 Catalyst
SXC +
Health
Solutions
Catalyst
SXC +
Health
Solutions
CREATING A LEADING NATIONAL PROVIDER
OF PBM SERVICES AND HEALTHCARE
INFORMATION TECHNOLOGY SOLUTIONS
April 18, 2012
Exhibit 99.2 |
 Forward-Looking Statements
Forward-Looking Statements
2
Certain statements included in this communication, including those that express
management’s expectations or estimates of SXC’s or the combined company’s future performance, constitute “forward-looking statements”
within the meaning of applicable securities laws. Forward-looking statements
are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management at this time, are inherently
subject to significant business, economic and competitive uncertainties and
contingencies. SXC cautions that such forward-looking statements involve known and unknown risks, uncertainties and other risks that may cause
SXC’s actual financial results, performance, or achievements to be
materially different from SXC’s estimated future results, performance or achievements expressed or implied by those forward-looking statements. Numerous
factors could cause actual results to differ materially from those in the
forward-looking statements, including without limitation, SXC’s ability to achieve increased market acceptance for SXC’s product offerings and penetrate
new markets; consolidation in the healthcare industry; the existence of
undetected errors or similar problems in SXC’s software products; SXC’s ability to identify and complete acquisitions, manage SXC’s growth and integrate
acquisitions; SXC’s ability to compete successfully; potential liability
for the use of incorrect or incomplete data; the length of the sales cycle for SXC’s healthcare software solutions; interruption of SXC’s operations due to
outside sources; SXC’s dependence on key customers; maintaining SXC’s
intellectual property rights and litigation involving intellectual property rights; SXC’s ability to obtain, use or successfully integrate third-party licensed
technology; compliance with existing laws, regulations and industry initiatives
and future change in laws or regulations in the healthcare industry; breach of SXC’s security by third parties; SXC’s dependence on the expertise of
SXC’s key personnel; SXC’s access to sufficient capital to fund
SXC’s future requirements; and potential write-offs of goodwill or other intangible assets. This list is not exhaustive of the factors that may affect any of SXC’s
forward-looking statements. Other factors that should be considered are
discussed from time to time in SXC’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including the risks and uncertainties
discussed under the captions “Risk Factors” and “Management's
Discussion and Analysis of Financial Condition and Results of Operations” in SXC’s 2011 Annual Report on Form 10-K and subsequent Form 10-Qs, which are
available at www.sec.gov. Investors are cautioned not to put undue reliance on
forward- looking statements. All subsequent written and oral forward-looking statements attributable to SXC or persons acting on SXC’s behalf are
expressly qualified in their entirety by this cautionary statement. SXC
disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.
Certain of the assumptions made in preparing forward-looking information and
management’s expectations include: maintenance of SXC’s existing customers and contracts, SXC’s ability to market SXC’s products successfully
to anticipated customers, the impact of increasing competition, the growth of
prescription drug utilization rates at predicted levels, the retention of SXC’s key personnel, SXC’s customers continuing to process transactions at
historical levels, that SXC’s systems will not be interrupted for any
significant period of time, that SXC’s products will perform free of major errors, SXC’s ability to obtain financing on acceptable terms and that there will be no
significant changes in the regulation of SXC’s business.
SXC Forward-Looking Statements
Catalyst Forward-Looking Statements
Certain statements included herein may contain certain forward-looking
statements including, without limitation, statements concerning Catalyst's operations, economic performance and financial condition. The words
"believe," "expect," "anticipate," "will,"
"could," "would," "should," "may," "plan," "estimate," "intend," "predict," "potential," "continue," and the negatives of these words and other similar expressions
generally identify forward- looking statements. In addition to
Catalyst's expectations or estimates of a combined company's future performance or matters relating to the proposed transaction, these forward-looking statements may include statements
addressing Catalyst's operations and Catalyst's financial performance.
Readers are cautioned not to place undue reliance on these forward-looking statements, which, among other things, speak only as of their dates. These
forward-looking statements are based largely on Catalyst's current
expectations and are based on a number of risks and uncertainties, including, without limitation, (i) general adverse economic conditions, (ii) changes in
governmental laws and regulations, (iii) Catalyst's ability to compete
effectively in the pharmacy benefit management industry, (iv) Catalyst's relationships with key clients, pharmacy network affiliations and various
pharmaceutical manufacturers and rebate intermediaries, (v) changes in industry
pricing benchmarks, (vi) uncertainties relating to the transition and integration of completed and future acquisitions and/or expansion
opportunities, (vii) Catalyst's current level of indebtedness and any future
indebtedness Catalyst may incur; (viii) disruption in Catalyst's operations, (ix) unanticipated changes in Catalyst's ability to execute its growth strategy,
(x) generic utilization levels, (xi) insufficient insurance coverage to cover
costs associated with litigation, (xii) Catalyst's ability to accurately estimate how much future revenue Catalyst will generate, as well as the level of
implementation and transaction costs that Catalyst will incur, under newly
commenced PBM agreements and other risks and uncertainties discussed in Catalyst's filings with the SEC, including Catalyst's Annual Report on
Form 10-K and quarterly reports on Form 10-Q. Actual results could
differ materially from results referred to in the forward-looking statements. In light of these risks and uncertainties, there can be no assurances that the
results referred to in the forward-looking statements contained herein will,
in fact, occur. Catalyst undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise
after the date hereof. Readers are urged to carefully review and consider
the various disclosures made in Catalyst's other filings with the SEC that attempt to advise interested parties of the risks and factors that may affect
Catalyst's business.
|
 Forward-Looking Statements cont.
Forward-Looking Statements cont.
Transaction Forward-Looking Statements
In addition, numerous factors could cause actual results with respect to the
proposed transaction to differ materially from those in the forward-looking statements, including without limitation, the
possibility
that
the
expected
efficiencies
and
cost
savings
from
the
proposed
transaction
will
not
be
realized,
or
will
not
be
realized
within
the
expected
time
period;
the
risk
that
the
SXC
and
Catalyst businesses will not be integrated successfully; the ability to obtain
governmental approvals of the proposed transaction on the proposed terms and schedule contemplated by the parties;
the failure of shareholders of SXC or Catalyst to approve the proposed
transaction; disruption from the proposed transaction making it more difficult to maintain business and operational
relationships; the risk of customer attrition; the possibility that the proposed
transaction does not close, including, but not limited to, due to the failure to satisfy the closing conditions; and the
ability to obtain the financing contemplated to fund a portion of the
consideration to be paid in the proposed transaction and the terms of such financing.
Important Additional Information
This
communication
does
not
constitute
an
offer
to
sell
or
the
solicitation
of
an
offer
to
buy
any
securities
or
a
solicitation
of
any
vote
or
approval.
This
communication
is
being
made
in
respect
of
the
proposed
transaction
involving
Catalyst
and
SXC.
The
proposed
transaction
will
be
submitted
to
the
shareholders
of
Catalyst
and
the
shareholders
of
SXC
for
their
consideration.
In
connection
therewith,
the
parties
intend
to
file
relevant
materials
with
the
SEC,
including
a
joint
proxy
statement/prospectus
that
will
be
mailed
to
shareholders.
Such
documents,
however,
are
not
currently
available.
BEFORE
MAKING
ANY
VOTING
OR
INVESTMENT
DECISIONS,
INVESTORS
AND
SECURITY
HOLDERS
OF
CATALYST
AND/OR
SXC
ARE
URGED
TO
READ
THE
JOINT
PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT
DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Investors and security holders may obtain free copies of the proxy
statement/prospectus and other documents containing important information about
Catalyst and SXC, once such documents are filed with the SEC, through the website maintained by the SEC at
www.sec.gov.
Copies
of
the
documents
filed
with
the
SEC
by
SXC
will
be
available
free
of
charge
on
SXC’s
website
at
www.sxc.com
under
the
heading
“Investor
Information”
or
by
contacting
SXC’s
Investor Relations Department at 630-577-3100. Copies of the documents
filed with the SEC by Catalyst will be available free of charge on Catalyst’s website at www.catalysthealthsolutions.com
under
the
heading
“Investor
Information”
or
by
contacting
Catalyst’s
Investor
Relations
Department
at
301-548-2900.
SXC,
Catalyst
and
certain
of
their
respective
directors,
executive
officers
and
other
members
of
management
and
employees
may
be
deemed
to
be
participants
in
the
solicitation
of
proxies
in
connection
with
the
proposed
transaction.
Information
about
the
directors
and
executive officers of SXC is set forth in its proxy statement for its 2012
annual meeting of stockholders, which was filed with the SEC on April 2, 2012. Information about the directors and executive
officers
of
Catalyst
is
set
forth
in
its
proxy
statement
for
its
2011
annual
meeting
of
shareholders,
which
was
filed
with
the
SEC
on
April
28,
2011.
These
documents
can
be
obtained
free
of
charge
from the sources indicated above. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will
be
contained
in
the
joint
proxy
statement/prospectus
and
other
relevant
materials
to
be
filed
with
the
SEC
when
they
become
available.
3 |
 Strategically and Financially
Compelling Transaction
Strategically and Financially
Compelling Transaction
Combines two fast-growing complementary businesses to create a $13 billion
leader in PBM services and healthcare information technology
solutions Complementary products, services and solutions
Distinct market segments served; combination will serve a larger
addressable market
Creates a market-leading PBM with strengthened capabilities, improved market
visibility and additional scale
Leverages Catalyst’s industry-leading client services model and
award-winning clinical capabilities Leverages SXC’s industry
leading PBM tools and services Increased operating size and scale delivers
value for clients and members Improved purchasing leverage for
prescription drugs to drive lower costs Unique PBM model
well-positioned to serve evolving market needs Ability to serve
large employers, health plans and government clients with industry-leading innovation and
flexible offerings
Strengthened financial profile
Expected to be highly accretive to SXC’s non-GAAP earnings in
2013 Strong balance sheet and significant free cash flow post
closing Low integration risk
Low integration risk given SXC’s proven integration experience, shared IT
platform, and overall familiarity with Catalyst
4 |
 Transaction Summary
Transaction Summary
Structure and
Consideration
Accretion
Synergies
Governance
Merged Company
Path To Completion
•
$28.00 in cash and 0.6606 shares of SXC stock
•
Implied premium of approximately 28% as of 4/17/12
•
SXC shareholders expected to own 65%; Catalyst shareholders expected to own
35% •
Catalyst shareholders to receive $81.02 per share in cash and stock (based on
the closing price of SXC’s stock on 4/17/12)
•
Transaction expected to be highly accretive to SXC’s non-GAAP
earnings in 2013 •
Expect to achieve approximately $125 million of annual cost synergies
•
SXC Chairman and CEO will lead the combined company
•
SXC CFO will remain CFO of the combined company
•
SXC Board will include two current Catalyst directors
•
SXC (NASDAQ: SXCI, TSX: SXC)
•
Headquarters in Lisle, IL
•
SXC and Catalyst shareholder votes
•
Regulatory approvals and customary closing conditions
•
Expected closing in the second half of 2012
5 |
 Significant Benefits to Catalyst Shareholders
Significant Benefits to Catalyst Shareholders
Strategic premium delivers immediate value to Catalyst shareholders
28% premium to closing price as of 4/17/12
Pro forma company expected to be owned 35% by Catalyst shareholders
Enhanced growth potential
Combination aligns core competencies, strengthens capabilities, and provides
opportunity for synergy realization
Leverages SXC’s tools and technology to provide additional value to
Catalyst’s client base
Accelerates revenues, earnings, and free cash flow growth
6
Participation in upside potential of combined company |
 Complementary Businesses
Compelling Strategic Fit
Complementary Businesses
Compelling Strategic Fit
7
Comprehensive suite of best-in-class
services and solutions
Increased client diversity including large
employers, managed care organizations,
state and local governments, hospice, FFS
Medicaid, long-term care, and workers’
compensation clients
Enhanced scale and scope to drive down
healthcare costs for clients and members
Flexible, customizable solutions to reduce
costs and manage complexity
Strengthened offering in mail, retail and
specialty pharmacy |
 Additional Size, Scale, and Broadened Scope
Additional Size, Scale, and Broadened Scope
Greater scale and scope increase purchasing efficiency and ability to
drive lower costs to members
Leading independent provider of flexible PBM solutions offers strong
alternative to traditional PBMs
SXC technology platform provides unlimited scalability
Increased breadth of client verticals served
8
Employers
Health Plans
PBMs
Medicare Part D
FFS Medicaid
Unions
Long-Term Care
Workers’
Compensation
State and Local
Governments
Hospice |
 Capitalizing on the Opportunity
Capitalizing on the Opportunity
Plan sponsors increasingly focused on cost containment
Recent transaction activity further elevates the need for scale to better
serve clients
Shift by MCOs toward integrated care models and hybrid PBM
structures thus creating the need for an “unbundled”
PBM offering
Increased client RFP activity creates new opportunities for well-
positioned competitors
Positive industry trends around generics, specialty pharmaceuticals
and healthcare reform support longer-term growth opportunity
9
Combined company well positioned to benefit
from rapidly evolving healthcare industry |
 Financially Compelling Transaction
Financially Compelling Transaction
Combination creates an organization with $13 billion in revenue
Expected to be highly accretive to SXC’s non-GAAP earnings in
2013 Combined company will have strong balance sheet and cash flow
Creates flexibility to continue investing in growth initiatives while
paying down debt
10 |
 Expected Transaction Metrics
Expected Transaction Metrics
Integration expected to be completed 18 to 24 months following
closing
SXC expects $125 million in synergies achieved primarily through
improved scale and operating leverage
SXC expects $40-$45 million of integration expenses over the
integration timeframe
SXC expects the transaction to result in $200 million in annual
deal- related amortization upon closing, which will be
backed-out in the adjusted EPS calculation
SXC expects $25 million in one-time transaction-related expenses,
which should be realized in 2012
SXC expects $70 million in annual interest expense upon closing due
to the $1.7 billion in debt used to finance the transaction
11 |
 An Ideal Partnership
An Ideal Partnership
Combines two fast-growing, complementary businesses focused on
lowering the cost of healthcare and improving patient outcomes
Long history of working closely together to deliver value to clients
Shared vision regarding customer-centered approach to client service
Impressive track record for growth and value creation in the PBM
space
Tremendous opportunity for combined company to compete in the
rapidly evolving PBM market and deliver additional value to
shareholders
12 |
 Summary of Non-GAAP Financial Measures
Summary of Non-GAAP Financial Measures
SXC reports its financial results in accordance with generally accepted
accounting principles in the United States (“GAAP”). SXC’s
management also evaluates and makes operating decisions using various other
measures. Such measures are adjusted earnings per share, EBITDA,
and adjusted EBITDA, which are non-GAAP financial measures. SXC’s management believes that
these
measures
provide
useful
supplemental
information
regarding
the
performance
of
SXC’s
business
operations.
Adjusted earnings per share is a non-GAAP measure which takes earnings per
share and adds back the impact of amortization of intangible
assets,
net
of
tax.
Amortization
of
intangible
assets
arises
from
the
acquisition
of
intangible
assets
in
connection
with
the Company’s acquisitions. SXC excludes amortization of intangible
assets from non-GAAP adjusted earnings per share because it
believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of SXC
business operations and (ii) such expenses can vary significantly between
periods as a result of new acquisitions and full amortization
of
previously
acquired
intangible
assets.
Investors
should
note
that
the
use
of
these
intangible
assets
will
contribute
to revenue in the future period presented and periods beyond that and should
also note that such expense will recur in future periods.
EBITDA is a non-GAAP measure that management believes is a useful
supplemental measure of operating performance prior to net interest
income (expense), income taxes, depreciation, and amortization. Adjusted EBITDA is a non-GAAP measure that
management believes is a useful supplemental measure of operating performance
prior to net interest income (expense), income taxes, depreciation,
amortization, and stock-based compensation. Management believes it is useful to exclude
depreciation, amortization and net interest income (expense) as these are
essentially fixed amounts that cannot be influenced by management in the
short term. Management believes that adjusted earnings per share,
EBITDA, and adjusted EBITDA provide useful supplemental information to
management and investors regarding the performance of the Company’s business operations and facilitate comparisons to its
historical operating results. Management also uses this information
internally for forecasting and budgeting as it believes that the
measures are indicative of the Company’s core operating results. Note however, that both items are performance measures
only, and do not provide any measure of the Company’s cash flow or
liquidity. Non-GAAP financial measures should not be
considered
as
a
substitute
for
measures
of
financial
performance
in
accordance
with
GAAP,
and
investors
and
potential
investors
are
encouraged
to
review
the
reconciliation
of
adjusted
earnings
per
share
adjusted
EBITDA
on
SXC’s
website
(www.sxc.com).
Adjusted earnings per share, EBITDA, and adjusted EBITDA do not have
standardized meanings prescribed by GAAP. The Company's method of
calculating adjusted earnings per share, EBITDA, and adjusted EBITDA may differ from the methods used
by
other
companies
and,
accordingly,
it
may
not
be
comparable
to
similarly
titled
measures
used
by
other
companies.
Reconciliation of adjusted EPS, EBITDA, and adjusted EBITDA to net income is
available on SXC’s website (www.sxc.com). 13
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