Exhibit 99.1
IMS Health Delivers Strong Fourth-Quarter 2004 with 16 Percent Revenue Growth
and 14 Percent EPS Growth
FAIRFIELD, Conn.--(BUSINESS WIRE)--Feb. 15, 2005--IMS Health
(NYSE: RX) today announced fourth-quarter 2004 revenues of $443.7
million, up 16 percent compared with revenues of $384.1 million for
the fourth quarter of 2003. Fourth-quarter diluted earnings per share
on an SEC-reported basis was $0.32, up 14 percent, compared with $0.28
in the 2003 fourth quarter. Fourth-quarter adjusted diluted earnings
per share was $0.34, compared with $0.29 per share in the same period
of 2003, an increase of 17 percent. Net income on an SEC-reported
basis was $73.6 million, up 6 percent compared with net income of
$69.7 million in the year-earlier quarter. On an adjusted basis, net
income for the fourth quarter of 2004 was $79.2 million, up 12
percent, compared with net income of $70.9 million in the prior year.
Adjusted results for the fourth quarter of 2004 include a $36.9
million pre-tax severance charge and a $38.8 million pre-tax gain on
the sale of IMS's equity interest in TriZetto, as well as the related
net tax provision of $1.4 million.
"IMS delivered a strong fourth quarter and an excellent 2004, in
line with the full-year guidance we raised back in July," said David
R. Carlucci, IMS chief executive officer and president. "Our
performance reflects the success of our teams around the world in
applying their creativity and expertise to solve our clients' most
challenging issues. We were particularly pleased with results in the
US, where we saw significant improvement in our business, and both our
Europe and Asia Pacific regions posted double-digit revenue gains. Our
balance sheet remains strong and our free cash flow is outstanding. As
a result, we have real momentum heading into 2005."
Adjusted results for the 2004 fourth quarter exclude certain net
pre-tax expense items totaling approximately $1.8 million, as well as
certain net tax provisions of approximately $3.7 million. See Tables 5
and 7 for a reconciliation between SEC and adjusted results for the
quarters ended December 31, 2004 and 2003, respectively.
Full-Year 2004 Results
For the year ended December 31, 2004, revenues were $1,569.0
million, up 14 percent over the same period in 2003. Diluted earnings
per share on an SEC-reported basis for the 2004 full year was $1.20,
compared with $2.58 in the year-earlier period, which included a $2.01
gain on the split-off of Cognizant Technology Solutions in the first
quarter of 2003. Adjusted diluted earnings per share for the full-year
2004 was $1.18, a 16 percent increase over the $1.02 reported in the
prior-year period. On an SEC-reported basis, net income for the full
year was $285.4 million, compared with $638.9 million for the
comparable period last year, which included a $496.9 million gain on
the split-off of Cognizant Technology Solutions in the first quarter
of 2003. On an adjusted basis, net income for the full year was $280.8
million, up 11 percent, compared with adjusted net income of $252.0
million in 2003.
For the full year, operating income was $386.5 million on both an
SEC-reported and adjusted basis, compared with $361.5 million on an
SEC-reported basis and $398.7 million on an adjusted basis in 2003.
Operating income in 2004 rose 7 percent on an SEC-reported basis and
declined 3 percent on an adjusted basis from 2003. Operating income in
2004 includes a $36.9 million pre-tax severance charge.
Adjusted results for the 2004 full year exclude certain net
pre-tax income items totaling approximately $7.7 million. In addition,
there were certain net tax provisions of approximately $3.1 million
that were excluded from adjusted results. See Tables 6 and 8 for a
reconciliation between SEC and adjusted results for the years ended
December 31, 2004 and 2003, respectively.
Preliminary net cash provided by operating activities on an
SEC-reported basis was $399.1 million. Preliminary free cash flow for
the full-year 2004 was $322.2 million. See Table 10 for a complete
reconciliation.
Balance Sheet Highlights
IMS's cash, cash equivalents and short-term marketable securities
as of December 31, 2004 totaled $460.0 million, compared with $384.5
million on December 31, 2003. Total debt as of December 31, 2004 was
$630.1 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 3.8 million shares in the fourth
quarter at a total cost of $85.6 million. For the full-year 2004, the
company repurchased 15.0 million shares at a total cost of $362.7
million. In December 2004, the board of directors authorized the
company to repurchase up to 10 million additional IMS shares.
The number of actual shares outstanding as of December 31, 2004
was approximately 229.1 million compared with 238.3 million as of
December 31, 2003.
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 $1.6 billion in 2004 revenue and more than
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 5 p.m. (EST) today to discuss
its fourth-quarter and full-year 2004 financial results. To
participate, please dial 1-800-530-9010 (U.S. and Canada) and
1-212-676-5395 (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. Prior to the conference call, a copy
of this press release and any other financial or statistical
information presented during the call will be made available in the
"Investors" area of IMS's Website.
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 21231512
beginning one hour after the call is completed.
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 joint 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.
Table 1
IMS Health
SEC Income Statement (a)
Three Months Ended December 31
(unaudited, in millions except per share)
2004 2003 % Fav
SEC SEC (Unfav)
------- ------- -------
Revenue
Sales Force Effectiveness $190.9 $181.3 5 %
Portfolio Optimization 121.0 108.5 12
Brand, Launch and Other 70.2 52.9 33
Consulting and Services 61.6 41.4 49
------- -------
Total 443.7 384.1 16
Operating Expenses (b)
Operating Costs (188.6) (154.6) (22)
Selling and Administrative (107.2) (94.3) (14)
Depreciation and Amortization (26.2) (20.1) (30)
Severance, Impairment & other charges
(j) (36.9) 0.0 NM
------- -------
Total (358.8) (269.0) (33)
Operating Income 84.9 115.1 (26)
Interest expense, net (3.4) (2.8)
Gains (losses) from investments, net (e) 1.2 (0.9)
Gain from sale of TriZetto (c) 38.8 0.0
Loss on issuance of investees' stock, net (f) (0.1) (0.0)
Other expense, net (g) (8.7) (4.1)
------- -------
Pretax Income 112.6 107.4 5
Provision for Income Taxes (h) (39.8) (35.4)
TriZetto Equity Income (Loss), Net (c) 0.8 (4.1)
------- -------
Net Income from continuing operations 73.6 67.9 8
Gain from discontinued operations - CTS (l) 0.0 1.8
------- -------
Net Income $73.6 $69.7 6
Diluted EPS:
Income from continuing operations 0.32 0.28
Income from discontinued operations -
CTS (l) 0.00 0.01
------- -------
Total Diluted EPS $0.32 $0.28 14 %
Shares Outstanding:
Weighted Average Diluted 233.4 244.8 5 %
End-of-Period Actual 229.1 238.3 4
The accompanying notes are an integral part of these financial tables.
Table 2
IMS Health
SEC Income Statement (a)
Twelve Months Ended December 31
(unaudited, in millions except per share)
% Fav
2004 SEC 2003 SEC (Unfav)
--------- --------- -------
Revenue
Sales Force Effectiveness $705.5 $657.1 7 %
Portfolio Optimization 451.3 413.3 9
Brand, Launch and Other 231.3 190.6 21
Consulting and Services 181.0 120.7 50
--------- ---------
Total 1,569.0 1,381.8 14
Operating Expenses (b)
Operating Costs (664.1) (575.8) (15)
Selling and Administrative (388.1) (332.1) (17)
Depreciation and Amortization (93.5) (75.1) (24)
Severance, Impairment & other
charges (i), (j) (36.9) (37.2) 1
--------- ---------
Total (1,182.6) (1,020.3) (16)
Operating Income 386.5 361.5 7
Interest expense, net (11.7) (11.2)
Gains from investments, net (e) 11.9 0.3
Gain from sale of TriZetto (c) 38.8 0.0
Loss on issuance of investees' stock, net
(f) (0.2) (0.4)
Other expense, net (g) (10.9) (25.8)
--------- ---------
Pretax Income 414.4 324.3 28
Provision for Income Taxes (h) (129.2) (166.0)
TriZetto Equity Income (Loss), Net (c) 0.2 (4.2)
TriZetto impairment charge, net (k) 0.0 (14.8)
--------- ---------
Net Income from continuing operations 285.4 139.3 105
Income from discontinued operations - CTS
(d) 0.0 2.8
Gain on discontinued operations - CTS (l) 0.0 496.9
--------- ---------
Net Income $285.4 $638.9 (55)
Diluted EPS:
Income from continuing operations 1.20 0.56
Income from discontinued operations
- CTS (d) 0.00 0.01
Gain on discontinued operations -
CTS (l) 0.00 2.01
--------- ---------
Total Diluted EPS $1.20 $2.58 (53)%
Shares Outstanding:
Weighted Average Diluted 237.7 247.3 4 %
End-of-Period Actual 229.1 238.3 4
The accompanying notes are an integral part of these financial tables.
Table 3
IMS Health
Adjusted Income Statement (a)
Three Months Ended December 31
(unaudited, in millions except per share)
2004 2003 % Fav Constant
Adjusted Adjusted (Unfav) $ Growth
--------- --------- ------- --------
Revenue
Sales Force Effectiveness $190.9 $181.3 5 % 1 %
Portfolio Optimization 121.0 108.5 12 6
Brand, Launch and Other 70.2 52.9 33 25
Consulting and Services 61.6 41.4 49 41
--------- ---------
Total 443.7 384.1 16 10
Operating Expenses (b)
Operating Costs (188.6) (154.6) (22)
Selling and Administrative (107.2) (94.3) (14)
Depreciation and Amortization (26.2) (20.1) (30)
Severance, Impairment &
other charges (j) (36.9) 0.0 NM
--------- ---------
Total (358.8) (269.0) (33)
Operating Income 84.9 115.1 (26) (31)
Interest expense, net (3.4) (2.8) (23)
Gain from sale of TriZetto (c) 38.8 0.0 NM
Other expense, net (5.8) (9.7) 40
--------- ---------
Pretax Income 114.5 102.6 12
Provision for Income Taxes (36.1) (30.6) (18)
TriZetto Equity Income (Loss),
Net (c) 0.8 (1.1) NM
--------- ---------
Net Income from continuing
operations $79.2 $70.9 12 %
Diluted EPS:
Total Diluted EPS $0.34 $0.29 17 %
Shares Outstanding:
Weighted Average Diluted 233.4 244.8 5 %
End-of-Period Actual 229.1 238.3 4
The accompanying notes are an integral part of these financial tables.
Table 4
IMS Health
Adjusted Income Statement (a)
Twelve Months Ended December 31
(unaudited, in millions except per share)
2004 2003 % Fav Constant
Adjusted Adjusted (Unfav) $ Growth
--------- --------- ------- --------
Revenue
Sales Force Effectiveness $705.5 $657.1 7 % 3 %
Portfolio Optimization 451.3 413.3 9 4
Brand, Launch and Other 231.3 190.6 21 15
Consulting and Services 181.0 120.7 50 43
--------- ---------
Total 1,569.0 1,381.8 14 8
Operating Expenses (b)
Operating Costs (664.1) (575.8) (15)
Selling and Administrative (388.1) (332.1) (17)
Depreciation and Amortization (93.5) (75.1) (24)
Severance, Impairment &
other charges (j) (36.9) 0.0 NM
--------- ---------
Total (1,182.6) (983.0) (20)
Operating Income 386.5 398.7 (3) (7)
Interest expense, net (11.7) (11.2) (5)
Gain from sale of TriZetto (c) 38.8 0.0 NM
Other expense, net (6.9) (26.9) 74
--------- ---------
Pretax Income 406.7 360.7 13
Provision for Income Taxes (126.1) (110.1) (15)
TriZetto Equity Income (Loss),
Net (c) 0.2 (1.3) NM
--------- ---------
Net Income from continuing
operations 280.8 249.3 13 %
Income from discontinued
operations - CTS (d) 0.0 2.8 (100)
--------- ---------
Net Income $280.8 $252.0 11 %
Diluted EPS:
Income from continuing
operations 1.18 1.01 17
Income from discontinued
operations - CTS (d) 0.00 0.01 (100)
--------- ---------
Total Diluted EPS $1.18 $1.02 16 %
Shares Outstanding:
Weighted Average Diluted 237.7 247.3 4 %
End-of-Period Actual 229.1 238.3 4
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 December 31, 2004
(unaudited, in millions except per share)
Adjusted
SEC Q4 Adjustments Q4
------- ----------- ---------
Revenue
Sales Force Effectiveness $190.9 $0.0 $190.9
Portfolio Optimization 121.0 0.0 121.0
Brand, Launch and Other 70.2 0.0 70.2
Consulting and Services 61.6 0.0 61.6
------- ----------- ---------
Total 443.7 0.0 443.7
Operating Expenses (b)
Operating Costs (188.6) 0.0 (188.6)
Selling and Administrative (107.2) 0.0 (107.2)
Depreciation and Amortization (26.2) 0.0 (26.2)
Severance, Impairment & other charges
(j) (36.9) 0.0 (36.9)
------- ----------- ---------
Total (358.8) 0.0 (358.8)
Operating Income 84.9 0.0 84.9
Interest expense, net (3.4) 0.0 (3.4)
Gains from investments, net (e) 1.2 (1.2) 0.0
Gain from sale of TriZetto (c) 38.8 0.0 38.8
Loss on issuance of investees' stock,
net (f) (0.1) 0.1 0.0
Other expense, net (g) (8.7) 2.9 (5.8)
------- ----------- ---------
Pretax Income 112.6 1.8 114.5
Provision for Income Taxes (h) (39.8) 3.7 (36.1)
TriZetto Equity Income, Net (c) 0.8 0.0 0.8
------- ----------- ---------
Net Income $73.6 $5.6 $79.2
Diluted EPS:
Total Diluted EPS $0.32 $0.02 $0.34
Shares Outstanding:
Weighted Average Diluted 233.4 0.0 233.4
End-of-Period Actual 229.1 0.0 229.1
The accompanying notes are an integral part of these financial tables.
Table 6
IMS Health
Reconciliation from SEC to Adjusted Income Statement (a)
Twelve Months Ended December 31 2004
(unaudited, in millions except per share)
Adjusted
SEC FY Adjustments FY
--------- ----------- ---------
Revenue
Sales Force Effectiveness $705.5 $0.0 $705.5
Portfolio Optimization 451.3 0.0 451.3
Brand, Launch and Other 231.3 0.0 231.3
Consulting and Services 181.0 0.0 181.0
--------- ----------- ---------
Total 1,569.0 0.0 1,569.0
Operating Expenses (b)
Operating Costs (664.1) 0.0 (664.1)
Selling and Administrative (388.1) 0.0 (388.1)
Depreciation and Amortization (93.5) 0.0 (93.5)
Severance, Impairment & other
charges (j) (36.9) 0.0 (36.9)
--------- ----------- ---------
Total (1,182.6) 0.0 (1,182.6)
Operating Income 386.5 0.0 386.5
Interest expense, net (11.7) 0.0 (11.7)
Gains from investments, net (e) 11.9 (11.9) 0.0
Gain from sale of TriZetto (c) 38.8 0.0 38.8
Loss on issuance of investees' stock,
net (f) (0.2) 0.2 0.0
Other expense, net (g) (10.9) 4.0 (6.9)
--------- ----------- ---------
Pretax Income 414.4 (7.7) 406.7
Provision for Income Taxes (h) (129.2) 3.1 (126.1)
TriZetto Equity Loss, Net (c) 0.2 0.0 0.2
--------- ----------- ---------
Net Income $285.4 ($4.6) $280.8
Diluted EPS:
Total Diluted EPS $1.20 ($0.02) $1.18
Shares Outstanding:
Weighted Average Diluted 237.7 0.0 237.7
End-of-Period Actual 229.1 0.0 229.1
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 December 31 2003
(unaudited, in millions except per share)
Adjusted
SEC Q4 Adjustments Q4
------- ----------- ---------
Revenue
Sales Force Effectiveness $181.3 $0.0 $181.3
Portfolio Optimization 108.5 0.0 108.5
Brand, Launch and Other 52.9 0.0 52.9
Consulting and Services 41.4 0.0 41.4
------- ----------- ---------
Total 384.1 0.0 384.1
Operating Expenses (b)
Operating Costs (154.6) 0.0 (154.6)
Selling and Administrative (94.3) 0.0 (94.3)
Depreciation and Amortization (20.1) 0.0 (20.1)
------- ----------- ---------
Total (269.0) 0.0 (269.0)
Operating Income 115.1 0.0 115.1
Interest expense, net (2.8) 0.0 (2.8)
Losses from investments, net (e) (0.9) 0.9 0.0
Loss on issuance of investees' stock,
net (f) (0.0) 0.0 0.0
Other expense, net (g) (4.1) (5.6) (9.7)
------- ----------- ---------
Pretax Income 107.4 (4.8) 102.6
Provision for Income Taxes (h) (35.4) 4.8 (30.6)
TriZetto Equity Loss, Net (c) (4.1) 3.0 (1.1)
------- ----------- ---------
Net Income from continuing operations 67.9 3.0 70.9
Income from discontinued operations -
CTS (l) 1.8 (1.8) 0.0
------- ----------- ---------
Net Income $69.7 $1.2 $70.9
Diluted EPS:
Income from continuing operations 0.28 0.01 0.29
Income from discontinued
operations - CTS (l) 0.01 (0.01) 0.00
------- ----------- ---------
Total Diluted EPS $0.28 $0.01 $0.29
Shares Outstanding:
Weighted Average Diluted 244.8 0.0 244.8
End-of-Period Actual 238.3 0.0 238.3
The accompanying notes are an integral part of these financial tables.
Table 8
IMS Health
Reconciliation from SEC to Adjusted Income Statement (a)
Twelve Months Ended December 31 2003
(unaudited, in millions except per share)
Adjusted
SEC FY Adjustments FY
--------- ----------- ---------
Revenue
Sales Force Effectiveness $657.1 $0.0 $657.1
Portfolio Optimization 413.3 0.0 413.3
Brand, Launch and Other 190.6 0.0 190.6
Consulting and Services 120.7 0.0 120.7
--------- ----------- ---------
Total 1,381.8 0.0 1,381.8
Operating Expenses (b)
Operating Costs (575.8) 0.0 (575.8)
Selling and Administrative (332.1) 0.0 (332.1)
Depreciation and Amortization (75.1) 0.0 (75.1)
Severance, Impairment & other
charges (i) (37.2) 37.2 0.0
--------- ----------- ---------
Total (1,020.3) 37.2 (983.0)
Operating Income 361.5 37.2 398.7
Interest expense, net (11.2) 0.0 (11.2)
Gains from investments, net (e) 0.3 (0.3) 0.0
Loss on issuance of investees' stock,
net (f) (0.4) 0.4 0.0
Other expense, net (g) (25.8) (1.0) (26.9)
--------- ----------- ---------
Pretax Income 324.3 36.3 360.7
Provision for income taxes (h) (166.0) 55.8 (110.1)
TriZetto equity loss, Net (c) (4.2) 3.0 (1.3)
TriZetto impairment charge, net (k) (14.8) 14.8 0.0
--------- ----------- ---------
Net Income from continuing operations 139.3 110.0 249.3
Income from discontinued operations -
CTS (d) 2.8 0.0 2.8
Gain on discontinued operations - CTS
(l) 496.9 (496.9) 0.0
--------- ----------- ---------
Net Income $638.9 ($386.9) $252.0
Diluted EPS:
Income from continuing
operations 0.56 0.44 1.01
Income from discontinued
operations - CTS (d) 0.01 0.00 0.01
Gain on discontinued operations
- CTS (l) 2.01 (2.01) 0.00
--------- ----------- ---------
Total Diluted EPS $2.58 ($1.56) $1.02
Shares Outstanding:
Weighted Average Diluted 247.3 0.0 247.3
End-of-Period Actual 238.3 0.0 238.3
The accompanying notes are an integral part of these financial tables.
Table 9
IMS Health
Selected Consolidated Balance Sheet Items
(unaudited, in millions)
Dec. 31, Dec. 31,
2004 2003
------- --------
Cash and cash equivalents $444.9 $344.4
Short-term marketable securities 15.1 40.1
Accounts receivable, net 280.5 271.3
Short-term debt 232.5 409.9
Long-term debt 397.7 152.1
The accompanying notes are an integral part of these financial tables.
IMS Health
NOTES TO FINANCIAL TABLES 1-9
(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 are those used by
management for the purposes of global business decision-making,
including developing budgets and managing expenditures. Adjusted
results exclude certain U.S. GAAP measures to the extent that
management believes exclusion will facilitate comparisons across
periods and more clearly indicate trends. Although IMS discloses
adjusted results in order to give a full picture to investors of
its business as seen by management, these adjusted results are not
prepared specifically for investors and are not a replacement for
the more comprehensive information for investors included in IMS's
U.S. GAAP results. 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. Investors
interested in management's adjusted results are urged to review
the detailed reconciliations of the adjusted measures to
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 Income in the fourth quarter of 2004 includes
IMS's share of TriZetto results as well as purchase accounting
amortization expenses. In the fourth quarter of 2004, IMS sold its
entire interest in TriZetto back to the company for a pre-tax gain
of $38.8 million. IMS intends to use a portion of the proceeds
from this sale to fund the severance expense described in Note (j)
below. In the fourth quarter of 2003, TriZetto recorded a $18.7
million charge relating to loss contracts and asset impairments.
IMS's share of this charge ($3.0 million) has been excluded from
adjusted results because it is not related to IMS's core business
operations.
(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 $1.2 million in the fourth
quarter of 2004, relating primarily to a $1.7 million gain from
the sale of a security, partially offset by $0.4 million of fees
for the Enterprise investments. This is compared with a net loss
of $0.9 million in the fourth quarter of 2003. Gains from
investments, net were $11.9 million for 2004, primarily from the
sale of securities in the first three quarters and the items
discussed above. This is compared with a net gain of $0.3 million
for 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
fourth quarter of 2004 compared with a loss of $0.0 million in the
fourth quarter of 2003. Loss on issuance of investees' stock was
$0.2 million for full year 2004 compared to a loss of $0.4 million
for full year 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 and $0.4 million of expenses for
legal fees in the fourth quarter of 2004 and 2003, respectively,
related to the IRI litigation. For full year 2004, IRI litigation
fees were $4.0 million compared with ($1.0) million for full year
2003. 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 $1.7 million in the fourth quarter of 2004 and
($6.0) million in the fourth quarter 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 is no
difference between the hedge losses in adjusted and SEC results.
(h) The tax provision for the fourth quarter and full year of 2004
includes a tax benefit of $0.2 million and a tax provision of $3.1
million, respectively, related to the items described in notes
(e), (f) and (g). The tax provision for the fourth quarter and
full year of 2003 includes a tax provision of $0.8 million and
$0.3 million, respectively, related to items described in notes
(e), (f) and (g), and a tax benefit for the full year 2003 of
$13.2 million for the item in note (i). These tax benefits and tax
provisions 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 phasing
adjustment for the fourth quarter of 2004 was $4.0 million. This
phasing adjustment allows the full year effective tax rate to be
applied in each quarter to adjusted pretax results. Similarly, the
tax provision for the first quarter of 2003 includes a $13.9
million tax benefit; adjusted results include a phasing adjustment
to recognize it ratably throughout 2003. The fourth quarter 2003
phasing adjustment was a provision of $3.9 million. The tax
provision for full year 2003 also includes an accrual of $69.6
million related to a D&B legacy tax transaction and subsequent
related transactions. This tax provision is excluded from adjusted
results because it relates to legacy tax transactions and is not
related to IMS's core business operations.
(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) IMS incurred $36.9 million of expense in the fourth quarter of
2004 for severance for approximately 465 employees. This severance
expense will be funded by a portion of the proceeds from the sale
of IMS's equity interest in TriZetto, which is described in Note
(c) above.
(k) 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.
(l) The split-off of CTS described in Note (d) generated a net gain of
$496.9 million in 2003, of which $495.1 million was recorded in
the first quarter and $1.8 million was recorded in the fourth
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.
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.
Table 10
IMS Health
Reconciliation from SEC to Free Cash Flow
(Preliminary - Subject to Change)
Twelve Months Ended December 31 2004
(unaudited, in millions)
SEC
Cash Free Cash
Flow Adjustments Flow
------- ----------- ---------
Cash Flows from Operating Activities:
Net income $285.4 $(4.6)(1) $280.8
Adjustments to Reconcile Net Income to Net Cash Provided
by Op. Activities:
Depreciation & amortization 93.5 0 93.5
Bad debt expense 4.0 0 4.0
Deferred income taxes 17.9 (17.9)(2) 0
Gains from investments, net (11.9) 11.9 (3) 0
Gain from sale of TriZetto (38.8) 0 (38.8)
Loss on issuance of investees' stock,
net 0.2 (0.2)(3) 0
TriZetto equity income, net (0.2) 0 (0.2)
Minority interests in net income of
consolidated companies 5.8 (5.8)(4) 0
Non-cash stock compensation charges 3.5 0 3.5
Change in Assets and Liabilities, excl. Effects from
Acquisitions and Dispositions:
Net decrease in accounts receivable 17.5 0 17.5
Net increase in inventory (6.9) 0 (6.9)
Net increase in prepaid expenses and
other current assets (16.9) 0 (16.9)
Net increase in accounts payable 11.0 0 11.0
Net increase in accrued and other
current liabilities 1.2 0 1.2
Net decrease in accrued severance,
impairment and other charges (6.9) 6.9 (5) 0
Net increase in 2004 accrued
severance, impairment and other
charges 36.4 0 36.4
Net decrease in deferred revenues (0.5) 0 (0.5)
Net increase in accrued income taxes 23.1 (23.1)(2) 0
Net increase in pension assets, net
of liabilities (25.5) 25.5 (6) 0
Net increase in other long-term
assets (1.9) 1.9 (6) 0
Net tax benefit on stock option
exercises 9.2 (9.2)(7) 0
------- --------- -------
Net Cash Provided by Operating
Activities $399.1 $(14.5) $384.6
Cash Flows Provided by/(Used in)
Investing Activities:
Capital expenditures (22.5) 0 (22.5)(8)
Additions to computer software (84.5) 0 (84.5)(8)
Proceeds from sale of TriZetto 44.6 0 44.6
-------
Free Cash Flow, End of Period $322.2
-------
In addition to SEC Cash Flow, management provides Free Cash Flow
information as it is believed to be a helpful measure for investors of
cash generated from and invested in current operations, and is
indicative of the cash the Company has available for acquisitions,
share repurchases, dividends, debt reduction, etc. Final free cash
flow information will be posted on www.imshealth.com when available.
Amounts presented may not add due to rounding. Please see
following page for the accompanying notes to the Reconciliation of SEC
Cash Flow to Free Cash Flow (unaudited)
IMS Health
NOTES TO RECONCILIATION FROM SEC TO FREE CASH FLOW (TABLE 10)
1 For details of reconciliation items between SEC net income and
adjusted net income, see Table 6. Adjusted results are those used
by management for the purposes of global business decision making,
including developing budgets and managing expenditures. Adjusted
results exclude certain U.S. GAAP measures to the extent that
management believes that exclusion will facilitate comparisons
across periods and more clearly indicate trends. Although IMS
discloses adjusted results in order to give a full picture to
investors of its business as seen by management, these adjusted
results are not prepared specifically for investors and are not a
replacement for the more comprehensive information for investors
included in IMS's U.S. GAAP results. 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. Investors interested in management's adjusted results
are urged to review the detailed reconciliations of the adjusted
measures to comparable U.S. GAAP results.
2 Movements in deferred and accrued income taxes do not necessarily
relate directly to current operations. The tax provision, included
within Adjusted Net Income, is considered to be useful to
represent cash taxes from operations.
3 This item constitutes part of the $4.6 million net adjustment to
Net Income, so no add back is required for Free Cash Flow.
4 Free Cash Flow is designed to only include IMS's share of cash
from consolidated subsidiaries, so no add back is required.
5 Payouts for severance, impairment and other charges in prior years
do not constitute part of Adjusted Net Income, and are therefore
not included as Free Cash Flow.
6 Pension assets and liabilities and other inherently long-term
assets are not viewed as part of current operations and are
therefore excluded from Free Cash Flow.
7 All impacts from stock option exercises are excluded from Free
Cash Flow as they are considered to be financing activities.
8 Investments in capital assets and software are integral to the
ongoing business and operations of the Company and are therefore
included as part of Free Cash Flow.
CONTACT: IMS Health
Corporate Communications:
Bill Hughes, 203-319-4732
bhughes@imshealth.com
or
Investor Relations
Darcie Peck, 203-319-4766
dpeck@imshealth.com