Emdeon Reports Third Quarter 2012 Results -- Revenue of $297.1 million, increased 5.3% over third quarter 2011

-- Adjusted EBITDA of $79.2 million, increased 3.3% over third quarter 2011

NASHVILLE, Tenn., Nov. 8, 2012 /PRNewswire/ -- Emdeon Inc., a leading provider of healthcare revenue and payment cycle management and clinical information exchange solutions, today announced financial results for the third quarter ended September 30, 2012 as summarized below:


(In millions)


3Q 2012



3Q 2011



% Change


Revenue

$

297.1


$

282.1



5.3%


Net Income (Loss)

$

(15.2)


$

6.3



-341.3%


Non-GAAP Adjusted EBITDA

$

79.2


$

76.7



3.3%

"We continue to make significant progress towards our financial goals as demonstrated by our operational performance in the third quarter," said George Lazenby, chief executive officer for Emdeon. "The third quarter also proved productive strategically with the recently announced patient medication history initiative in our pharmacy services division and the launch of our integrated payment integrity suite, Emdeon Edge. We are looking forward to continued success to round out the year."

Third quarter revenue was $297.1 million, an increase of 5.3%, compared to $282.1 for the same period in 2011.  Net loss for the third quarter of 2012 was $15.2 million compared to net income of $6.3 million for the same period in 2011.  This loss was primarily due to increased interest and other expenses associated with the November 2011 acquisition of Emdeon by affiliates of Blackstone, which more than offset the impact of business growth as compared to the prior year period.  Third quarter 2012 Non-GAAP Adjusted EBITDA grew 3.3% to $79.2 million, or 26.7% of revenue, from Non-GAAP Adjusted EBITDA of $76.7 million, or 27.2% of revenue, for the comparable period in 2011. 

A reconciliation of Emdeon's financial results determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) to certain non-GAAP financial measures has been provided in the financial statement tables included in this release to supplement its unaudited condensed consolidated financial statements presented on a GAAP basis.  An explanation of these non-GAAP measures is also included below under the heading "Explanation of Non-GAAP Financial Measures."

About Emdeon

Emdeon is a leading provider of revenue and payment cycle management and clinical information exchange solutions, connecting payers, providers and patients in the U.S. healthcare system. Emdeon's offerings integrate and automate key business and administrative functions of its payer and provider customers throughout the patient encounter. Through the use of Emdeon's comprehensive suite of solutions, which are designed to easily integrate with existing technology infrastructures, customers are able to improve efficiency, reduce costs, increase cash flow and more efficiently manage the complex revenue and payment cycle and clinical information exchange processes. For more information, visit www.emdeon.com.

Forward-Looking Statements

Statements made in this press release that express Emdeon's or management's intentions, plans, beliefs, expectations or predictions of future events are forward-looking statements.  These statements often include words such as "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions.  Forward-looking statements may include information concerning Emdeon's possible or assumed future results of operations, including descriptions of Emdeon's revenues, profitability, outlook and overall business strategy.  You should not place undue reliance on these statements because they are subject to numerous uncertainties and factors relating to Emdeon's operations and business environment, all of which are difficult to predict and many of which are beyond Emdeon's control.  Although Emdeon believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Emdeon's actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.  Such factors related to Emdeon's actual financial results or results of operations include:  effects of competition, including competition from entities that are customers for certain of Emdeon's solutions; Emdeon's ability to maintain relationships with its customers and channel partners; Emdeon's ability to effectively cross-sell its solutions to existing customers and to continue to generate revenue and maintain profitability by developing or acquiring and successfully deploying new or updated solutions; pricing pressures on Emdeon's solutions; the anticipated benefits from acquisitions not being fully realized or not being realized within the expected time frames; and general economic, business or regulatory conditions affecting the healthcare information technology and services industries; as well as the other risks discussed in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections and elsewhere in Emdeon's Registration Statement on Form S-4 (File No. 333-182786) and the accompanying Prospectus thereto, as well as Emdeon's periodic and other reports, filed with the Securities and Exchange Commission.

You should keep in mind that any forward-looking statement made by Emdeon herein, or elsewhere, speaks only as of the date on which made. Emdeon expressly disclaims any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in Emdeon's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.   

 

Emdeon Inc.

Condensed Consolidated Statements of Operations

(unaudited and amounts in thousands)




















Successor



Predecessor


Successor



Predecessor




Three Months



Three Months


Nine Months



Nine Months




Ended



Ended


Ended



Ended




September 30,



September 30,


September 30,



September 30,




2012



2011


2012



2011

















Revenue


$

297,075



$

282,149


$

877,577



$

835,758

Costs and expenses:
















Cost of operations (exclusive of depreciation and
















amortization below)



184,794




173,455



542,550




515,481


Development and engineering



7,994




7,473



24,246




23,602


Sales, marketing, general and administrative



35,308




38,342



107,382




105,604


Depreciation and amortization



48,572




39,830



140,354




116,786


Accretion



2,758




-



15,104




-

Operating income



17,649




23,049



47,941




74,285

Interest expense, net



41,898




12,573



130,539




37,848

Loss on extinguishment of debt



-




-



21,853




-

Other



-




(4,398)



-




(8,036)

Income (loss) before income tax provision (benefit)



(24,249)




14,874



(104,451)




44,473

Income tax provision (benefit)



(9,093)




8,601



(36,364)




21,696

Net income (loss)



(15,156)




6,273



(68,087)




22,777

Net income attributable to noncontrolling interest



-




2,906



-




9,214

Net income (loss) attributable to Emdeon Inc.


$

(15,156)



$

3,367


$

(68,087)



$

13,563


 

Emdeon Inc.

Condensed Consolidated Balance Sheets

(unaudited and amounts in thousands, except share and per share amounts)
















September 30,


December 31,






2012


2011

ASSETS



Current assets:








Cash and cash equivalents


$

50,337


$

37,925


Accounts receivable, net of allowance for doubtful accounts of $4,276









and $1,201 at September 30, 2012 and December 31, 2011, respectively



197,169



188,960


Deferred income tax assets



4,772



5,862


Prepaid expenses and other current assets



20,914



16,926

Total current assets



273,192



249,673

Property and equipment, net



268,381



277,768

Goodwill



1,481,951



1,443,574

Intangible assets, net



1,757,783



1,821,897

Other assets, net



30,797



39,403

Total assets


$

3,812,104


$

3,832,315









LIABILITIES AND EQUITY



Current liabilities:








Accounts payable


$

13,567


$

8,827


Accrued expenses



119,461



132,096


Deferred revenues



8,967



5,561


Current portion of long-term debt



16,805



16,034

Total current liabilities



158,800



162,518

Long-term debt, excluding current portion



2,005,368



1,945,074

Deferred income tax liabilities



469,578



502,044

Tax receivable agreement obligations to related parties



132,581



117,477

Other long-term liabilities



6,145



1,413

Commitments and contingencies







Equity:








Common stock (par value, $.01), 100 shares authorized and outstanding









at September 30, 2012 and December 31, 2011, respectively



-



-


Additional paid-in capital



1,128,320



1,120,676


Accumulated other comprehensive income (loss)



(3,908)



(194)


Accumulated deficit



(84,780)



(16,693)

Total equity



1,039,632



1,103,789

Total liabilities and equity


$

3,812,104


$

3,832,315


 

Emdeon Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)















Successor



Predecessor





Nine Months Ended



Nine Months Ended





September 30, 2012



September 30, 2011

Operating activities









Net income (loss)


$

(68,087)



$

22,777


Adjustments to reconcile net income (loss) to net cash provided by operating activities:










Depreciation and amortization



140,354




116,786



Accretion



15,104




-



Equity compensation



3,969




17,610



Deferred income tax expense (benefit)



(37,369)




2,611



Amortization of debt discount and issuance costs



7,613




10,470



Amortization of discontinued cash flow hedge from other comprehensive loss



-




2,843



Change in contingent consideration



-




(8,036)



Change in fair value of interest rate swap (not subject to hedge accounting)



-




(7,983)



Loss on extinguishment of debt



18,293




-



Other



1,927




36


Changes in operating assets and liabilities:










Accounts receivable



(5,547)




(7,040)



Prepaid expenses and other



(3,686)




10,843



Accounts payable



5,153




5,888



Accrued expenses, deferred revenue and other liabilities



(8,444)




16,329



Tax receivable agreement obligations to related parties



(114)




(2,593)

Net cash provided by operating activities



69,166




180,541











Investing activities









Purchases of property and equipment



(40,949)




(48,207)


Payments for acquisitions, net of cash acquired



(59,011)




(39,422)

Net cash used in investing activities



(99,960)




(87,629)











Financing activities









Proceeds from Term Loan Facility



70,351




-


Debt principal payments



(9,565)




(6,412)


Payments on revolver



(15,000)




-


Payment of loan costs



(2,060)




-


Repurchase of Parent common stock



(317)




-


Other



(203)




(620)

Net cash provided by (used in) financing activities



43,206




(7,032)











Net increase in cash and cash equivalents



12,412




85,880

Cash and cash equivalents at beginning of period



37,925




99,188

Cash and cash equivalents at end of period


$

50,337



$

185,068


 

Explanation of Non-GAAP Financial Measures

Emdeon's management believes that, in order to properly understand Emdeon's short-term and long-term financial trends, investors may wish to consider the impact of certain non-cash or non-operating items, when used as a supplement to financial performance measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).  These items result from facts and circumstances that vary in frequency and/or impact continuing operations.  In addition, management uses results of operations before such excluded items to evaluate the operational performance of Emdeon as a basis for strategic planning and as a performance evaluation metric in determining achievement of certain executive and management incentive compensation programs.  Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP.  In addition to the description provided below, reconciliations of GAAP to non-GAAP results are provided in the financial statement tables included in this release.

In this release, Emdeon defines Adjusted EBITDA as EBITDA (which is defined as net income before income tax provision (benefit), net interest expense and depreciation and amortization), plus certain other non-cash or non-operating items (collectively, "EBITDA Adjustments").

To properly evaluate Emdeon's business, Emdeon encourages investors to review the GAAP financial information included in this release, and not rely on any single financial measure to evaluate Emdeon's business.  Emdeon also strongly encourages investors to review the reconciliation of net income (loss) to the non-GAAP measure of Adjusted EBITDA.  Adjusted EBITDA, as Emdeon defines it, may differ from and may not be comparable to similarly titled measures used by other companies, because Adjusted EBITDA is not a measure of financial performance under GAAP and is susceptible to varying calculations.  Adjusted EBITDA calculations are also used in our credit facilities and indentures, although the adjustments used to calculate Adjusted EBITDA as used in our credit facilities and indentures vary in certain respects among such agreements and from those presented below.

Management uses Adjusted EBITDA to facilitate a comparison of Emdeon's operating performance on a consistent basis from period to period that, when viewed in combination with Emdeon's GAAP results, management believes provides a more complete understanding of factors and trends affecting Emdeon's business than GAAP measures alone.  Management believes this non-GAAP measure assists Emdeon's board of directors, management, lenders and investors in comparing Emdeon's operating performance on a consistent basis because it removes where applicable, the impact of Emdeon's capital structure, asset base, acquisition accounting, non-cash charges and non-operating items from Emdeon's operations.


 

Emdeon Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(unaudited and amounts in thousands)



































For the Three Months



For the Nine Months







Ended September 30,



Ended September 30,







2012



2011



2012



2011

















Net income (loss)


$

(15,156)


$

6,273


$

(68,087)


$

22,777

Interest expense, net



41,898



12,573



130,539



37,848

Income tax provision (benefit)



(9,093)



8,601



(36,364)



21,696

Depreciation and amortization



48,572



39,830



140,354



116,786

EBITDA



66,221



67,277



166,442



199,107

















Non-2011 Transactions related adjustments:














Equity compensation



3,969



6,126



3,969



17,610


Acquisition-related costs



609



1,448



4,264



4,237


Strategic initiatives, duplicative running and transition costs



2,059



198



5,592



711


Contingent consideration adjustments



-



(4,398)



-



(8,036)


Loss on extinguishment of debt and other related costs



-



-



25,411



-


Other



390



321



2,960



547

2011 Transactions related adjustments:














Costs and fees



2,237



5,689



6,899



6,024


Acquisition accounting adjustments



937



-



4,370



-


Strategic initiatives costs



-



-



2,709



-


Accretion expense



2,758



-



15,104



-


EBITDA Adjustments



12,959



9,384



71,277



21,093

















Adjusted EBITDA


$

79,180


$

76,661


$

237,720


$

220,200

 

 

SOURCE Emdeon Inc.



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