NDCHealth Reports Fourth Quarter and Fiscal Year-end Results

Monitor this Company



    ATLANTA, Aug. 10 /PRNewswire-FirstCall/ - NDCHealth Corporation (NYSE: NDC), a leading provider of healthcare technology and information solutions, today announced financial and operating results for its fourth quarter and fiscal year ended May 27, 2005. Financial results for all periods are presented to reflect certain business operations sold or discontinued during fiscal 2005.

    Total revenue from continuing operations was $99.8 million, a 5.8% increase from $94.3 million in the fourth quarter of fiscal 2004. Income from continuing operations for the fourth quarter was $0.4 million, or $0.01 per diluted share. This compared to a loss from continuing operations of $3.2 million, or ($0.09) per diluted share, in the same period in fiscal 2004. Net income after discontinued operations for the fourth quarter of fiscal 2005 was $0.3 million, or $0.01 per diluted share, compared to a net loss of $16.6 million, or ($0.47) per diluted share, in the fourth quarter of fiscal 2004.

    Because management believes Restructuring, Special Governance and Other Charges, which include severance and corporate governance-related expenses and the settlement of certain litigation, are not reflective of the company's core operating results over time, these charges are excluded from the calculation of adjusted EBITDA (1) and adjusted income (loss) from continuing operations (2). Adjusted EBITDA (1), a non-GAAP measure, in the fourth quarter was $24.1 million, versus $20.1 million in the same period of fiscal 2004. Adjusted income from continuing operations (2), also a non-GAAP measure, for the fourth quarter of fiscal 2005 was $0.16 per diluted share, compared to an adjusted loss from continuing operations in the fourth quarter of fiscal 2004 of ($0.04) per diluted share.

    "We are encouraged by this quarter's performance as we are making financial progress in each of our business units. Our execution improvements, combined with our increasing market penetration, are helping to deliver a sustainable financial and operating recovery," said Walter Hoff, NDCHealth chairman and chief executive officer.

    "Over the last twelve months, we implemented a number of actions to streamline NDCHealth and focus on what we believe are our best business operations and market opportunities. We accomplished this by selling certain businesses, simplifying our management structure and gaining market penetration with our newer products," Hoff added. "However, our fourth quarter operating results were somewhat overshadowed by the restructuring, legal settlement and corporate governance costs that we believe should decrease over time. Therefore, we continue to believe our improving operating fundamentals and the results of our business actions point to clear signs that we can achieve long-term, sustainable growth in revenue and profit."

    For the full year of fiscal 2005, total revenue from continuing operations was $387.6 million compared to $395.8 million in fiscal 2004. Income from continuing operations in fiscal 2005 was $5.9 million, or $0.16 per diluted share, compared to income from continuing operations of $21.5 million, or $0.60 per diluted share, in fiscal 2004. Total net loss after discontinued operations was $6.6 million, or ($0.18) per diluted share, compared to net income of $6.9 million, or $0.19 per diluted share, in fiscal 2004.

    Adjusted EBITDA (1) for the full year was $88.3 million, versus $109.6 million for fiscal 2004. Adjusted income from continuing operations (2) for fiscal 2005 was $0.41 per diluted share, compared to $0.71 per diluted share, a year ago.

    Fourth Quarter Financial Review

    Following the sale of certain business operations and interests during fiscal 2005, NDCHealth is now reporting four segments, which are Pharmacy Services and Systems, Hospital Solutions, Physician Solutions and Information Management.

    On a business segment basis:

     - Pharmacy Services and Systems revenue decreased $1.8 million, or 5.4%,

     in the fourth quarter compared to the same quarter of fiscal 2004 as

     the $1.1 million, or 5.9%, increase in pharmacy transaction services

     revenue was more than offset by a decline in retail information sales

     and lower revenue from legacy system customers. Pharmacy Services and

     Systems revenue for the full year declined $1.7 million, or 1.3%, from

     fiscal 2004 as the $6.6 million, or 9.7%, increase in transaction

     services revenue was more than offset by lower systems and retail

     information revenue noted above.

     - Hospital Solutions revenue in the fourth quarter of fiscal 2005

     increased $0.1 million, or 0.4%, from the fourth quarter of fiscal

     2004, and increased $1.1 million or 7.2% from the most recent third

     quarter. The conversion to a recurring revenue model with the NDC

     ePREMIS(R) revenue cycle management solution is now delivering

     sequential revenue growth from increased sales and installations of NDC

     ePREMIS, which is increasing its share of NDCHealth transaction volumes

     and generating higher average revenue per transaction.

     - Physician Solutions has recovered from its change to cash terms in

     software sales as revenue increased $1.0 million, or 15.0%, in the

     fourth quarter of fiscal 2005 compared to the same period in fiscal

     2004 due to higher system sales. The $3.1 million, or 29.5%, decline in

     revenue from the most recent third quarter reflects normal seasonality

     in sales as the company does not launch a new software solution upgrade

     during the fourth quarter as well as $1.6 million in revenue benefit

     recognized in the most recent third quarter related to discontinuing a

     software returns reserve that was no longer required.

     - Information Management revenue in the fourth quarter of fiscal 2005

     increased $6.2 million, or 16.5%, compared to the same quarter last

     year, driven by new product growth from the company's newer, advanced

     longitudinal and patient-level analytical solutions. This growth more

     than offset declines in legacy product offerings and revenue

     compression from certain pharmaceutical manufacturer customers.

    On a consolidated basis:

     - Cost of Service decreased $0.6 million or 1.1% from the fourth quarter

     of fiscal 2004, reflecting lower data center, telecommunications and

     data costs as well as reduced personnel. These cost reduction

     initiatives were partially offset by a higher level of software

     development expense. For the full year, Cost of Service increased $6.2

     million, or 3.2%, from the comparable period in fiscal 2004 due to

     increased net software development expense in the Pharmacy Services and

     Systems segment, higher implementation costs related to growth of NDC

     ePREMIS in the Hospital Solutions segment and increased data costs in

     the Information Management segment.

     - Sales, General and Administrative expense in the fourth quarter of

     fiscal 2005 rose $2.0 million, or 8.2%, from a year ago due to

     increased legal and audit-related professional fees, which offset a

     decrease in personnel costs. For the full year, Sales, General and

     Administrative expense increased $6.8 million, or 7.4% from the

     comparable period in fiscal 2004 due to increased corporate staff and

     professional fees as well as higher audit, insurance and litigation

     expenses.

     - Restructuring, Special Governance and Other Charges in the quarter

     increased $5.9 million from the fourth quarter of fiscal 2004,

     primarily due to a $4.7 million settlement of certain commercial

     litigation, as well as higher legal and governance-related expenses

     associated with stockholder litigation, the SEC investigation and

     professional fees associated with the strategic review initiated by the

     NDCHealth Board of Directors. For the full year, Restructuring, Special

     Governance and Other Charges were $15.0 million, versus $6.1 million in

     fiscal 2004.

     - Free cash flow (3), a non-GAAP measure, was $17.2 million and $5.9

     million in the fourth quarter and full year of fiscal 2005,

     respectively.

     - Total outstanding debt at May 27, 2005 was $270.8 million, down from

     $302.9 million at the end of fiscal 2004.

    Business Highlights

     - Pharmacy network services volume totaled more than 1.51 billion

     transactions in the fourth quarter of fiscal 2005, a 23.1% increase

     from the same period last year as NDCHealth continued to gain market

     share in core claims processing and increase penetration of its pre-

     and post-edit (PPE) transaction services.

     - In May 2005, NDCHealth was awarded a contract to provide electronic

     services to calculate Medicare beneficiaries' True Out-Of-Pocket

     (TrOOP) costs following the drug benefit implementation starting

     January 1, 2006 as part of the Medicare Modernization Act of 2003.

     NDCHealth will provide routing of claims for benefits paid by entities

     other than Medicare back to the prescription drug plans to ensure that

     what seniors pay at pharmacy counters takes into account the proper

     level of their Medicare coverage. NDCHealth also will be responsible

     for facilitating retail pharmacy inquiries on Medicare enrollee benefit

     eligibility to their designated Medicare Part D insurance plan.

     - The company sold 101 PharmacyRx systems to regional and independent

     pharmacies during the fourth quarter, and a total of 268 during fiscal

     2005. NDCHealth ended the period with an installed base of 383

     pharmacies, and a scheduled installation backlog of 71 PharmacyRx

     systems heading into fiscal 2006. In addition, the company is

     progressing with its plan to roll out the NDC EnterpriseRx(TM) pharmacy

     management solution for regional and national chains, with live in-

     store use proceeding in one retail pharmacy location and an agreement

     to go into live testing in an additional store with another customer in

     the near future.

     - During the fourth quarter, the NDC ePREMIS revenue cycle management

     solution handled 26.8% of the hospital claims transactions processed

     for customers by NDCHealth, compared to 9.1% of the total hospital

     claims transactions processed by NDCHealth in the fourth quarter of

     fiscal 2004.

     - NDCHealth sold an additional 81 NDC ePREMIS units and installed 87

     units during the fourth quarter of fiscal 2005, increasing the total

     NDC ePREMIS installed base to 558. The scheduled installation backlog

     moving into fiscal 2006 was 194 units.

     - As previously disclosed, NDCHealth is pursuing the potential sale of

     the company. The Blackstone Group L.P. and Goldman, Sachs & Co., acting

     as the company's financial advisors, continue to work with NDCHealth to

     present the company's business assets, strategy, market position and

     business outlook to a number of interested parties. A definitive

     decision has not been reached at this time, and NDCHealth notes there

     can be no assurance regarding the outcome of this process.

    Financial Outlook

    For the first quarter of fiscal 2006, management expects revenue to be in the range of $96.5 million to $98.5 million, a normal sequential trend for this seasonally low quarter. Adjusted EBITDA (1) is expected to be in the range of $21.0 million to $23.0 million, excluding approximately $3.0 million in estimated Restructuring, Special Governance and Other Charges. This would compare to adjusted EBITDA of $18.2 million in the first quarter last year. Adjusted income per share from continuing operations (2), excluding Restructuring, Special Governance and Other Charges, is expected to be in the range of $0.07 to $0.10 in the first quarter of fiscal 2006, versus $0.03 per diluted share in the same period of fiscal 2005.

    Conference Call and Webcast

    NDCHealth will host a conference call to discuss its financial results and business outlook beginning at 5:00 pm ET today, August 10, 2005. To listen to the conference call, please dial 877-421-3895 (706-679-0822 for international callers), or access the webcast through the Investor Relations page at http://www.ndchealth.com. A replay of the conference call will be available via webcast or by dialing 800-642-1687 (706-645-9291 for international callers) and entering conference ID 8072813.

    Cautionary Information Regarding Forward-Looking Statements

    This press release contains forward-looking statements related to the company's expected business outlook for fiscal year 2006 and financial guidance for the first quarter of fiscal 2006. These statements involve risks and uncertainties that may cause actual results to differ materially. The company's business outlook and the projected results for future periods are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but may be beyond management's control. Forward-looking statements are only predictions and are not guarantees of performance, and include statements preceded by, followed by or that include the words "may," "could," "would," "should," "believe," "expect," "anticipate," "plan," "estimate," "target," "project," "intend," or similar expressions. These statements include, among others, statements regarding the company's expected business outlook, anticipated financial and operating results, its business strategy and means to implement the strategy, the company's objectives, the amount and timing of future capital expenditures, the likelihood of the company's success in developing and introducing new products and expanding its business, the timing of the introduction of new and modified products or services, financing plans, working capital needs and sources of liquidity. These forward-looking statements are based on management's beliefs and assumptions, which in turn are based on currently available information. Important risks and assumptions relating to the forward-looking statements include, without limitation: (1) the potential sale of the company; (2) the company's ability to comply with the Sarbanes-Oxley Act of 2002; (3) demand for the company's products and services; (4) the company's ability to expand in new and existing markets; (5) the cost of product development; (6) the timely completion, market demand and acceptance of the company's products; (7) competitive forces; (8) industry conditions affecting NDCHealth's customers; (9) expected pricing levels; (10) expected growth of revenue and net income; (11) access to data from suppliers; (12) complex state and federal regulations and their impact on the demand for information products or availability of certain data; (13) the timing and cost of planned capital expenditures; (14) the availability of capital to invest in business growth and expansion; (15) the timing of recognition of certain revenue; (16) the potential for information or network services interruptions; (17) adequate protection of proprietary technology; (18) unanticipated changes in accounting rules and/or interpretations; (19) outcomes and cost of litigation and/or the Securities and Exchange Commission investigation; (20) the company's ability to maintain compliance with certain restrictive debt covenants; and (21) the company's substantial indebtedness, which could adversely affect its financial condition, results of operations and liquidity. Many of these risk factors and assumptions are beyond the company's ability to control or predict, and are not intended to represent a complete list of all risks and uncertainties inherent in the company's business, and should be read in conjunction with the more detailed cautionary statements included in NDCHealth's Annual Report on Form 10-K for the fiscal year ended May 27, 2005 and other company filings with the Securities and Exchange Commission. The company believes its forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on the company's current assumptions and expectations. Forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update publicly any of them in light of new information or future events.

    About NDCHealth

    NDCHealth is a leading information solutions company serving all sectors of healthcare. Its network solutions automate the exchange of information among pharmacies, payers, hospitals and physicians. Its systems and information management solutions help improve operational efficiencies and business decision making for providers, retail pharmacy and pharmaceutical manufacturers.

    Headquartered at Atlanta, Ga., NDCHealth provides information vital to the delivery of healthcare every day. For more information, visit http://www.ndchealth.com.

    NDCHealth is a trademark of NDCHealth Corporation. All other company and product names mentioned may be trademarks of the company.

     1. Adjusted EBITDA, a non-GAAP measure, can be derived from the

     company's Condensed Consolidated Statements of Operations, and is

     defined as Operating Income before Depreciation and Amortization, and

     Restructuring, Special Governance and Other Charges. Reconciliation

     of adjusted EBITDA to Operating Income, the most directly comparable

     GAAP financial measure, is provided in an accompanying table.

     2. Adjusted income from continuing operations, a non-GAAP measure, can

     be derived from the company's Condensed Consolidated Statements of

     Operations, and is defined as Income from Continuing Operations

     before Restructuring, Special Governance and Other Charges.

     Reconciliation of adjusted income from continuing operations to

     Income from Continuing Operations, the most directly comparable GAAP

     financial measure, is provided in an accompanying table.

     3. Free cash flow, a non-GAAP measure, can be derived from the company's

     Condensed Consolidated Statements of Cash Flows, and is defined as

     net cash (used in) provided by operating activities less capital

     expenditures and dividends paid. Reconciliation of free cash flow to

     net cash provided by operating activities, the most directly

     comparable GAAP financial measure, is provided in an accompanying

     table.

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    NDCHealth Corporation and Subsidiaries

    (Unaudited)

    (In Thousands, Except Per Share Data)

     Three Months Ended

     May 27, May 28,

     2005 2004

    Revenue $99,755 $94,311

    Operating Expenses:

     Cost of Service 49,546 50,100

     Sales, General and

     Administrative 26,084 24,102

     Depreciation and Amortization 9,720 9,715

     Restructuring, Special

     Governance and Other Charges 8,640 2,771

     93,990 86,688

    Operating Income 5,765 7,623

    Other Income (Expense):

     Interest and Other Income 230 96

     Interest and Other Expense (6,582) (6,317)

     Loss Related to Investments - (4,475)

     Early Extinguishment of Debt - (143)

     (6,352) (10,839)

    Loss from Continuing Operations

     before Income Taxes (587) (3,216)

    Provision for Income Taxes (Benefit) (997) (58)

    Income (Loss) from Continuing

     Operations 410 (3,158)

    Loss from Discontinued Operations (154) (13,393)

    Net Income (Loss) $256 $(16,551)

    Basic Earnings (Loss) Per Share:

     Income (Loss) from Continuing

     Operations $0.01 $(0.09)

     Discontinued Operations $- $(0.38)

     Total $0.01 $(0.47)

     Weighted Average Shares

     Outstanding 35,800 35,569

    Diluted Earnings (Loss) Per Share:

     Income (Loss) from Continuing

     Operations $0.01 $(0.09)

     Discontinued Operations $- $(0.38)

     Total $0.01 $(0.47)

     Weighted Average Shares

     Outstanding 35,947 35,569

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    NDCHealth Corporation and Subsidiaries

    (In Thousands, Except Per Share Data)

     Year Ended

     May 27, May 28,

     2005 2004

    Revenue $387,558 $395,815

    Operating Expenses:

     Cost of Service 200,441 194,206

     Sales, General and

     Administrative 98,828 92,013

     Depreciation and Amortization 39,902 35,598

     Restructuring, Special

     Governance and Other Charges 14,977 6,068

     354,148 327,885

    Operating Income 33,410 67,930

    Other Income (Expense):

     Interest and Other Income 460 467

     Interest and Other Expense (25,406) (27,567)

     Loss Related to Investments - (4,475)

     Early Extinguishment of Debt - (143)

     (24,946) (31,718)

    Income from Continuing Operations

     before Income Taxes 8,464 36,212

    Provision for Income Taxes 2,534 14,709

    Income from Continuing Operations 5,930 21,503

    Loss from Discontinued Operations (12,569) (14,652)

    Net Income (Loss) $(6,639) $6,851

    Basic Earnings (Loss) Per Share:

     Income from Continuing Operations $0.17 $0.61

     Discontinued Operations $(0.35) $(0.42)

     Total $(0.19) $0.20

     Weighted Average Shares

     Outstanding 35,708 35,101

    Diluted Earnings (Loss) Per Share:

     Income from Continuing Operations $0.16 $0.60

     Discontinued Operations $(0.35) $(0.41)

     Total $(0.18) $0.19

     Weighted Average Shares

     Outstanding 35,957 35,847

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    NDCHealth Corporation and Subsidiaries

    (In Thousands)

     Year Ended

     May 27, May 28,

     2005 2004

    Cash flows from operating activities:

     Net income (loss) $(6,639) $6,851

     Adjustments to reconcile net income

     (loss) to cash provided by

     operating activities:

     Loss on discontinued operations 12,569 14,652

     Loss related to investments - 4,475

     Non-cash restructuring and

     other charges 547 453

     Depreciation and amortization 39,902 35,598

     Deferred income taxes 2,417 15,346

     Allowance for doubtful accounts 7,224 8,926

     Other, net 5,300 4,877

     Total 61,320 91,178

     Changes in assets and liabilities,

     net of the effects of

     acquisitions:

     Accounts receivable, net 4,397 (7,834)

     Prepaid expenses and other

     assets 4,272 (2,756)

     Accounts payable and accrued

     liabilities (6,957) 8,928

     Accrued interest on long-term

     debt (399) (2,550)

     Deferred revenue (22,673) 11,453

     Total (21,360) 7,241

     Net cash provided by operating

     activities 39,960 98,419

    Cash flows from investing activities:

     Capital expenditures-Property

     Acquisitions (15,626) (15,435)

     Capital expenditures-Capitalized

     External Use Software (15,574) (23,006)

     Proceeds from the sale of equipment 1,966 3,187

     Acquisitions and other investing

     activities (2,919) (20,446)

     Net cash used in investing

     activities (32,153) (55,700)

    Cash flows from financing activities:

     Net Repayments/ borrowings under

     lines of credit 29,100 -

     Principal payments under long-term

     debt arrangements (61,174) (26,433)

     Net cash used in refinancing

     activities - (399)

     Net issuances related to stock

     activities 415 9,273

     Dividends paid (2,880) (5,694)

     Net cash used in financing

     activities (34,539) (23,253)

     Cash provided by divestiture of

     discontinued operations 28,274 -

     Net cash used in discontinued

     operations (8,337) (8,061)

    Decrease in cash and cash equivalents (6,795) 11,405

    Cash and cash equivalents, beginning

     of period 24,585 13,180

    Cash and cash equivalents, end of

     period $17,790 $24,585

    CONDENSED CONSOLIDATED BALANCE SHEETS

    NDCHealth Corporation and Subsidiaries

    (In Thousands, Except Per Share Data)

     May 27, May 28,

     2005 2004

    ASSETS

    Current Assets:

     Cash and Cash Equivalents $17,790 $24,585

     Accounts Receivable (Less

     Allowance of $6,603 and $7,236,

     respectively) 50,977 62,169

     Prepaid Expenses 22,777 25,287

     Deferred Income Taxes 6,214 3,476

     Other Current Assets 8,843 11,759

     Total Assets of Discontinued

     Operations 36,245 89,611

     Total Current Assets 142,846 216,887

    Property and Equipment, Net 69,842 77,757

    Capitalized External Use Software

     Held For Sale, Net 68,474 61,567

    Goodwill 351,474 356,928

    Intangible Assets, Net 61,886 71,760

    Debt Issuance Cost 11,496 12,963

    Deferred Income Taxes 18,350 15,092

    Other Assets 25,299 22,561

     Total Assets $749,667 $835,515

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities:

     Current Portion of Long-term Debt $31,529 $33,511

     Trade Accounts Payable 24,033 29,334

     Accrued Compensation and Benefits 9,901 6,034

     Accrued Interest 10,524 10,923

     Other Accrued Liabilities 34,772 30,403

     Deferred Revenue 33,795 53,801

     Total Liabilities of Discontinued

     Operations 11,967 37,894

     Total Current Liabilities 156,521 201,900

    Deferred Revenue 4,602 7,208

    Other Non-current Liabilities 26,789 29,225

    Long-term Debt 239,255 269,347

     Total Liabilities 427,167 507,680

    Commitments and Contingencies - -

    Stockholders' Equity:

     Preferred Stock, par value $1.00

     per share; 1,000,000 shares

     authorized, none issued - -

     Common Stock, par value $.125 per

     share; 200,000,000 shares

     authorized; 36,210,808 and 36,006,641

     shares issued, respectively. 4,526 4,501

     Capital in excess of par value 248,446 245,314

     Retained Earnings 70,907 80,426

     Deferred Compensation (5,039) (7,694)

     Other Comprehensive Income 3,660 5,288

     Total Stockholders' Equity 322,500 327,835

    Total Liabilities and Stockholders'

     Equity $749,667 $835,515

     ADJUSTED EBITDA RECONCILIATION

     NDCHealth Corporation and Subsidiaries

     Adjusted EBITDA is defined as Operating Income before Depreciation

     and Amortization, and Restructuring, Special Governance and Other

     Charges. Adjusted EBITDA is not a Generally Accepted Accounting

     Principles (GAAP) measurement and may not be comparable to

     EBITDA reported by other companies. Management believes Adjusted

     EBITDA is useful to investors, analysts and others because it

     provides a more meaningful representation of the company's

     performance as it excludes certain items that either do not impact

     the company's cash flows or which management believes are not

     reflective of the company's core operating results over time.

     Reconciliation of Adjusted EBITDA to Operating Income, the most

     directly comparable GAAP financial measure, for the three-month

     and twelve-month periods ended May 27, 2005 and May 28, 2004 is

     provided below. Non-GAAP measures should be evaluated in

     conjunction with, and are not a substitute for, GAAP financial

     measures.

     (In Thousands)

     Three Months Ended Twelve Months Ended

     May 27, May 28, May 27, May 28,

     2005 2004 2005 2004

     Operating Income $5,765 $7,623 $33,410 $67,930

     Depreciation and Amortization 9,720 9,715 39,902 35,598

     Restructuring, Special

     Governance and Other Charges 8,640 2,771 14,977 6,068

     Adjusted EBITDA $24,125 $20,109 $88,289 $109,596

    ADJUSTED EPS FROM CONTINUING OPERATIONS RECONCILIATION

    NDCHealth Corporation and Subsidiaries

    (Continuing Operations)

    Adjusted Diluted Earnings Per Share from Continuing Operations (Adjusted

    EPS) is defined as Diluted Earnings Per Share from Continuing Operations

    before Restructuring, Special Governance and Other Charges. Adjusted EPS

    is not a Generally Accepted Accounting Principles (GAAP) measurement and

    may not be comparable to Earnings Per Share reported by other companies.

    Management believes Adjusted EPS is useful to investors, analysts and

    others because it provides a meaningful representation of the company's

    ongoing operating earnings performance as it excludes certain items that

    management believes are not reflective of the company's core operating

    results over time.

    Reconciliation of Adjusted EPS to Diluted Earnings Per Share from

    Continuing Operations, the most directly comparable GAAP financial

    measure, for the three-month and twelve-month periods ended May 27, 2005

    and May 28, 2004 is provided below. Non-GAAP measures should be evaluated

    in conjunction with, and are not a substitute for, GAAP financial

    measures.

     Three Months Ended Twelve Months Ended

     May 27, May 28, May 27, May 28,

     2005 2004 2005 2004

    Diluted EPS from Continuing

     Operations $0.01 $(0.09) $0.16 $0.60

    Restructuring, Special Governance

     and Other Charges $0.15 $0.05 $0.25 $0.11

    Adjusted EPS from Continuing

     Operations $0.16 $(0.04) $0.41 $0.71

    FREE CASH FLOW RECONCILIATION

    NDCHealth Corporation and Subsidiaries

    Free cash flow is defined as net cash from operations less capital

    expenditures and dividends paid. Free cash flow is not a Generally

    Accepted Accounting Principles (GAAP) measurement and may not be

    comparable to free cash flow reported by other companies. In light of the

    company's goal to reduce its levels of senior debt and interest expense,

    management believes free cash flow is useful to investors, analysts and

    others because it provides a meaningful measure of the company's ability

    to generate cash and reduce its debt.

    Reconciliation of free cash flow to Net Cash Provided by Operating

    Activities, the most directly comparable GAAP financial measure, for the

    three-month and twelve-month periods ended May 27, 2005 and the twelve-

    month period ended May 28, 2004 is provided below. Non-GAAP measures

    should be evaluated with, and are not a substitute for, GAAP financial

    measures.

     (In Thousands)

     Three Months Ended

     May 27,

     2005

     Net Cash Provided by

     Operating Activities $23,994

     Capital Expenditures $(6,783)

     Dividends Paid $-

     Free Cash Flow $17,211

     Fiscal Year Ended

     May 27, May 28,

     2005 2004

     Net Cash Provided by

     Operating Activities $39,960 $98,419

     Capital Expenditures $(31,200) $(38,441)

     Dividends Paid $(2,880) $(5,694)

     Free Cash Flow $5,880 $54,284

    SEGMENT FINANCIAL SUMMARY

    NDCHealth Corporation and Subsidiaries

    (Continuing Operations)

    (In Thousands)

     Fiscal 2004

     Qtr 1 Qtr 2 Qtr 3 Qtr 4 FY 2004

    Pharmacy Services and

     Systems:

     Revenue $31,270 $31,697 $33,952 $33,453 $130,372

     Operating Income

     before Charges $7,636 $6,981 $9,180 $6,959 $30,756

     % margin 24.4% 22.0% 27.0% 20.8% 23.6%

     Restructuring, Special

     Governance and

     Other Charges $(568) $(600) $- $(1,133) $(2,301)

     Operating Income after

     Charges $7,068 $6,381 $9,180 $5,826 $28,455

    Hospital Solutions:

     Revenue $17,137 $17,302 $15,862 $16,790 $67,091

     Operating Income

     before Charges $6,410 $6,217 $5,239 $6,108 $23,974

     % margin 37.4% 35.9% 33.0% 36.4% 35.7%

     Restructuring, Special

     Governance and

     Other Charges $(101) $- $- $(158) $(259)

     Operating Income after

     Charges $6,309 $6,217 $5,239 $5,950 $23,715

    Physician Solutions:

     Revenue $9,217 $11,722 $12,197 $6,504 $39,640

     Operating Income

     before Charges $1,552 $2,398 $2,008 $(227) $5,731

     % margin 16.8% 20.5% 16.5% -3.5% 14.5%

     Restructuring, Special

     Governance and

     Other Charges (Benefit) $- $(157) $- $521 $364

     Operating Income after

     Charges $1,552 $2,241 $2,008 $294 $6,095

    Information Management:

     Revenue $38,606 $41,782 $40,760 $37,564 $158,712

     Operating Income

     before Charges $3,665 $6,612 $5,706 $(2,446) $13,537

     % margin 9.5% 15.8% 14.0% -6.5% 8.5%

     Restructuring, Special

     Governance and

     Other Charges $(555) $(58) $- $(426) $(1,039)

     Operating Income after

     Charges $3,110 $6,554 $5,706 $(2,872) $12,498

    Other: (1)

     Operating Expense $(275) $(983) $- $(1,575) $(2,833)

    NDCHealth - Total

     Revenue $96,230 $102,503 $102,771 $94,311 $395,815

     Operating Income

     before Charges $19,263 $22,208 $22,133 $10,394 $73,998

     % margin 20.0% 21.7% 21.5% 11.0% 18.7%

     Restructuring, Special

     Governance and

     Other Charges $(1,499) $(1,798) $- $(2,771) $(6,068)

     Operating Income after

     Charges $17,764 $20,410 $22,133 $7,623 $67,930

     18.5% 19.9% 21.5% 8.1% 17.2%

    (1) Includes Restructuring, Special Governance and Other Charges

     not directly identified to an Operating Segment.

    SEGMENT FINANCIAL SUMMARY

    NDCHealth Corporation and Subsidiaries

    (Continuing Operations)

    (In Thousands)

     Fiscal 2005

     Qtr 1 Qtr 2 Qtr 3 Qtr 4 FY 2005

    Pharmacy Services and

     Systems:

     Revenue $31,154 $32,717 $33,143 $31,650 $128,664

     Operating Income

     before Charges $3,159 $2,364 $4,916 $4,878 $15,317

     % margin 10.1% 7.2% 14.8% 15.4% 11.9%

     Restructuring, Special

     Governance and

     Other Charges $- $- $(1,162) $(4,910) $(6,072)

     Operating Income after

     Charges $3,159 $2,364 $3,754 $(32) $9,245

    Hospital Solutions:

     Revenue $16,144 $15,535 $15,730 $16,856 $64,265

     Operating Income

     before Charges $4,279 $3,336 $3,876 $4,798 $16,289

     % margin 26.5% 21.5% 24.6% 28.5% 25.3%

     Restructuring, Special

     Governance and

     Other Charges $- $(265) $(501) $(115) $(881)

     Operating Income after

     Charges $4,279 $3,071 $3,375 $4,683 $15,408

    Physician Solutions:

     Revenue $6,477 $7,943 $10,610 $7,480 $32,510

     Operating Income

     before Charges $556 $1,522 $3,964 $2,096 $8,138

     % margin 8.6% 19.2% 37.4% 28.0% 25.0%

     Restructuring, Special

     Governance and

     Other Charges (Benefit) $- $(646) $(45) $(23) $(714)

     Operating Income after

     Charges $556 $876 $3,919 $2,073 $7,424

    Information Management:

     Revenue $37,233 $40,485 $40,632 $43,769 $162,119

     Operating Income

     before Charges $(22) $2,635 $3,397 $2,633 $8,643

     % margin -0.1% 6.5% 8.4% 6.0% 5.3%

     Restructuring, Special

     Governance and

     Other Charges $- $(433) $(140) $- $(573)

     Operating Income after

     Charges $(22) $2,202 $3,257 $2,633 $8,070

    Other: (1)

     Operating Expense $(388) $(1,535) $(1,222) $(3,592) $(6,737)

    NDCHealth - Total

     Revenue $91,008 $96,680 $100,115 $99,755 $387,558

     Operating Income

     before Charges $7,972 $9,857 $16,153 $14,405 $48,387

     % margin 8.8% 10.2% 16.1% 14.4% 12.5%

     Restructuring, Special

     Governance and

     Other Charges $(388) $(2,879) $(3,070) $(8,640) $(14,977)

     Operating Income after

     Charges $7,584 $6,978 $13,083 $5,765 $33,410

     8.3% 7.2% 13.1% 5.8% 8.6%

    (1) Includes Restructuring, Special Governance and Other Charges

     not directly identified to an Operating Segment.

    SEGMENT FINANCIAL SUMMARY

    NDCHealth Corporation and Subsidiaries

    (Continuing Operations)

    (In Thousands)

     Q4/Q4 Q3/Q4 FY05/FY04

     Y-Y Sequential Y-Y

     % Change % Change % Change

    Pharmacy Services and Systems:

     Revenue -5.4% -4.5% -1.3%

     Operating Income

     before Charges -29.9% -0.8% -50.2%

     % margin

     Restructuring, Special

     Governance and

     Other Charges

     Operating Income after Charges -100.5% -100.9% -67.5%

    Hospital Solutions:

     Revenue 0.4% 7.2% -4.2%

     Operating Income

     before Charges -21.4% 23.8% -32.1%

     % margin

     Restructuring, Special

     Governance and

     Other Charges

     Operating Income after Charges -21.3% 38.8% -35.0%

    Physician Solutions:

     Revenue 15.0% -29.5% -18.0%

     Operating Income

     before Charges nm -47.1% 42.0%

     % margin

     Restructuring, Special

     Governance and

     Other Charges (Benefit)

     Operating Income after Charges nm -47.1% 21.8%

    Information Management:

     Revenue 16.5% 7.7% 2.1%

     Operating Income

     before Charges nm -22.5% -36.2%

     % margin

     Restructuring, Special

     Governance and

     Other Charges

     Operating Income after Charges nm -19.2% -35.4%

    Other: (1)

     Operating Expense nm nm nm

    NDCHealth - Total

     Revenue 5.8% -0.4% -2.1%

     Operating Income

     before Charges 38.6% -10.8% -34.6%

     % margin

     Restructuring, Special

     Governance and

     Other Charges 211.8% 181.4% 146.8%

     Operating Income after Charges -24.4% -55.9% -50.8%

    (1) Includes Restructuring, Special Governance and Other Charges

     not directly identified to an Operating Segment.
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