the division had
net new business sold of $16 million, compared to $5 million in the
first nine months of 2003. The Company defines net new business sold
as the annualized revenue value of new contracts signed in a period,
less the annualized revenue value of terminated business in that same
period.
"Our new business sold, excluding client terminations, in the
quarter increased more than 40% over our third quarter 2003
performance and represented our fourth largest quarter for new
business," stated Pead. "Although client terminations in the quarter
were higher than anticipated, we expect our client retention level to
meet our targeted mid-90% range for the year. Our strong pipeline of
new business going into the fourth quarter reflects the momentum of
our larger sales organization, and we continue to forecast achieving
our net new business sold objectives for the full year 2004."
The division had a net backlog of approximately $3 million as of
September 30, 2004, compared to a net backlog of $2 million as of
September 30, 2003. Net backlog represents the annualized revenue
related to new contracts signed with the business still to be
implemented, less the annualized revenue related to existing contracts
where discontinuance notification has been received.
The Hospital Services division reported revenue and operating
income of $28.1 million and $6.4 million, or 22.9% of revenue,
respectively, for the third quarter of 2004, compared to revenue and
operating income of $24.4 million and $5.8 million, or 23.9% of
revenue, respectively, for the third quarter of 2003. As expected,
margins in the division were impacted by a higher mix of print and
mail revenue due to a large customer contract signed in the second
quarter of 2004.
New business sold in the Hospital Services division during the
third quarter of 2004 was approximately $5 million, compared to new
business sold of approximately $7 million during the third quarter of
2003. On a year-to-date basis, the division had new business sold of
$27 million compared to $19 million in the prior year period.
Medical-related transaction volume increased approximately 25% in the
third quarter compared to the prior year period. This increase was
driven by the strong new business sold performance in the division
during 2004.
"We are pleased by the strong demand for our Hospital Services
solutions. New business sold for our resource management systems
increased year-over-year driven by demand for new functionality in
both our patient and staff scheduling solutions," stated Pead.
Contingent Convertible Debentures
On June 30, 2004, the Company issued $125 million principal amount
of 3.25% subordinated contingent convertible debentures due 2024 to
qualified institutional buyers pursuant to Rule 144A of the Securities
Act of 1933, as amended. The conversion of the debentures into the
Company's common stock is contingent upon the share price reaching
approximately $23.20, or a premium of 30% of the conversion trigger
price of $17.85.
The Company has exercised its right under the convertible
debentures indenture to commit to pay the principal amount of the
debentures in cash. Any stock appreciation amount above the conversion
trigger price of $17.85 will be satisfied by the Company through the
issuance of common stock.
Under current generally accepted accounting principles (GAAP), the
potential dilutive effect of a contingent convertible instrument is
not included in a company's fully diluted earnings per share
calculation until the contingent conversion share price is reached (in
the Company's case, when the share price reaches $23.20). In late
September, the Emerging Issues Task Force of the Financial Accounting
Standards Board concluded that the accounting for contingent
convertible instruments should follow the same accounting treatment as
traditional convertible instruments - the "if converted" method of
accounting - and that the potential dilutive effect of the instrument
should be included in fully diluted earnings per share immediately
upon its issuance. It is expected that this change in accounting will
be issued and effective during the fourth quarter of 2004. The
Company's fully diluted earnings per share for the third quarter was
calculated under current GAAP and, therefore, the "if converted"
method of accounting was not used for the convertible debentures.
The Company has committed to pay the principal amount of the
convertible debentures in cash, and, therefore, there will be no
dilutive impact until the average stock price exceeds the conversion
trigger price of $17.85. The Company will then use the treasury stock
method of accounting for the difference between the weighted average
stock price in a quarter and $17.85. The shares required to cover this
difference will be included in calculating fully diluted earnings per
share.
Lloyd's of London Settlement
As previously reported, the Company reached a settlement in May
2004 with Lloyd's. The Company was in litigation with Lloyd's
following Lloyd's attempt in May 2002 to rescind certain Errors &
Omissions Liability Policies and Directors and Officers Liability
Policies issued by Lloyd's to the Company for the period December 31,
1998, to June 30, 2002.
During the third quarter, the Company received the cash settlement
amount of $16.2 million. This cash is reflected as a reduction of
working capital in the operating section of the cash flow statement.
At the time the settlement was received, the Company recognized a gain
of $1.5 million, which is reflected in the corporate segment of the
income statement.
New Corporate Office Lease
On July 30, 2004, the Company relocated its corporate offices to
Alpharetta, GA, a northern suburb of Atlanta. Over the life of the
10-year lease, the move will result in cash flow savings for the
Company of approximately $5 million compared to its previous office
lease. As part of the new lease arrangement, the new landlord is
funding the remaining lease obligation on the previous corporate
facility. While this arrangement is neutral in the current year from a
cash flow standpoint, the Company recorded a one-time, non-cash
expense of approximately $1.0 million during the third quarter related
to the remaining lease obligation on the previous facility upon its
exit of that facility.
Deferred Tax Asset
As of December 31, 2003, the Company had net operating loss
carryforwards (NOLs) for income tax purposes of approximately $406.9
million. The NOLs expire at various dates between 2004 and 2022. As of
December 31, 2003, the Company had a deferred tax asset, which was
generated primarily from the NOLs, of approximately $185.5 million. In
accordance with GAAP, the deferred tax asset has been fully reserved
since 1998 due to the Company's history of operating losses. The
Company has been profitable for the last three years, and as such, the
deferred tax asset is currently being reviewed to determine the
appropriateness of the reserve. During the fourth quarter of 2004, the
Company may release a portion of the valuation allowance based on
projections of the amount of pre-tax income that could be offset by
the NOL carryforwards in the coming two to three years. Any release of
the valuation allowance in the fourth quarter would result in a tax
benefit. The Company expects its GAAP tax rate to remain at its tax
paying rate for 2005.
Outlook
For the full year 2004, the Company expects consolidated revenue
growth of approximately 6% over the prior year, and fully diluted
earnings per share from continuing operations of $.89 to $.92. The
earnings per share from continuing operations guidance excludes the
gain on the settlement with Lloyd's, the non-cash lease expense, the
additional procedures expenses, the debt retirement expenses, and the
impact of any potential release of the deferred tax asset valuation
allowance.
By segment for the full year 2004, the Company expects revenue
growth for the Physician Services division to be between 4.5% to 5.0%
over 2003 revenue. Operating margins for the division are expected to
be in the range of 10.5% to 11.0%. These revenue growth and operating
margin expectations reflect the deferral of approximately $0.9 million
in revenue as discussed above. For the Hospital Services division, the
Company expects revenue growth of approximately 9% and operating
margins of 22% to 23%.
The Company expects cash flow from continuing operations for the
full year 2004 to be between $46 million and $49 million. The Company
expects capital expenditures and capitalized software development
costs to be between $14 million and $15 million. Cash flow guidance
includes the costs of the additional procedures and the positive net
cash flow impact of the Lloyd's settlement.
"We anticipate our new business sold for the full year 2004 to be
one of our strongest performances," stated Pead. "Net new business
sold in the fourth quarter in particular is an important factor in
forecasting our 2005 financial performance. Therefore, we will provide
2005 revenue growth guidance after fourth quarter 2004 new business
sold is finalized."
If 2005 revenue growth was equivalent to 2004, the Company is
comfortable that it will achieve growth in fully diluted earnings per
share from continuing operations of 20% to 25%, which approximates to
$1.05 to $1.15 per share. The Company expects to achieve further
improvements in consolidated operating margins in 2005. The Company
expects to continue to generate strong cash flow in 2005 with cash
flow from operations consistent with 2004 levels of near $50 million.
"Our Company continues to gain momentum in new sales and operating
income, and we believe 2005 will be another strong year of earnings
and cash flow generation," stated Pead.
Conference Call
Per-Se will host a conference call for institutional investors and
security analysts at 10:00 a.m. Eastern time today. All interested
investors are invited to access a live audio broadcast of the call via
Webcast. The Webcast can be accessed at www.per-se.com in the
Investors section by selecting the Webcast link. Listeners should go
to the website at least 15 minutes before the scheduled start time of
the conference call to download and install any necessary audio
software. For those unable to listen to the live broadcast of the
call, a replay will be available shortly after completion of the call
and will be archived on Per-Se's website for approximately 60 days.
About Per-Se Technologies
Per-Se Technologies (Nasdaq: PSTI) is the leader in Connective
Healthcare. Connective Healthcare solutions from Per-Se enable
physicians and hospitals to achieve their income potential by creating
an environment that streamlines and simplifies the complex
administrative burden of providing healthcare.
Per-Se's Connective Healthcare solutions help reduce
administrative expenses, increase revenue and accelerate the movement
of funds to benefit providers, payers and patients. More information
is available at www.per-se.com.
Safe Harbor Statement
This Press Release contains statements that constitute
forward-looking statements within the meaning of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended by the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements contained in this Press Release include the intent, belief
or current expectations of the Company and members of its management
team with respect to the Company's future business operations as well
as the assumptions upon which such statements are based.
Forward-looking statements include specifically, but are not limited
to, revenue projections, operating income projections, operating
margin projections, earnings per share from continuing operations
projections, cash flow projections, capital expenditure and
capitalized software projections, the accounting for the Company's
contingent convertible debentures, the potential release of a portion
of the Company's deferred tax asset valuation allowance, and full year
2004 new business sold forecasts. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future
performance, and involve risks and uncertainties, and that actual
results may differ materially from those contemplated by such
forward-looking statements. Important factors currently known to
management that could cause actual results to differ materially from
those contemplated by the forward-looking statements in this Press
Release include, but are not limited to, failure to realize
improvements in performance, efficiency and profitability, failure to
complete anticipated sales under negotiations, failure to successfully
implement sales backlog, lack of revenue growth, client losses, the
timing of the issuance of accounting pronouncements, the outcome of
the deferred tax asset valuation allowance analysis, and adverse
developments with respect to the operation or performance of the
Company's business units or the market price of its common stock.
Additional factors that would cause actual results to differ
materially from those contemplated within this Press Release can also
be found in the Company's Safe Harbor Compliance Statement and Factors
That May Affect Future Results of Operations, Financial Condition or
Business included in the Company's Form 10-Q for the quarter ended
June 30, 2004, and Form 10-K for the year ended December 31, 2003. The
Company disclaims any responsibility to update any forward-looking
statements.
The Company believes that the following non-GAAP measures are
additional meaningful measures of operating performance: (1) operating
income and operating margins excluding the gain on the settlement with
Lloyd's, the corporate office relocation expenses, and additional
procedures expenses; (2) income from continuing operations and
earnings per share from continuing operations excluding the gain on
the settlement with Lloyd's, the corporate office relocation expenses,
additional procedures expenses, and debt retirement expenses; and (3)
guidance for income from continuing operations and fully diluted
earnings per share from continuing operations that excludes the gain
on the Lloyd's settlement, the one-time, non-cash lease expense, the
additional procedures expenses, the loss on extinguishment of debt,
and any impact from the potential release of the deferred tax asset
valuation allowance. The presentation of such non-GAAP measures
enables investors to focus on period-over-period operating
performance, without the impact of significant special items, and
thereby enhances the user's overall understanding of the Company's
current financial performance and provides a better baseline for
modeling future earnings expectations. The Company believes the
inclusion of such non-GAAP measures provides consistency and
comparability in its financial reporting and is provided in order to
enable investors to more thoroughly evaluate our current performance
compared to past performance. However, this information will
necessarily be different from comparable information provided by other
companies and should not be used in isolation or as an alternative to
our operating and other financial information as determined under U.S.
generally accepted accounting principles.
CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT REPORTING
(unaudited, in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2004 2003 2004 2003
------- ------- -------- --------
Revenue
Physician Services $66,059 $63,516 $195,317 $189,668
Hospital Services (1) 28,057 24,423 78,274 72,339
Eliminations (3,475) (3,416) (10,208) (10,030)
------- ------- -------- --------
Consolidated $90,641 $84,523 $263,383 $251,977
======= ======= ======== ========
Operating Income
Physician Services $ 7,175 $ 7,506 $ 20,245 $ 22,604
Hospital Services (1) 6,433 5,844 18,603 16,317
Corporate (2) (3,968) (3,509) (12,599) (11,570)
------- ------- -------- --------
$ 9,640 $ 9,841 $ 26,249 $ 27,351
Other income (expenses) -
Corporate 591 --- (5,861) ---
------- ------- -------- --------
Consolidated $10,231 $ 9,841 $ 20,388 $ 27,351
======= ======= ======== ========
(1) The Patient1 and Business1 product lines have been classified
as discontinued operations for all periods presented and, therefore,
are not included in the Hospital Services division segment.
(2) Corporate excludes other income/expenses of $591,000 of income
and $5,861,000 of expenses for the three and nine months ended
September 30, 2004, respectively, related to the additional
procedures, gain related to Lloyd's, and corporate office relocation.
The consolidated other income/expenses also includes $63,000 and
$16,000 for the three and nine months ended September 30, 2004,
respectively, of miscellaneous income.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
September 30, December 31,
2004 2003
------------- -------------
Assets
Cash and cash equivalents $ 36,573 $ 25,271
Restricted cash 70 66
Accounts receivable, net 50,861 47,948
Lloyd's receivable --- 17,405
Other current assets 7,263 6,183
Property and equipment 14,970 16,434
Goodwill 32,549 32,549
Other intangible assets 21,323 19,787
Other 5,573 5,881
Net assets of discontinued operations (3) --- 129
------------- -------------
$ 169,182 $ 171,653
============= =============
Liabilities and Stockholders' Deficit
Current liabilities $ 38,884 $ 43,726
Deferred revenue 25,261 20,334
Current portion of long-term debt --- 12,500
Long-term debt 125,000 109,375
Other long-term obligations 4,683 2,908
Net liabilities of discontinued
operations (3) --- 422
Stockholders' deficit (24,646) (17,612)
------------- -------------
$ 169,182 $ 171,653
============= =============
(3) Net assets and net liabilities of discontinued operations at
December 31, 2003, included Business1.
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2004 2003 2004 2003
-------- -------- -------- ---------
Revenue $ 90,641 $ 84,523 $263,383 $251,977
-------- -------- -------- --------
Salaries and wages 52,662 49,851 153,861 146,086
Other operating expenses 24,361 20,572 71,511 65,792
Depreciation 1,889 2,289 5,979 7,154
Amortization 2,152 1,793 5,799 5,417
Other (income) expense (654) 177 5,845 177
-------- -------- -------- --------
Operating income 10,231 9,841 20,388 27,351
Interest expense 1,410 3,863 5,483 12,524
Interest income (88) (79) (332) (245)
Loss on extinguishment of debt --- 6,034 5,896 6,255
-------- -------- -------- --------
Income before income taxes 8,909 23 9,341 8,817
Income tax expense 102 143 314 803
-------- -------- -------- --------
Income (loss) from continuing
operations 8,807 (120) 9,027 8,014
-------- -------- -------- --------
Discontinued operations
Loss from discontinued
operations,
net of tax - Patient1 -- (228) (18) (1,336)
(Loss) gain on sale of
Patient1, net of tax (106) 9,797 3,649 9,797
Loss from discontinued
operations,
net of tax - Business1 -- (977) (303) (2,851)
Loss on sale of Business1,
net of tax -- (7,708) (130) (7,708)
Loss from discontinued
operations, net of tax -
Other (1) (258) (94) (492)
-------- -------- -------- --------
(107) 626 3,104 (2,590)
-------- -------- -------- --------
Net income $ 8,700 $ 506 $ 12,131 $ 5,424
======== ======== ======== ========
Diluted net income (loss) per
common share (4):
Income from continuing operations
excluding other income
(expense), and loss on
extinguishment of debt $ 0.25 $ 0.18 $ 0.62 $ 0.44
Other income (expense) 0.02 --- (0.17) ---
Loss on extinguishment
of debt --- (0.18) (0.18) (0.19)
-------- -------- -------- --------
Income from continuing
operations 0.27 --- 0.27 0.25
-------- -------- -------- --------
Loss from discontinued
operations, net of tax -
Patient1 --- (0.01) --- (0.04)
(Loss) gain on sale of Patient1,
net of tax --- 0.29 0.10 0.30
Loss from discontinued
operations, net of tax -
Business1. --- (0.03) (0.01) (0.09)
Loss on sale of Business1, net of
tax --- (0.23) --- (0.24)
Loss from discontinued
operations, net of tax - Other --- (0.01) --- (0.01)
-------- -------- -------- --------
Net income $ 0.27 $ 0.01 $ 0.36 $ 0.17
======== ======== ======== ========
Weighted average shares used in
computing diluted earnings
per share (4) 32,168 33,688 33,273 32,199
(4) As the Company had a loss from continuing operations for the
three months ended September 30, 2003, diluted earnings per share
calculated on a GAAP basis would be the same as basic earnings per
share. The weighted average shares calculation would exclude
approximately 3.0 million shares related to dilutive options and
warrants that are included above. The Company has provided fully
diluted earnings per share from continuing operations to facilitate
comparisons to previously issued guidance. This is a non-GAAP
calculation. The GAAP calculation for basic earnings per share is a
$0.00 loss from continuing operations per share and a $0.02 net income
per share for the three months ended September 30, 2003.
PER-SE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine Months Ended
September 30,
-------------------
2004 2003
--------- ---------
Cash Flows From Operating Activities:
Net income $12,131 $5,424
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 11,778 12,571
Loss on extinguishment of debt 5,896 6,255
Gain on sale of Patient1 (3,649) (9,797)
Loss from discontinued operations 545 12,387
Amortization of deferred financing costs 963 932
Changes in assets and liabilities,
excluding effects
of acquisitions and divestitures 13,831 (10,700)
--------- ---------
Net cash provided by continuing operations 41,495 17,072
Net cash used for discontinued operations (514) (9,672)
--------- ---------
Net cash provided by operating activities 40,981 7,400
--------- ---------
Cash Flows From Investing Activities:
Purchases of property and equipment (4,624) (4,850)
Software development costs (5,334) (2,821)
Net proceeds from sale of Patient1 and Business1 3,520 27,092
Acquisition, net of cash acquired (1,141) --
Other (66) (54)
--------- ---------
Net cash (used for) provided by continuing
operations (7,645) 19,367
Net cash used for discontinued operations --- (2,289)
--------- ---------
Net cash (used for) provided by investing
activities (7,645) 17,078
--------- ---------
Cash Flows From Financing Activities:
Proceeds from the exercise of stock options 5,853 7,012
Proceeds from borrowings 125,000 125,000
Treasury stock purchase (24,999) --
Debt issuance costs (6,013) (9,737)
Repayments of debt (121,875) (175,020)
--------- ---------
Net cash used for financing activities (22,034) (52,745)
--------- ---------
Cash and Cash Equivalents:
Net change in cash 11,302 (28,267)
Balance at beginning of period 25,271 46,748
--------- ---------
Balance at end of period $36,573 $18,481
========= =========
RECONCILIATION OF CONSOLIDATED OPERATING INCOME AND MARGIN,
AND INCOME FROM CONTINUING OPERATIONS AND EPS
(unaudited, in thousands except per share data)
For the period ended September 30, 2004
---------------------------------------
QTD YTD
---------- --------
% of % of
Revenue Revenue
-------- -------
Operating income excluding
Lloyd's gain, corporate
office relocation expenses
and additional procedures
expenses (a non-GAAP measure) $9,640 10.6% $26,249 10.0%
------------------ ---------------
Gain related to settlement
with Lloyd's 1,526 1,526
Non-cash lease abandonment
expenses (1,040) (1,040)
Additional procedures
expenses 105 (6,347)
------------------ ---------------
Consolidated operating income
on a GAAP basis $10,231 11.3% $20,388 7.7%
================== ===============
QTD EPS YTD EPS
---------------------------------------
Income from continuing
operations, and earnings per
share from continuing
operations, excluding Lloyd's Increase
gain, corporate office (decr)
relocation expenses, vs.
additional procedures prior
expenses and loss on year
extinguishment of debt (a
non-GAAP measure) $8,216 38.9% $.25 $20,784 $.62
---------------------------------------
Gain related to settlement
with Lloyd's 1,526 $.05 1,526 $.05
Non-cash lease abandonment
expenses (1,040) ($.03) (1,040) ($.03)
Additional procedures
expenses 105 -- (6,347) ($.19)
Loss on extinguishment of
debt -- -- (5,896) ($.18)
---------- ---------------------
Income from continuing
operations on a GAAP basis $8,807 $.27 $9,027 $.27
========== =====================
For the period ended September 30, 2003
---------------------------------------
QTD YTD
------------------ --------
EPS EPS
--------
Income from continuing
operations excluding
extinguishment of debt
expenses (a non-GAAP measure) $5,914 $.18 $14,269 $.44
Loss on extinguishment of
debt (6,034) ($.18) (6,255) (.19)
------------------ ---------------
(Loss) income from continuing
operations on a GAAP basis $(120) ($.00) 8,014 $.25
================== ===============
NOTE: Gain related to settlement with Lloyd's, corporate office
relocation expense, and additional procedures expenses are classified
as other income/expense in the consolidated income statement. Other
income/expense also includes $63,000 and $16,000 for the three and
nine months ended September 30, 2004, respectively, of miscellaneous
income.
Operating income, income from continuing operations, and earnings
per share from continuing operations, excluding Lloyd's gain, non-cash
lease abandonment expenses, additional procedures and loss on
extinguishment of debt
The Company believes operating income, excluding gain related to
the settlement with Lloyd's, the non-cash lease abandonment expenses,
and additional procedures expenses as well as income from continuing
operations and related earnings per share from continuing operations,
excluding gain related to the settlement with Lloyd's, the non-cash
lease abandonment expenses, additional procedures expenses and loss on
extinguishment of debt are additional meaningful measures of operating
performance to facilitate comparisons to previously issued guidance
that excluded these items. These measures represent the earnings
generated from the "base business" excluding (1) the gain related to
the settlement of the Company's litigation with Lloyd's, (2) the lease
expense related to the relocation Company's corporate offices, (3) the
costs associated with the additional procedures requested by the
Company's external auditors as part of their year-end 2003 audit, and
(4) the costs associated with the issuance of the convertible
debentures and subsequent retirement of the Company's Term Loan B
debt. These items are special in nature. Internally, the Company uses
these measures to evaluate its operational performance. The
presentation of such non-GAAP measures enables investors to focus on
period-over-period operating performance, without the impact of
significant special items, and thereby enhances the user's overall
understanding of the Company's current financial performance and
provides a better baseline for modeling future earnings expectations.
The Company believes the inclusion of such non-GAAP measures provides
consistency and comparability in its financial reporting and is
provided in order to enable investors to more thoroughly evaluate its
current performance compared to past performance. However, this
information will necessarily be different from comparable information
provided by other companies and should not be used in isolation or as
an alternative to the Company's operating and other financial
information as determined under U.S. generally accepted accounting
principles.
Income from continuing operations and earnings per share from
continuing operations, excluding loss on extinguishment of debt
The Company believes income from continuing operations, excluding
loss on extinguishment of debt and related earnings per share is an
additional meaningful measure of operating performance to facilitate
comparisons to previously issued guidance that excluded this item.
These measures represent the earnings generated from the "base
business" excluding the costs associated with the refinancing and
retirement of the Company's debt. These expenses are special in
nature. Internally, the Company uses these measures to evaluate the
operational performance of the Company. The presentation of such
non-GAAP measures enables investors to focus on period-over-period
operating performance, without the impact of significant special
items, and thereby enhances the user's overall understanding of the
Company's current financial performance and provides a better baseline
for modeling future earnings expectations. The Company believes the
inclusion of such non-GAAP measures provides consistency and
comparability in its financial reporting and is provided in order to
enable investors to more thoroughly evaluate its current performance
compared to past performance. However, this information will
necessarily be different from comparable information provided by other
companies and should not be used in isolation or as an alternative to
the Company's operating and other financial information as determined
under U.S. generally accepted accounting principles.
RECONCILIATION OF GUIDANCE
(unaudited, in thousands)
Year Ended
December 31,
2004 EPS Guidance 2004
----------------
EPS from continuing operations excluding special
items (a non-GAAP measure) $.89 - $.92
Additional procedures expenses (.19)
Loss on extinguishment of debt (.18)
Non-cash lease abandonment expenses (.03)
Gain on Lloyd's settlement .05
----------------
EPS from continuing operations on a GAAP basis (1) $.54 - $.57
================
EPS from continuing operations, excluding special items - guidance
The Company believes earnings per share from continuing
operations, excluding special items, is an additional meaningful
measure of operating performance as it represents the earnings
generated from the "base business" excluding (1) the costs associated
with additional procedures requested by the Company's external
auditors as part of their year-end 2003 audit, (2) the costs
associated with the refinancing and retirement of the Company's debt,
(3) the non-cash costs associated with the Company's corporate office
move, as well as (4) the gain on the settlement of the Company's
litigation with Lloyd's. These items are special in nature.
Internally, the Company uses this measure to evaluate the operational
performance of the Company. The presentation of such non-GAAP measures
enables investors to focus on period-over-period operating
performance, without the impact of significant special items, and
thereby enhances the user's overall understanding of the Company's
current financial performance and provides a better baseline for
modeling future earnings expectations. The Company believes the
inclusion of such non-GAAP measures provides consistency and
comparability in its financial reporting and is provided in order to
enable investors to more thoroughly evaluate its current performance
compared to past performance. However, this information will
necessarily be different from comparable information provided by other
companies and should not be used in isolation or as an alternative to
the Company's operating and other financial information as determined
under U.S. generally accepted accounting principles.
(1) The impact of any potential release of the deferred tax asset
valuation allowance is not included in the above reconciliation
because the amount is not quantifiable at this time.
CONTACT: Per-Se Technologies, Alpharetta
Michele Howard, 770-237-7827
investors@per-se.com