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.
-0- *T 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 ========
======== ======== ======== *T (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. -0- *T 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 ============= ============= *T -0- *T 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 ======== ======== ======== ======== *T -0- *T 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 ========= ========= *T -0- *T
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
================================ *T 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.
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