UNITED STATES
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): July 28, 2015
EMDEON INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 1-34435 | 20-5799664 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
3055 Lebanon Pike, Suite 1000 Nashville, TN |
37214 | |
(Address of Principal Executive Offices) | (Zip Code) |
(615) 932-3000
(Registrants telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01. | Regulation FD Disclosure. |
As previously disclosed, on July 3, 2015, Emdeon Inc. (the Company) entered into a commitment letter with a consortium of lender banks (the Debt Commitment Parties), pursuant to which, subject to customary conditions, the Debt Commitment Parties have committed to provide the Company with debt financing for the previously announced acquisition of Altegra Health, Inc. through a senior secured incremental term loan facility and senior unsecured bridge loans (the Debt Commitment Financing). Certain information that will be provided to prospective lenders in connection with the Debt Commitment Financing is attached as Exhibit 99.1 and is incorporated by reference herein. Such information is supplemental and is intended to be considered in conjunction with the Companys previously disclosed financial and other information and other reports previously filed by the Company with the Securities and Exchange Commission.
The information furnished under Item 7.01 of this Current Report and in Exhibit 99.1 shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Information set forth in this Current Report (including the exhibits attached hereto) contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risk and uncertainties. A discussion of factors that may affect future results is contained in registrants filings with the Securities and Exchange Commission. Registrant disclaims any obligation to update forward-looking statements, except as may be required by law.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. The following exhibits are being furnished herewith to this Current Report on Form 8-K. |
Exhibit |
Description | |
99.1 | Certain information to be provided to prospective debt financing sources. |
SIGNATURES
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 hereunto duly authorized.
EMDEON INC. | ||||||
Date: July 28, 2015 | By: | /s/ Gregory T. Stevens | ||||
Name: | Gregory T. Stevens | |||||
Title: | Executive Vice President, General Counsel and Secretary |
INDEX TO EXHIBITS
Exhibit No. |
Description | |
99.1 | Certain information to be provided to prospective debt financing sources. |
Exhibit 99.1
Certain Information to be Provided to Prospective Debt Financing Sources
Set forth below is certain information included in a presentation to certain third parties in connection with debt financing by Emdeon Inc. (Emdeon) for the previously announced acquisition of Altegra Health, Inc. (Altegra) through a senior secured incremental term loan facility and senior unsecured bridge loans (the Debt Commitment Financing).
Sources and Uses
The following table reflects the estimated sources and uses of the funds from the Debt Commitment Financing and may vary at the closing of the Debt Commitment Financing. The below also assumes the sizes of the incremental term loan, the new senior unsecured notes and the new sponsor equity.
($ in millions) | ||||
Sources of Funds |
Amount | |||
Cash from Balance Sheet |
$ | 65 | ||
Revolver |
60 | |||
Incremental Term Loan B |
395 | |||
New Senior Unsecured Notes |
250 | |||
New Sponsor Equity |
160 | |||
|
|
|||
Total Sources |
$ | 930 | ||
|
|
|||
Uses of Funds |
Amount | |||
Purchase Price |
$ | 910 | ||
Estimated Fees & Expenses |
20 | |||
|
|
|||
Total Uses |
$ | 930 | ||
|
|
Pro Forma Capitalization
The following table reflects the pro forma capitalization of Emdeon as a result of the Debt Commitment Financing.
($ in millions) | ||||||||
Pro Forma Capitalization |
Current | Pro Forma | ||||||
Cash and Equivalents |
$ | 160 | $ | 95 | ||||
Revolver |
| 60 | ||||||
Existing Term Loan B |
1,418 | 1,418 | ||||||
Incremental Term Loan B |
| 395 | ||||||
Capital Leases |
24 | 24 | ||||||
|
|
|
|
|||||
Senior Secured Debt |
$ | 1,442 | $ | 1,897 | ||||
|
|
|
|
|||||
Existing 11.000% Senior Unsecured Notes |
375 | 375 | ||||||
Existing 11.250% Senior Unsecured Notes |
375 | 375 | ||||||
New Senior Unsecured Notes |
| 250 | ||||||
|
|
|
|
|||||
Total Debt |
$ | 2,192 | $ | 2,897 | ||||
|
|
|
|
|||||
Sponsor Equity |
1,215 | 1,375 | ||||||
|
|
|
|
|||||
Total Capitalization |
$ | 3,407 | $ | 4,272 | ||||
|
|
|
|
|||||
Pro Forma Financials |
LTM 6/30/15 |
PF LTM 6/30/15 |
||||||
Emdeon PF Adj. EBITDA |
$ | 390 | $ | 390 | ||||
Altegra Health PF Adj. EBITDA |
| 59 | ||||||
Estimated PF Cost Synergies |
| 15 | ||||||
|
|
|
|
|||||
Combined PF Adj. EBITDA |
$ | 390 | $ | 463 | ||||
Pro Forma Credit Statistics |
||||||||
Senior Secured Debt / PF Adj. EBITDA(1) |
3.70x | 3.97x | ||||||
Total Debt / PF Adj. EBITDA |
5.63x | 6.25x | ||||||
Total Net Debt / PF Adj. EBITDA(2) |
5.31x | 6.05x |
(1) | The revolver debt is not included in the senior secured leverage calculation per Emdeons exiting credit agreement and indentures. |
(2) | Cash netting capped at $125 million per Emdeons existing credit agreement. |
-2-
Reconciliation of Non-GAAP Financial Measures
Emdeon
Reconciliations of Emdeons Net Income (Loss) determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) to Adjusted EBITDA and Pro Forma Adjusted EBITDA have been provided in the chart below. An explanation of these non-GAAP measures is also included under the heading Explanation of Non-GAAP Financial Measures below. To properly evaluate Emdeons business, Emdeon encourages investors not to rely on any single financial measure to evaluate Emdeons business and to review the GAAP reconciliations. These non-GAAP measures, as Emdeon defines them, may not be similar to non-GAAP measures used by other companies.
Emdeon Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(unaudited and amounts in millions)
Three months ended 3/31, | Three months ended 6/30, | Year To Date 6/30, | LTM 6/30, | |||||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2015 | ||||||||||||||||||||||
Net income (loss) |
$ | (3.0 | ) | $ | (5.7 | ) | $ | (59.5 | ) | $ | 7.9 | $ | (62.5 | ) | $ | 2.2 | $ | (11.2 | ) | |||||||||
Interest expense, net |
36.6 | 38.0 | 36.5 | 38.1 | 73.1 | 76.1 | 149.9 | |||||||||||||||||||||
Income tax provision (benefit) |
(21.3 | ) | (6.0 | ) | (27.0 | ) | (15.9 | ) | (48.2 | ) | (22.0 | ) | (15.6 | ) | ||||||||||||||
Depreciation and amortization |
46.5 | 48.1 | 46.6 | 49.5 | 93.1 | 97.6 | 193.8 | |||||||||||||||||||||
EBITDA |
$ | 58.8 | $ | 74.3 | $ | (3.3 | ) | $ | 79.6 | $ | 55.5 | $ | 154.0 | $ | 316.8 | |||||||||||||
EBITDA Adjustments: |
||||||||||||||||||||||||||||
Equity compensation |
$ | 1.9 | $ | 2.2 | $ | 1.8 | $ | 2.0 | $ | 3.7 | $ | 4.2 | $ | 7.8 | ||||||||||||||
Acquisition accounting adjustments |
0.3 | 0.4 | 0.2 | 0.5 | 0.5 | 0.9 | 1.4 | |||||||||||||||||||||
Acquisition-related costs |
1.4 | 0.8 | 2.1 | 2.4 | 3.5 | 3.2 | 6.7 | |||||||||||||||||||||
Transaction-related costs and advisory fees |
1.5 | 1.5 | 1.6 | 1.7 | 3.1 | 3.2 | 6.5 | |||||||||||||||||||||
Strategic initiatives, duplicative and transition costs |
5.0 | 1.0 | 4.7 | 2.3 | 9.8 | 3.2 | 6.3 | |||||||||||||||||||||
Severance costs |
2.7 | 2.1 | 1.1 | 2.0 | 3.8 | 4.1 | 8.3 | |||||||||||||||||||||
Accretion |
(0.1 | ) | 5.0 | 4.8 | 3.8 | 4.8 | 8.8 | 18.5 | ||||||||||||||||||||
Impairment of long-lived assets |
3.1 | 0.8 | 76.5 | 0.1 | 79.6 | 1.0 | 4.6 | |||||||||||||||||||||
Contingent Consideration |
2.0 | (2.0 | ) | (0.3 | ) | 1.9 | 1.7 | (0.2 | ) | (0.5 | ) | |||||||||||||||||
Other non-routine, net |
1.7 | 1.4 | 1.1 | 1.6 | 2.8 | 3.0 | 4.7 | |||||||||||||||||||||
Total |
19.5 | 13.2 | 93.6 | 18.3 | 113.2 | 31.5 | 64.3 | |||||||||||||||||||||
Adjusted EBITDA |
$ | 78.3 | $ | 87.6 | $ | 90.3 | $ | 97.9 | $ | 168.6 | $ | 185.5 | $ | 381.2 | ||||||||||||||
PF impact of acquisitions and related cost savings initiatives (1) |
8.3 | |||||||||||||||||||||||||||
Pro Forma Adjusted EBITDA |
$ | 389.5 | ||||||||||||||||||||||||||
Altegra Health Acquisition (2) |
59.0 | |||||||||||||||||||||||||||
Cost savings related to Altegra Health acquisition (2) |
14.7 | |||||||||||||||||||||||||||
Pro Forma Adjusted EBITDA for Altegra Health acquisition |
$ | 463.2 |
(1) | Represents pro forma adjustments for LTM period to reflect acquisitions of Capario, Change Healthcare and AdminiSource Communications as if consummated as of beginning of the period and pro forma adjustments in accordance with Emdeons Credit Agreement for the impact of cost savings initiatives. Pro forma adjustments permitted by Emdeons Credit Agreement may include adjustments that are not permitted in pro forma financial statements presented in accordance with generally accepted accounting principles or Regulation S-X. |
(2) | Includes net pro forma acquired EBITDA for contemplated acquisition of Altegra Health, including related pro forma adjustments for excluding shared services costs, projected cost synergies and other pro forma adjustments in accordance with Emdeons Credit Agreement. Pro forma adjustments permitted by Emdeons Credit Agreement may include adjustments that are not permitted in pro forma financial statements presented in accordance with generally accepted accounting principles or Regulation S-X. |
-3-
Altegra
Reconciliations of Altegras Net Income (Loss) determined in accordance with GAAP to Adjusted EBITDA and Pro Forma Adjusted EBITDA have been provided in the chart below. An explanation of these non-GAAP measures is also included under the heading Explanation of Non-GAAP Financial Measures below. To properly evaluate Altegras business, Altegra encourages investors not to rely on any single financial measure to evaluate Altegras business and to review the GAAP reconciliations. These non-GAAP measures, as Altegra defines them, may not be similar to non-GAAP measures used by other companies.
Altegra Health
Reconciliation of GAAP Net Income to Adjusted EBITDA
(unaudited and amounts in millions)
Year Ended December 31, |
Three Months Ended 3/31, | Three Months Ended 6/30, | LTM 6/30, | |||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2014 | 2015 | 2014 | 2015 | 2015 | |||||||||||||||||||||||||
Net income (loss) |
$ | (1.3 | ) | $ | 2.0 | $ | 5.1 | $ | (0.6 | ) | $ | 1.6 | $ | 1.3 | $ | 3.0 | $ | 9.1 | ||||||||||||||
Interest expense, net |
7.5 | 4.6 | 6.7 | 1.4 | 1.6 | 1.5 | 1.6 | 7.0 | ||||||||||||||||||||||||
Income tax provision (benefit) |
0.9 | 1.4 | 3.4 | (0.4 | ) | 1.1 | 0.9 | 1.9 | 6.0 | |||||||||||||||||||||||
Depreciation and amortization |
14.4 | 16.7 | 24.1 | 5.4 | 6.9 | 5.6 | 6.9 | 26.9 | ||||||||||||||||||||||||
EBITDA |
$ | 21.5 | $ | 24.6 | $ | 39.4 | $ | 5.8 | $ | 11.2 | $ | 9.2 | $ | 13.3 | $ | 48.9 | ||||||||||||||||
EBITDA Adjustments: |
||||||||||||||||||||||||||||||||
Equity compensation |
2.9 | 3.2 | 4.8 | 1.1 | 1.2 | 1.2 | 1.5 | 5.2 | ||||||||||||||||||||||||
Acquisition accounting adjustments |
| (0.9 | ) | 0.9 | 0.2 | | 0.2 | | 0.4 | |||||||||||||||||||||||
Acquisition-related costs |
1.6 | 1.3 | 3.0 | 1.2 | 0.1 | 0.9 | 0.8 | 1.8 | ||||||||||||||||||||||||
Sponsor Advisory fees |
0.5 | 0.5 | 0.5 | 0.1 | 0.1 | 0.1 | 0.1 | 0.5 | ||||||||||||||||||||||||
Severance costs |
| 0.8 | 0.9 | 0.0 | 0.0 | 0.3 | 0.2 | 0.9 | ||||||||||||||||||||||||
Loss (gain) related to financing transactions |
3.1 | 0.6 | 0.6 | 0.6 | 0.0 | 0.0 | | 0.0 | ||||||||||||||||||||||||
Other non-routine, net |
0.3 | 5.3 | 1.5 | 0.8 | (0.3 | ) | 0.2 | 0.2 | 0.3 | |||||||||||||||||||||||
Total |
8.4 | 10.8 | 12.2 | 4.0 | 1.1 | 2.9 | 2.8 | 9.2 | ||||||||||||||||||||||||
Adjusted EBITDA |
$ | 29.9 | $ | 35.4 | $ | 51.7 | $ | 9.9 | $ | 12.3 | $ | 12.1 | $ | 16.2 | $ | 58.1 | ||||||||||||||||
PF impact of acquisitions and related cost savings initiatives(1) |
0.9 | |||||||||||||||||||||||||||||||
Pro Forma Adjusted EBITDA |
$ | 59.0 |
(1) | Represents pro forma adjustments to reflect acquisition of Outcome Health Information Solutions as if consummated as of beginning of the period presented and pro forma adjustments for the impact of cost savings initiatives. Pro forma adjustments may include adjustments that are not permitted in pro forma financial statements presented in accordance with generally accepted accounting principles or Regulation S-X. |
Explanation of Non-GAAP Financial Measures
Emdeon
Emdeons management believes that, in order to properly understand Emdeons 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). 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 Emdeons GAAP to non-GAAP results are provided in the financial statement tables included above.
In this presentation, Emdeon defines Adjusted EBITDA as EBITDA (which is defined as net income (loss) before net interest expense, income tax provision (benefit) and depreciation and amortization), plus certain other non-cash or non-operating items, and defines Pro Forma Adjusted EBITDA as Adjusted EBITDA plus the pro forma effects of acquisitions and cost savings initiatives as permitted by the terms of Emdeons credit facilities.
-4-
To properly evaluate Emdeons business, Emdeon encourages investors to not rely on any single financial measure to evaluate Emdeons business and to review the reconciliation of net income (loss) to the non-GAAP measures of Adjusted EBITDA and Pro Forma Adjusted EBITDA. Adjusted EBITDA and Pro Forma Adjusted EBITDA, as Emdeon defines them, may differ from and may not be comparable to similarly titled measures used by other companies, because Adjusted EBITDA and Pro Forma Adjusted EBITDA are not measures of financial performance under GAAP and are susceptible to varying calculations. Adjusted EBITDA and Pro Forma Adjusted EBITDA calculations also are used in Emdeons credit facilities and indentures, although the adjustments used to calculate Adjusted EBITDA and Pro Forma Adjusted EBITDA as used in Emdeons credit facilities and indentures may vary in certain respects among such agreements and from those presented below.
Emdeons management uses Adjusted EBITDA and Pro Forma Adjusted EBITDA to facilitate a comparison of Emdeons operating performance on a consistent basis from period to period that, when viewed in combination with Emdeons GAAP results, Emdeons management believes to provide a more complete understanding of factors and trends affecting Emdeons business than GAAP measures alone. Emdeons management believes these non-GAAP measures assist Emdeons board of directors, management, lenders and investors in comparing Emdeons operating performance on a consistent basis because they remove, where applicable, the impact of Emdeons capital structure, asset base, acquisition accounting, non-cash charges and non-operating items from Emdeons operating performance. Additionally, management uses Adjusted EBITDA and Pro Forma Adjusted EBITDA 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.
Altegra Health
Altegras management believes that, in order to properly understand Altegras 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). 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 Altegras GAAP to non-GAAP results are provided in the financial statement tables included above.
In this presentation, Altegra defines Adjusted EBITDA as EBITDA (which is defined as net income (loss) before net interest expense, income tax provision (benefit) and depreciation and amortization), plus certain other non-cash or non-operating items, and defines Pro Forma Adjusted EBITDA as Adjusted EBITDA plus the pro forma effects of acquisitions and cost savings initiatives.
To properly evaluate Altegras business, Altegra encourages investors to not rely on any single financial measure to evaluate Altegras business and to review the reconciliation of net income (loss) to the non-GAAP measures of Adjusted EBITDA and Pro Forma Adjusted EBITDA. Adjusted EBITDA and Pro Forma Adjusted EBITDA, as Altegra defines them, may differ from and may not be comparable to similarly titled measures used by other companies, because Adjusted EBITDA and Pro Forma Adjusted EBITDA are not measures of financial performance under GAAP and are susceptible to varying calculations.
Altegras management uses Adjusted EBITDA and Pro Forma Adjusted EBITDA to facilitate a comparison of Altegras operating performance on a consistent basis from period to period that, when viewed in combination with Altegras GAAP results, Altegras management believes to provide a more complete understanding of factors and trends affecting Altegras business than GAAP measures alone. Altegras management believes these non-GAAP measures assist Altegras board of directors, management, lenders and investors in comparing Altegras operating performance on a consistent basis because it removes, where applicable, the impact of Altegras capital structure, asset base, acquisition accounting, non-cash charges and non-operating items from Altegras operating performance. Additionally, Altegras management uses Adjusted EBITDA to evaluate the operational performance of Altegra as a basis for strategic planning and as a performance evaluation metric in determining achievement of certain executive and management incentive compensation programs.
Altegra Health
Historical Financial and Operations Data
The below table includes information on Altegras historical financials for 2012, 2013 and 2014. This information excludes the pro forma adjustments to reflect acquisitions as if consummated at the beginning of the period (these pro forma adjustments are included in the Altegra EBITDA reconciliation table above).
Altegra | PF FYE December 31, | Quarter Ending 3/31, | Quarter Ending 6/30, | LTM | ||||||||||||||||||||||||||||
($ in millions) |
2012 | 2013 | 2014 | 2014 | 2015 | 2014 | 2015 | Q2 2015 | ||||||||||||||||||||||||
Total Revenue |
$ | 116.2 | $ | 138.5 | $ | 192.6 | $ | 44.1 | $ | 54.8 | $ | 47.7 | $ | 56.2 | $ | 211.8 | ||||||||||||||||
% Growth |
| 19.1 | % | 39.1 | % | | 24.3 | % | | 17.8 | % | | ||||||||||||||||||||
Gross Profit |
$ | 74.8 | $ | 89.2 | $ | 119.1 | $ | 26.7 | $ | 34.0 | $ | 29.2 | $ | 36.8 | $ | 134.0 | ||||||||||||||||
% Growth |
| 19.3 | % | 33.5 | % | | 27.4 | % | | 26.1 | % | | ||||||||||||||||||||
% Margin |
64.3 | % | 64.4 | % | 61.8 | % | 60.5 | % | 62.0 | % | 61.1 | % | 65.4 | % | 63.3 | % | ||||||||||||||||
Adjusted EBITDA |
$ | 29.9 | $ | 35.4 | $ | 51.7 | $ | 9.9 | $ | 12.3 | $ | 12.1 | $ | 16.2 | $ | 58.1 | ||||||||||||||||
% Growth |
| 18.2 | % | 46.0 | % | | 24.2 | % | | 33.4 | % | | ||||||||||||||||||||
% Margin |
25.8 | % | 25.6 | % | 26.8 | % | 22.4 | % | 22.4 | % | 25.4 | % | 28.8 | % | 27.4 | % | ||||||||||||||||
Change in Margin (bps) |
| (21) | bps | 127 | bps | | (3) | bps | | 338 | bps | | ||||||||||||||||||||
Net Income / (Loss) |
$ | (1.3 | ) | $ | 2.0 | $ | 5.1 | $ | (0.6 | ) | $ | 1.6 | $ | 1.3 | $ | 3.0 | $ | 9.1 |
-5-