Filed by Per-Se Technologies, Inc.
Pursuant to Rule 425 under the Securities Act of 1933,
as amended, and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934, as amended
Subject Company: NDCHealth Corporation
Commission File No.: 001-12392
On November 2, 2005, Per-Se Technologies, Inc. issued the following press
release:
Per-Se Technologies Reports Earnings Per Share of
$.29 for the Third Quarter; Cash Flow from Operations of
$36 million on Year-to-Date Basis
ALPHARETTA, Ga.--(BUSINESS WIRE)--Nov. 2, 2005--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, 2005.
The Company reported revenue of $94.0 million, operating income of
$11.0 million, or 11.7% of revenue, and income from continuing
operations of $9.8 million, or $.29 per share on a diluted basis
during the third quarter.
"Highlights of the quarter included the continued strong
performance of our outsourced services business in our Physician
Services division, which demonstrated good revenue growth and margin
expansion. We also had strong cash flow generation in the quarter,"
stated Philip M. Pead, Per-Se's chairman, president and chief
executive officer. "We remain confident in our full year profitability
and cash flow expectations."
For comparison purposes, in the third quarter of 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 diluted share. On a non-GAAP
basis, excluding the gain on a litigation settlement of $1.5 million
and the corporate office relocation expenses of $1.0 million, 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 diluted
share for the third quarter of 2004.
Year-to-Date Results
On a year-to-date basis, the Company reported revenue of $279.3
million, operating income of $30.7 million, or 11.0% of revenue, and
income from continuing operations of $26.8 million, or $.81 per share
on a diluted basis.
Cash flow from continuing operations for the nine months ended
September 30, 2005, was $35.5 million compared to $41.4 million for
the nine months ended September 30, 2004. Cash flow from continuing
operations for 2004 included a positive litigation settlement of $16.2
million. The prior year also included a use of cash of approximately
$6.3 million related to the additional accounting procedures.
For comparison purposes, in the prior year period on a GAAP basis,
the Company had 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 diluted basis. On a non-GAAP
basis, excluding the gain on a litigation settlement, corporate office
relocation expenses, additional accounting procedures expenses, and
debt refinancing expenses, 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 diluted basis.
Physician Services Division
The Physician Services division reported revenue and operating
income of $69.8 million and $8.4 million, respectively, or 12.0% of
revenue, for the third quarter of 2005, compared to revenue and
operating income of $66.1 million and $7.2 million, respectively, or
10.9% of revenue, for the third quarter of 2004.
"The Physician Services division had strong revenue growth and
margin expansion during the third quarter with the outsourcing
business exceeding the division's overall growth rate and operating
margins," stated Pead.
The division had net new business sold in the third quarter of $2
million, compared to net new business sold of $1 million in the third
quarter of 2004. 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.
"For the first nine months of 2005, our Physician Services
division had net new business sold of $16 million. Our fourth quarter
performance to date has been strong, and we are on course to achieve
our second consecutive year of record net new business sold. We have
narrowed our net new business sold range to $23 million to $27 million
for 2005. At these levels, our 2005 net new business sold would be 20%
to 40% higher than our record 2004 performance," stated Pead.
The division had a net backlog of approximately $7 million as of
September 30, 2005, compared to a net backlog of approximately $3
million as of September 30, 2004. 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.
Hospital Services Division
The Hospital Services division reported revenue and operating
income of $27.9 million and $6.1 million, respectively, or 22.0% of
revenue, for the third quarter of 2005, compared to revenue of $28.1
million and operating income of $6.4 million, or 22.9% of revenue, for
the third quarter of 2004. In the current year quarter, the division
expensed approximately $0.4 million related to its project to enhance
its physician claims clearinghouse.
New business sold in the Hospital Services division during the
third quarter of 2005 was approximately $4 million, compared to new
business sold of approximately $5 million during the third quarter of
2004. Medical-related transaction volume increased approximately 3% in
the third quarter compared to the prior year period.
"New sales of our revenue cycle management products were lower in
the third quarter than we had projected, which impacted third quarter
revenue versus our original expectations," stated Pead. "We are
modifying our new business sold target for the division to $15 million
to $20 million for 2005."
Enhancements to Physician Claims Clearinghouse
During the latter part of 2004, the Company initiated a project
with IBM to enhance its physician claims clearinghouse functionality.
The Company expects that the improved platform will provide
significant efficiencies and competitive advantages for its Physician
Services division. The Company's clearinghouse infrastructure is part
of the Hospital Services division.
The Company expects the project to be completed in mid-year 2006.
For full year 2005, project expenses are forecasted to be
approximately $1.5 million, or $.04 per diluted share, and capital
expenditures and capitalized software are expected to be approximately
$2.5 million.
NDCHealth Acquisition
As announced on August 29, 2005, the Company has signed a
definitive agreement to purchase NDCHealth Corporation (NYSE: NDC).
Per-Se will acquire the physician, hospital and retail pharmacy
businesses of NDCHealth. As part of the transaction, Wolters Kluwer,
based in Amsterdam, the Netherlands, will purchase the pharmaceutical
information management business from NDCHealth. During September, the
Company received early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 related to the
transaction. As previously announced, the transaction is expected to
close within three to six months from signing. The acquisition remains
subject to other closing conditions, including approval by
shareholders of both Per-Se and NDCHealth.
2005 Outlook
For the full year 2005, the Company expects diluted earnings per
share of $1.08 to $1.10 and consolidated operating income margins of
11% to 11.5%. This guidance includes expenses related to the claims
clearinghouse enhancement of approximately $1.5 million, or $.04 per
diluted share, for full year 2005.
By segment, the Company continues to forecast revenue growth for
the Physician Services division of 6% to 6.5% and operating margins of
12% to 12.5% for the full year 2005 led by the strong year-to-date
performance of its outsourcing business. The Company expects to
achieve net new business sold during 2005 in the Physician Services
division of $23 million to $27 million, compared to previous guidance
of $20 million to $30 million.
For the Hospital Services division, the Company expects to achieve
new business sold of $15 million to $20 million, compared to previous
guidance of $20 million to $25 million. The Company now forecasts full
year revenue growth for the division of 6% to 7% versus previous
guidance of 8% to 10% due to reduced new business sold expectations
for the year. The Company continues to expect operating margins of 21%
to 21.5%, including the clearinghouse enhancement costs, for the
division.
The Company expects consolidated 2005 revenue growth of 6% to 6.5%
versus previous expectations of 6.5% to 7.5%.
The Company reiterates its previous expectations for full year
2005 cash flow from continuing operations to be in excess of $47
million, which includes the impact of its clearinghouse enhancement
project. The Company also expects capital expenditures and capitalized
software development costs to be between $15 million and $17 million,
which includes approximately $2.5 million related to the clearinghouse
enhancement.
The Company's 2005 guidance excludes any impact related to its
planned acquisition of NDCHealth.
"Our physicians outsourcing business is performing well in 2005 in
both revenue growth and margin expansion, and our record net new
business sold positions us well for the future," stated Pead. "We
expect our recurring revenue business model to continue to generate
strong operating cash flow in 2005."
2006 Outlook
For the full year 2006, the Company expects diluted earnings per
share of $1.28 to $1.38 and cash flow from continuing operations for
the full year 2006 to be in excess of $52 million.
The Company's 2006 guidance excludes any impact related to its
planned acquisition of NDCHealth.
The Company's guidance also does not reflect the impact of
adopting Statement of Financial Accounting Standards No. 123 (R),
Share-Based Payment, which requires the expensing of stock options and
other stock-based compensation. This Statement is effective for the
Company on January 1, 2006. The Company is currently evaluating the
adoption of the Statement and its financial statement impact, which we
expect will result in an additional non-cash expense related to the
adoption.
"Our stated objective is to grow earnings by 20% per year and our
projected 2005 performance and our 2006 EPS guidance delivers on that
commitment," stated Pead. "I am confident in the strength of our
operating segments as we prepare for the transformations that the
acquisition of NDCHealth will bring in the coming year."
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 margin projections, earnings
per share from continuing operations projections, cash flow
projections, capital expenditure and capitalized software projections,
full year 2005 new business sold forecasts, the cost, timing and
results of the physician claims clearinghouse enhancement, the impact
of adopting SFAS123(R), and the timing and impact of the Company's
acquisition of NDCHealth Corporation. 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 implement
successfully sales backlog, lack of revenue growth, client losses,
technical issues in processing claims through the clearinghouse,
failure to close the NDCHealth transaction, 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
could 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, 2005, and
its Form 10-K for the year ended December 31, 2004. The Company
disclaims any responsibility to update any forward-looking statements.
The Company believes that the non-GAAP measures of operating
income, operating margins, income from continuing operations and
earnings per share from continuing operations excluding gain on the
litigation settlement with Lloyd's, corporate office relocation
expenses, debt refinancing expenses and additional accounting
procedures expenses are additional meaningful measures of operating
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.
Important Legal Information
This press release includes communication with respect to the
proposed acquisition transaction involving Per-Se Technologies and
NDCHealth Corporation. This press release shall not constitute an
offer of any securities for sale. In connection with the proposed
transaction, NDCHealth Corporation and Per-Se Technologies have
prepared and filed with the Securities and Exchange Commission ("SEC")
a registration statement on Form S-4 containing a joint proxy
statement/prospectus for the shareholders of both companies, and each
will be filing other documents regarding the proposed transaction with
the SEC as well. Before making any voting or investment decision,
investors are urged to read the joint proxy statement/prospectus
regarding the proposed transaction and any other relevant documents
carefully in their entirety when they become available, as well as any
amendments and supplements thereto, as they will contain important
information about the proposed transaction. The final joint proxy
statement/prospectus will be mailed to the shareholders of both
NDCHealth and Per-Se.
Investors may obtain copies of all documents filed with the SEC
regarding this transaction, free of charge, at the SEC's website
(www.sec.gov). Investors may also obtain these documents, free of
charge, from NDCHealth's website (www.ndchealth.com) under the tab
"Investor Relations" through the "SEC Filing" link. Investors may also
obtain these documents, free of charge, from Per-Se's website
(www.per-se.com) under the tab "Investors" through the "SEC Filing"
link.
Participants in the NDCHealth Acquisition
NDCHealth Corporation and Per-Se Technologies and their respective
directors and executive officers may be deemed participants in the
solicitation of proxies from stockholders in connection with this
transaction. Information about the directors and executive officers of
NDCHealth and Per-Se Technologies and information about other persons
who may be deemed participants in this transaction is included in the
joint proxy statement/prospectus. Investors can also find information
about NDCHealth's executive officers and directors in NDCHealth's
definitive proxy statement filed with the SEC on September 15, 2004.
Investors can also find information about Per-Se Technologies'
executive officers and directors in Per-Se's definitive proxy
statement filed with the SEC on March 25, 2005.
CONSOLIDATED STATEMENTS OF OPERATIONS
SEGMENT REPORTING
(unaudited, in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue
Physician Services $ 69,805 $ 66,059 $206,063 $195,317
Hospital Services 27,860 28,057 84,032 78,274
Eliminations (3,659) (3,475) (10,759) (10,208)
-------- -------- -------- --------
Consolidated $ 94,006 $ 90,641 $279,336 $263,383
======== ======== ======== ========
Operating Income
Physician Services $ 8,375 $ 7,175 $ 24,430 $ 20,245
Hospital Services 6,140 6,433 17,830 18,603
Corporate (1) (3,516) (4,031) (11,552) (12,615)
-------- -------- -------- --------
$ 10,999 $ 9,577 $ 30,708 $ 26,233
Other income (expenses) (1) -- 654 -- (5,845)
-------- -------- -------- --------
Consolidated $ 10,999 $ 10,231 $ 30,708 $ 20,388
======== ======== ======== ========
(1) Corporate excludes other income/expenses of $0.7 million of
income and $5.9 million of expenses for the three and nine months
ended September 30, 2004, respectively, related to the additional
accounting procedures, gain related to Lloyd's, corporate office
relocation and miscellaneous income.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
September 30, December 31,
2005 2004
------------- -------------
Assets
Cash and cash equivalents $ 56,130 $ 42,422
Restricted cash 31 51
Accounts receivable, net 56,474 49,407
Other current assets 10,807 7,729
Property and equipment 16,354 15,512
Goodwill 32,549 32,549
Other intangible assets 19,202 20,784
Deferred income tax asset, net 28,115 28,115
Other 6,653 6,122
------------- -------------
$ 226,315 $ 202,691
============= =============
Liabilities and Stockholders' Equity
Current liabilities $ 38,210 $ 34,480
Deferred revenue 26,616 24,127
Current portion of long-term debt 133 98
Long-term debt 125,535 125,527
Other long-term obligations 5,358 5,484
Stockholders' equity 30,463 12,975
------------- -------------
$ 226,315 $ 202,691
============= =============
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue $ 94,006 $ 90,641 $279,336 $263,383
-------- -------- -------- --------
Cost of services 63,089 60,486 185,596 172,823
Selling, general and
administrative 19,918 20,578 63,032 64,327
Other (income) expenses --- (654) --- 5,845
-------- -------- -------- --------
Operating income 10,999 10,231 30,708 20,388
Interest expense 1,431 1,410 4,360 5,483
Interest income (427) (88) (1,075) (332)
Loss on extinguishment of debt --- --- --- 5,896
-------- -------- -------- --------
Income before income taxes 9,995 8,909 27,423 9,341
Income tax expense 172 102 623 314
-------- -------- -------- --------
Income from continuing
operations 9,823 8,807 26,800 9,027
-------- -------- -------- --------
Loss from discontinued
operations, net of tax -
Patient1 --- -- --- (18)
(Loss) gain on sale of Patient1,
net of tax --- (106) --- 3,649
Loss from discontinued
operations, net of tax -
Business1 --- --- --- (303)
Loss on sale of Business1, net of
tax --- --- --- (130)
Loss from discontinued
operations, net of tax - Other --- (1) --- (94)
-------- -------- -------- --------
Net income $ 9,823 $ 8,700 $ 26,800 $ 12,131
======== ======== ======== ========
Diluted net income per common
share:
Income from continuing
operations excluding other
expenses and debt retirement
costs $ 0.29 $ 0.25 $ 0.81 $ 0.62
Other expenses --- 0.02 --- (0.17)
Debt retirement costs --- --- --- (0.18)
-------- -------- -------- --------
Income from continuing
operations 0.29 0.27 0.81 0.27
Gain on sale of Patient1, net of
tax -- --- --- 0.10
Loss from discontinued
operations, net of tax -
Business1 --- --- --- (0.01)
------------------------------------
Net income $ 0.29 $ 0.27 $ 0.81 $ 0.36
======== ======== ======== ========
Weighted average shares used in
computing diluted earnings per
share 33,792 32,168 32,917 33,273
======== ======== ======== ========
PER-SE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine Months Ended
September 30,
---------------------
2005 2004
--------- ---------
Cash Flows From Operating Activities:
Net income $ 26,800 $ 12,131
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 11,233 11,778
Loss on extinguishment of debt --- 5,896
Gain on sale of Patient1 --- (3,649)
Loss from discontinued operations --- 545
Changes in assets and liabilities,
excluding effects of acquisitions and
divestitures (2,496) 14,687
--------- ---------
Net cash provided by continuing operations 35,537 41,388
Net cash used for discontinued operations --- (514)
--------- ---------
Net cash provided by operating activities 35,537 40,874
--------- ---------
Cash Flows From Investing Activities:
Acquisitions, net of cash acquired --- (1,141)
Purchases of property and equipment (6,098) (4,624)
Software development costs (4,544) (5,334)
Capitalized acquisition costs (1,484)
Proceeds from sale of subsidiaries --- 3,520
Other (216) (66)
--------- ---------
Net cash used for investing activities (12,342) (7,645)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from the exercise of stock options 5,967 5,853
Proceeds from borrowings --- 125,000
Treasury stock purchase (15,404) (24,999)
Deferred financing costs --- (6,013)
Other (18) 107
Repayments of debt (32) (121,875)
--------- ---------
Net cash used for financing activities (9,487) (21,927)
--------- ---------
Cash and Cash Equivalents:
Net change in cash 13,708 11,302
Balance at beginning of period 42,422 25,271
--------- ---------
Balance at end of period $ 56,130 $ 36,573
========= =========
RECONCILIATION OF CONSOLIDATED OPERATING INCOME AND MARGIN,
AND INCOME FROM CONTINUING OPERATIONS AND EPS - 2004
(unaudited, in thousands)
For the period ended
September 30, 2004
---------------------------------
QTD YTD
--------- ----------
% of % of
Revenue Revenue
------- -------
Operating income excluding special
items (non-GAAP measure) $ 9,577 10.6% $ 26,233 10.0%
Gain related to settlement with
Lloyd's 1,526 1,526
Corporate office relocation (1,040) (1,040)
Additional accounting procedures
expenses 105 (6,347)
Miscellaneous income 63 16
--------------------------------
Consolidated operating income (GAAP
measure) $ 10,231 11.3% $ 20,388 7.7%
================================
QTD EPS YTD EPS
---------------------------------
Income from continuing operations
excluding special items (non-GAAP
measure) $ 8,153 $ .25 $ 20,768 $ .62
Gain related to settlement with
Lloyd's 1,526 $ .05 1,526 $ .05
Corporate office relocation (1,040) ($.03) (1,040) ($.03)
Additional accounting procedures
expenses 105 -- (6,347) ($.19)
Miscellaneous income 63 -- 16 --
Loss on extinguishment of debt -- -- (5,896) ($.18)
--------------------------------
Income from continuing operations
(GAAP measure) $ 8,807 $ .27 $ 9,027 $ .27
================================
NOTE: Gain related to settlement with Lloyd's, corporate office
relocation expenses, additional accounting procedures expenses and
miscellaneous income are classified as other income/expense in the
consolidated income statement.
Operating income, income from continuing operations, and earnings
per share from continuing operations, excluding Lloyd's gain,
corporate office relocation expenses, additional accounting procedures
expenses and loss on extinguishment of debt The Company believes
operating income, excluding gain related to the settlement with
Lloyd's, the corporate office relocation expenses, and additional
accounting 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, corporate
office relocation 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 of the Company's corporate offices,
(3) the costs associated with the additional accounting 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.
While the Company believes these measures are meaningful and useful to
the readers of the financial statements, these measures will be
different from comparable information provided by other companies and
should not be used as an alternative to the Company's operating and
other financial information as determined under U.S. generally
accepted accounting principles.
CONTACT: Per-Se Technologies, Alpharetta
Michele Howard, 770-237-7827