8-K 1 y826178ke8vk.txt IMS HEALTH INCORPORATED SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 16, 2003 IMS HEALTH INCORPORATED (Exact name of registrant as specified in its charter) Delaware 001-14049 06-1506026 (State of (Commission File Number) (IRS Employer incorporation) Identification No.) 1499 Post Road Fairfield, Connecticut 06824 (Address of principal executive offices) (Zip Code) (203) 319-4700 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) Items 1-4. Not Applicable. Item 5. OTHER EVENTS. On January 9, 2003, IMS Health Incorporated (the "Company") commenced its offer to exchange 0.309 shares of class B common stock of Cognizant Technology Solutions Corporation for each share of the Company's common stock. The Company commenced the exchange offer by mailing an offering circular-prospectus with details of the transaction to its shareholders on January 9, 2003. This report updates and replaces the following pro forma financial information presented in the offering circular-prospectus. COMPARATIVE PER SHARE DATA
IMS HEALTH PRO FORMA FOR EXCHANGE OFFER(1) ---------- EARNINGS PER SHARE FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001 Basic........................................ $0.65 Diluted...................................... 0.64 EARNINGS PER SHARE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 Basic........................................ 0.72 Diluted...................................... 0.72 CASH DIVIDENDS PER SHARE DECLARED For the twelve months ended December 31, 2001....................................... 0.08 For the nine months ended September 30, 2002....................................... 0.06 BOOK VALUE PER SHARE As of September 30, 2002..................... $0.33
--------------- (1) The "IMS Health Pro Forma for Exchange Offer" amounts assume that 36,540,129 IMS Health shares are exchanged for 11,290,900 Cognizant shares. However, if we assumed that only 27,400,000 IMS Health shares -- the minimum amount that IMS will accept in the exchange offer -- are exchanged for 8,466,600 Cognizant shares, then the "IMS Health Pro Forma for Exchange Offer" amounts would not differ from the amounts presented as IMS Health would have accounted for its investment in Cognizant on the cost method of accounting. 1 IMS HEALTH UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION IMS HEALTH UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1999
PRO FORMA IMS ACTUAL ADJUSTMENTS(1) IMS PRO FORMA ---------- ------------------ ----------------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenue............................ $1,397,989 $(74,084) $1,323,905 Operating and other costs.................... 1,058,966 (57,439) 1,001,527 ---------- -------- ---------- Operating income............................. 339,023 (16,645) 322,378 ---------- -------- ---------- Interest income (expense), net............... 635 (1,263) (628) Gains from investments, net.................. 25,264 (5) 25,259 Other expense, net........................... (16,480) 4,376(2B) (12,104) ---------- -------- ---------- Non-operating income, net.................... 9,419 3,108 12,527 ---------- -------- ---------- Income before provision for income taxes..... 348,442 (13,537) 334,905 Provision for income taxes................... (98,076) 5,763(2B) (92,313) ---------- -------- ---------- Income from continuing operations............ $ 250,366 $ (7,774) $ 242,592 ========== ======== ========== Basic earnings per share of common stock from continuing operations...................... $ 0.80 $ 0.88 ========== ========== Diluted earnings per share of common stock from continuing operations................. $ 0.78 $ 0.86 ========== ========== Weighted average number of shares outstanding -- basic....................... 311,976 (36,540)(5) 275,436 ========== ======== ========== Weighted average number of shares outstanding -- diluted..................... 319,561 (36,540)(5) 283,021 ========== ======== ==========
--------------- See Notes to Unaudited Pro Forma Condensed Consolidated Financial Information. 2 IMS HEALTH UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2000
PRO FORMA IMS ACTUAL ADJUSTMENTS(1) IMS PRO FORMA ---------- -------------- ------------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenue........................... $1,424,359 $(122,763) $1,301,596 Operating and other costs................... 1,287,166 (96,634) 1,190,532 ---------- --------- ---------- Operating income............................ 137,193 (26,129) 111,064 ---------- --------- ---------- Interest (expense) income, net.............. (13,308) (2,650) (15,958) Loss on Gartner investment.................. (6,896) -- (6,896) Gains from investments, net................. 78,139 (7) 78,132 Gain on sale of Erisco...................... 84,530 -- 84,530 Gain on issuance of investees' stock........ 9,029 -- 9,029 Other expense, net.......................... (27,374) 6,979 (2B) (20,395) ---------- --------- ---------- Non-operating income, net................... 124,120 4,322 128,442 ---------- --------- ---------- Income before provision for income taxes.... 261,313 (21,807) 239,506 Provision for income taxes.................. (140,412) 9,494 (2B) (130,918) TriZetto equity loss, net of income tax benefit................................... (4,777) -- (4,777) ---------- --------- ---------- Income from continuing operations........... $ 116,124 $ (12,313) $ 103,811 ========== ========= ========== Basic earnings per share of common stock from continuing operations................ $ 0.39 $ 0.40 ========== ========== Diluted earnings per share of common stock from continuing operations................ $ 0.39 $ 0.39 ========== ========== Weighted average number of shares outstanding -- basic...................... 296,077 (36,540)(5) 259,537 ========== ========= ========== Weighted average number of shares outstanding -- diluted.................... 300,038 (36,540)(5) 263,498 ========== ========= ==========
--------------- See Notes to Unaudited Pro Forma Condensed Consolidated Financial Information. 3 IMS HEALTH UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2001
PRO FORMA IMS ACTUAL ADJUSTMENTS(1) IMS PRO FORMA ---------- -------------- ------------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenue............................ $1,332,923 $(158,969) $1,173,954 Operating and other costs.................... 1,008,762 (123,348) 885,414 ---------- --------- ---------- Operating income............................. 324,161 (35,621) 288,540 ---------- --------- ---------- Interest (expense) income, net............... (9,006) (2,501) (11,507) Loss on Gartner investment................... (84,880) -- (84,880) Loss from investments, net................... (27,642) 1,955 (25,687) Gain (loss) on issuance of investees' stock...................................... (1,490) (5,189)(2A) (6,679) Other expense, net........................... (17,342) 9,234 (2B) (8,108) ---------- --------- ---------- Non-operating income (loss), net............. (140,360) 3,499 (136,861) ---------- --------- ---------- Income before provision for income taxes..... 183,801 (32,122) 151,679 Provision for income taxes................... (38,415) 14,433 (2A-B) (23,982) TriZetto equity loss, net of income tax benefit.................................... (6,985) -- (6,985) ---------- --------- ---------- Income from continuing operations............ $ 138,401 $ (17,689) $ 120,712 ========== ========= ========== Basic earnings per share of common stock from continuing operations...................... $ 0.47 $ 0.47 ========== ========== Diluted earnings per share of common stock from continuing operations................. $ 0.46 $ 0.46 ========== ========== Weighted average number of shares outstanding -- basic....................... 295,162 (36,540)(5) 258,622 ========== ========= ========== Weighted average number of shares outstanding -- diluted..................... 300,147 (36,540)(5) 263,607 ========== ========= ==========
--------------- See Notes to Unaudited Pro Forma Condensed Consolidated Financial Information. 4 IMS HEALTH UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 2002
PRO FORMA IMS ACTUAL ADJUSTMENTS(1) IMS PRO FORMA ---------- -------------- ------------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenue............................ $1,046,172 $(146,510) $899,662 Operating and other costs.................... 727,290 (114,553) 612,737 ---------- --------- -------- Operating income............................. 318,882 (31,957) 286,925 ---------- --------- -------- Interest (expense) income, net............... (4,643) (1,305) (5,948) Gains from investments, net.................. 2,450 -- 2,450 Gain (loss) on issuance of investees' stock...................................... 7,508 (8,083)(2A) (575) Other expense, net........................... (29,003) 11,180(2B) (17,823) ---------- --------- -------- Non-operating income (loss), net............. (23,688) 1,792 (21,896) ---------- --------- -------- Income before provision for income taxes..... 295,194 (30,165) 265,029 Provision for income taxes................... (91,044) 8,308(2A-B) (82,736) TriZetto equity loss, net of income tax benefit.................................... (701) -- (701) ---------- --------- -------- Income from continuing operations............ $ 203,449 $ (21,857) $181,592 ========== ========= ======== Basic earnings per share of common stock from continuing operations...................... $ 0.71 $ 0.72 ========== ======== Diluted earnings per share of common stock from continuing operations................. $ 0.70 $ 0.72 ========== ======== Weighted average number of shares outstanding -- basic....................... 287,486 (36,540)(5) 250,946 ========== ========= ======== Weighted average number of shares outstanding -- diluted..................... 288,589 (36,540)(5) 252,049 ========== ========= ========
--------------- See Notes to Unaudited Pro Forma Condensed Financial Information. 5 IMS HEALTH UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION SEPTEMBER 30, 2002
PRO FORMA IMS ACTUAL ADJUSTMENTS(3) IMS PRO FORMA(5) ---------- -------------- ---------------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA) Assets: Current Assets: Cash and cash equivalents................................... $ 387,972 $(123,083) $ 264,889 Accounts receivable, net of allowance for doubtful accounts.................................................. 247,506 (40,780) 206,726 Other receivable............................................ 35,428 -- 35,428 Other current assets........................................ 125,755 10,231 135,986 ----------- --------- ----------- Total Current Assets........................................ 796,661 (153,632) 643,029 ----------- --------- ----------- Securities and other investments............................ 21,210 (112) 21,098(5) TriZetto equity investment.................................. 118,167 -- 118,167 Property, plant and equipment, net of accumulated depreciation.............................................. 152,084 (25,905) 126,179 Computer software........................................... 149,292 -- 149,292 Goodwill.................................................... 166,638 (878) 165,760 Other assets................................................ 145,666 (3,587) 142,079 ----------- --------- ----------- Total Assets................................................ $ 1,549,718 $(184,114) $ 1,365,604 =========== ========= =========== Liabilities, Minority Interests and Shareholders' Equity: Current Liabilities: Accounts payable............................................ $ 29,443 $ (3,202) $ 26,241 Accrued and other current liabilities....................... 187,680 (11,639)(4B) 176,041 Short-term debt............................................. 381,522 -- 381,522 Accrued income taxes........................................ 131,468 (818) 130,650 Short-term deferred tax liability........................... 12,220 (12,220) -- Deferred revenues........................................... 75,022 (1,602) 73,420 ----------- --------- ----------- Total Current Liabilities................................... 817,355 (29,481) 787,874 ----------- --------- ----------- Post-retirement and post-employment benefits................ 41,597 -- 41,597 Long-term debt.............................................. 175,000 -- 175,000 Other liabilities........................................... 183,068 (4,650) 178,418 ----------- --------- ----------- Total Liabilities........................................... 1,217,020 (34,131) 1,182,889 ----------- --------- ----------- Commitments and contingencies Minority Interests.......................................... 166,193 (64,673)(4A) 101,520 Shareholders' Equity: Common stock, par value $.01, authorized 800,000 shares; issued 335,045 shares at September 30, 2002............... 3,350 -- 3,350 Capital in excess of par.................................... 498,637 -- 498,637 Retained earnings........................................... 1,108,050 522,462(4B) 1,630,512 Treasury stock, at cost, 53,648 shares at September 30, 2002 (90,188 shares on a pro forma basis)(5)................... (1,314,445) (608,028)(4B) (1,922,473) Cumulative translation adjustment........................... (122,426) 256 (122,170) Minimum pension liability adjustment........................ (3,746) -- (3,746) Unrealized loss on changes in fair value of cash flow hedges.................................................... (3,017) -- (3,017) Unrealized gains on investments, net of tax expense......... 102 -- 102 ----------- --------- ----------- Total Shareholders' Equity.................................. 166,505 (85,310) 81,195 ----------- --------- ----------- Total Liabilities, Minority Interests and Shareholders' Equity.................................................... $ 1,549,718 $(184,114) $ 1,365,604 =========== ========= ===========
--------------- See Notes to Unaudited Pro-Forma Condensed Financial Information. 6 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (in thousands, except for per share amounts and percentages) 1. The adjustments to the unaudited pro forma condensed consolidated statements of income reflect the elimination of the unaudited results of operations of Cognizant (See Cognizant Financial Statements beginning on page F-1 of the offering circular-prospectus), after eliminating intercompany revenues and costs of $14,820, $14,273, $18,809 and $15,565, for the years ended 1999, 2000 and 2001 and the nine months ended September 30, 2002, respectively. 2. In addition, the pro forma adjustments to the unaudited pro forma condensed consolidated statements of income reflect: A. The elimination of the pre-tax gains recognized by IMS Health on the issuance of Cognizant stock in the amounts of $0, $0, $5,189 and $8,083 for the years ended December 31, 1999, 2000 and 2001 and the nine months ended September 30, 2002, respectively, and the related income tax expense of $0, $0, $1,816 and $2,834, respectively. B. The elimination of minority interest in the amounts of $4,376, $6,979, $9,234, and $11,180 for the years ended December 31, 1999, 2000 and 2001 and the nine months ended September 30, 2002, respectively. 3. The adjustments to the unaudited pro forma condensed consolidated statement of financial position reflect the elimination of the unaudited consolidated assets and liabilities of Cognizant as of September 30, 2002 (See Cognizant Financial Statements beginning on page F-1 of the offering circular-prospectus) and the recognition of an intercompany payable to Cognizant in the amount of $2,433. 4. In addition, the pro forma adjustments to the unaudited pro forma condensed consolidated statement of financial position reflect: A. The elimination of the minority interest in Cognizant as of September 30, 2002 in the amount of $64,673. B. (i) The acquisition of 36,540 shares of IMS Health common stock pursuant to the exchange offer, assuming the exchange offer is fully subscribed, recorded at a cost equal to the closing price on January 8, 2003 of $16.64 per share, amounts to $608,026. (ii) The estimated tax-free gain on the disposal of IMS Health's investment in Cognizant in the amount of $522,460, after consideration of the cost basis of $72,566. (iii) The accrual of the estimated direct and incremental costs of the exchange offer in the amount of $13,000. The gain on disposal is predicated upon the closing price of the IMS Health common stock on the exchange offer expiration date and the number of shares accepted in the exchange offer. The actual amount of gain may differ significantly based on the number of shares of IMS Health stock accepted and closing price for IMS Health common stock on the exchange offer expiration date. 5. The unaudited pro forma condensed consolidated financial information assumes that 36,540 shares of IMS Health common stock are acquired in the exchange offer. If we assume that only 27,400 shares of IMS Health common stock are acquired, the minimum amount that IMS Health will accept, IMS Health would retain a number of Cognizant shares representing approximately 13.8% of Cognizant's outstanding common stock. The estimated gain on disposal of the investment in Cognizant would be approximately $390,000 and IMS Health would have a remaining cost basis in Cognizant of approximately $18,000. 7 Item 6. Not Applicable. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements. None (b) Pro Forma Financial Information. None (c) Exhibits. None Item 8-9. Not Applicable. 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IMS HEALTH INCORPORATED By: /s/ Robert H. Steinfeld Name: Robert H. Steinfeld Title: Senior Vice President, General Counsel and Corporate Secretary Date: January 16, 2003