8-K

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): March 19, 2003

Commission File No. 001-12392

NDCHealth Corporation

(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation)

58-0977458
(IRS Employer
Identification Number)

NDC Plaza, Atlanta, Georgia
(Address of principal executive offices)
30329-2010
(Zip Code)

Registrant’s telephone number, including area code (404) 728-2000

None
(Former name or former address, if changed since last report.)

Item 7.Financial Statements and Exhibits

Exhibit 99.1

(a)Press Release dated March 19, 2003.

(b)Schedules:

1)NDCHealth Corporation Consolidated Statements of Operations for the three months ended February 28, 2003 and March 1, 2002,

2)NDCHealth Corporation Consolidated Statements of Operations for the nine months ended February 28, 2003 and March 1, 2002,

3)NDCHealth Corporation Consolidated Balance Sheets as of February 28, 2003 and May 31, 2002, and

4)NDCHealth Corporation Consolidated Statements of Cash Flows for the nine months ended February 28, 2003 and March 1, 2002.

Exhibit 99.2

(a)NDCHealth Corporation software cost (by quarter) for the nine months ended February 28, 2003 and March 1, 2002.

Item 9.Regulation FD Disclosure

On March 19, 2003, NDCHealth Corporation issued a press release which is filed herewith as Exhibit 99.1 (a) and (b) 1, 2, 3 and 4 and incorporated in this Item 9 by this reference.

MedUnite Investment

As reflected in the financials statements filed with this report, we have taken pre-tax non-cash charges of approximately $17.2 million related to our investments including MedUnite. The charges are reflected in Loss related to investments of approximately $14.9 million and Restructuring, impairment and other charges of approximately $2.3 million. Loss related to investments includes a write down of the net carrying value of our investment of approximately $11.6 million and provisions for other liabilities totaling approximately $3.3 million. Restructuring, impairment and other charges were incurred to reserve for receivables related to our investment. Because of the nature of certain of these charges, our ability to deduct them for tax purposes is uncertain. In light of this uncertainty we have reserved, and therefore excluded, these certain charges in the calculation of the Provision for income taxes during the quarter resulting in a tax expense although we have recorded a loss for the quarter.

Software Costs

In Exhibit 99.2 (a), we have provided software costs for the periods covered by the financial statements filed with this report. Software costs consist of expenses related

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to the development of new products and maintenance and enhancement of existing products. We capitalize the cost of developing software held for sale to our customers as well as software used internally to provide services to our customers.

Our current focus is developing new products such as Rx Safety Advisor, Pharmacy Aide, ePREMIS, Global Trends, and a next generation pharmacy systems platform being developed by TechRx. Excluding TechRx, during 2003 capitalized software development costs, as a percentage of revenue, has declined as these new products have been completed and placed into service. Looking forward, we expect this trend to continue.

Software maintenance expense for the first nine months of 2003, excluding TechRx, has decreased approximately $2.0 million from the first nine months of 2002. Savings have been achieved through the implementation of expense controls, such as the consolidation of data center management, and a shift in focus from maintenance and enhancement of existing products to the development of new products. These cost saving initiatives and shift in focus are reflected in the decrease in total net software expense, excluding TechRx, from 2002 to 2003.

EBITDA

In light of the recent restructuring of our balance sheet and the resulting increase in interest expense, we believe that EBITDA is a meaningful measure of our operating performance as it is a key measurement related to our debt covenants. EBITDA is defined in our credit agreement as income before equity in losses of affiliated companies, plus income taxes, interest expense, depreciation and amortization, and certain other non-cash losses on asset disposition, less minority interest in losses. EBITDA is not a Generally Accepted Accounting Principles (GAAP) measurement and may not be comparable to EBITDA reported by other companies. The tables below reconcile EBITDA for the three months ended February 28, 2003 and March 1, 2002 to our results determined under GAAP.

Other includes charges related to the early extinguishment of debt and losses related to investments for the three months ended February 28, 2003 and results from divested businesses for the three months ended March 1, 2002.

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Three months ended February 28, 2003 (in thousands)	Information Management			Network Services and Systems		Other			Totals
Loss before equity in losses of affiliated companies									$	(3,341	)
Income taxes									3,121
Income (loss) before income taxes and equity in losses of affiliated companies	$	6,749		$	9,424	$	(16,393	)	$	(220	)
Interest expense and related costs	3,064			5,077		1,438			9,579
Depreciation and amortization	2,529			5,313		—			7,842
Amortization of restricted stock	129			215		—			344
Other non-cash charges	—			2,283		14,955			17,238
Minority interest in losses	(378		)	193		—			(185		)
EBITDA	$	12,093		$	22,505	$	—		$	34,598

Three months ended March 1, 2002 (in thousands)	Information Management			Network Services and Systems			Other			Totals
Income before equity in losses of affiliated companies										$	11,589
Income taxes										6,518
Income (loss) before income taxes and equity in losses of affiliated companies	$	6,903		$	11,391		$	(187	)	$	18,107
Interest expense and related costs	1,006			1,298			—			2,304
Depreciation and amortization	2,619			3,329			—			5,948
Amortization of restricted stock	117			151			—			268
Other non-cash charges	2			24			—			26
Minority interest in (losses) earnings	(595		)	(12		)	—			(607		)
EBITDA	$	10,052		$	16,181		$	(187	)	$	26,046

The Company believes that EBITDA is an additional meaningful measure of operating performance. However, this pro forma information will necessarily be different from comparable information provided by other companies and should not be used as an alternative to NDCHealth’s operating and other financial information, as determined under accounting principles generally accepted in the United States of America.

3

When used in this report and the exhibits hereto, in documents incorporated herein and elsewhere by management of NDCHealth Corporation, the words “believes,” “anticipates,” “expects,” “intends,” “plans” and similar expressions and statements that are necessarily dependent on future events are intended to identify forward-looking statements concerning the Company’s business operations, economic performance and financial condition. These include, but are not limited to, statements regarding the Company’s business strategy and means to implement the strategy, the Company’s objectives, future capital expenditures, sources and cost of future financing, the effective tax rate, 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, the ability to consummate and integrate acquisitions, and the expected benefits and prospects for acquisitions and alliances. For such statements, the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 is applicable and invoked. Such statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, uncertainties and contingencies that are subject to change. Actual revenues, revenue growth, margins and other results will be dependent upon all such factors and results subject to risks related to the performance of our various investments and alliances, estimates of the valuation of these investments, economic and market conditions in the pharmaceutical manufacturing industry, ability to accelerate revenue growth during the remainder of fiscal 2003, the application of accounting standards, the implementation of changes by the Company, the failure to implement changes, and customer acceptance of such changes or lack of change. Actual results of events could differ materially from those anticipated in the Company’s forward-looking statements as a result of a variety of factors, including: (a) those set forth under the caption “Additional Factors That May Affect Future Performance” in the Company’s Annual Report on Form 10-K for the period ended May 31, 2002 which are incorporated herein by this reference; (b) those set forth elsewhere herein; (c) those set forth from time to time in the Company’s press releases and reports and other filings made with the Securities and Exchange Commission including its most recent Form 10-K; and (d) those set forth from time to time in the Company’s analyst calls and discussions. In addition, the Company is currently unable to assess the impact, if any, on its financial performance that may result from the economic effects of  terrorist attacks or from military action in the Middle East. The Company cautions that such factors are not exclusive. Consequently, all of the forward-looking statements made herein are qualified by these cautionary statements and readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update forward-looking or other statements or to publicly release the results of any revisions of such forward-looking statements that may be made to reflect events or circumstances after the date hereof, or thereof, as the case may be, or to reflect the occurrence of unanticipated events.

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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 hereunto duly authorized.

	NDCHealth Corporation              (Registrant)
	By:	/s/ DAVID H. SHENK
		David H. Shenk Vice President & Corporate Controller (Chief Accounting Officer)
Date: March 19, 2003

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EX-99.1(A)

Exhibit 99.1 (a)

Contact:Betty Feezor	For Immediate Release
404-728-2363

NDCHealth ANNOUNCES RESULTS FOR
THIRD QUARTER FISCAL 2003

ATLANTA, March 19, 2003 — NDCHealth Corporation (NYSE: NDC) announced today financial results for its third quarter of fiscal 2003 ended February 28, 2003. Revenue increased 22% to $109.0 million from $89.3 million in the third quarter of the prior year. The Company reported a net loss for the third quarter of ($3.7) million and diluted loss per share of ($0.11). Excluding charges for early extinguishment of debt, loss on the Company’s investments including MedUnite, Inc., and other charges related to MedUnite incurred in the third quarter, net income was $11.5 million and diluted earnings per share was $0.33. These results compare to net income of $11.2 million and diluted earnings per share of $0.31 in the third quarter of fiscal 2002. EBITDA⁽¹⁾ for the third quarter increased 33% to $34.6 million from $26.0 million for the comparable prior year period.

The Company incurred non-cash charges of $14.9 million in the third quarter for loss on its investments, which included a write down of the net carrying value of MedUnite of $11.6 million and provisions for other liabilities totaling $3.3 million. Restructuring, impairment and other charges of $2.3 million from the write down of receivables related to MedUnite were also recorded in the third quarter. These charges totaled approximately $17.2 million on a pre-tax basis and $14.2 million after-tax, or approximately ($0.41) per share. Also in the third quarter, NDCHealth recorded pretax charges for early extinguishment of debt of $1.4 million, or $0.9 million after-tax, or approximately ($0.03) per share.

At February 28, 2003, the Company’s cash balance was $112.1 million and for the nine month period then ended net cash provided by operating activities was $70.3 million.

Segment Results

For the Information Management segment, revenue grew by 5% to $41.0 million from $38.9 million in the third quarter of the prior year and EBITDA grew by 20% to

$12.1 million from $10.1 million. The revenue growth was attributable primarily to increases in the domestic subscription business and the Company’s German operations. This growth was partially offset by lower revenue from this segment’s less profitable consulting services.

For the Network Services and Systems segment, revenue grew by 35% to $68.0 million from $50.2 million in the third quarter of the prior year and EBITDA grew by 39% to $22.5 million from $16.2 million. Strong growth continues in network transactions, with third quarter total healthcare volume exceeding one billion transactions for the first time in the Company’s history.

Accomplishments and New Products

Chief Executive Officer Walter Hoff said, “We had many important accomplishments during the third quarter. In our Network Services and Systems segment, the organic revenue growth rate was more than 15%. Organic revenue does not include acquisition revenue from TechRx and Scriptline of approximately $10 million. The annualized run rate for total transaction volume on our network is now more than four billion transactions. And, we continue to have very strong cash flow and EBITDA growth.

“Further, to position the Company for future growth, we made great strides developing a very strong pipeline of new products, many of which have recently been released or are planned for release during the next several quarters. New products include Rx Safety Advisor, Pharmacy Aide, and new TechRx platforms for pharmacies, Medisoft Version 8 and electronic script services for physicians, ePremis for hospitals, messaging and payor analytical solutions for pharmaceutical manufacturers, and Global Trends and new retail products for international customers. We see growing demand for these products despite a weak economy because each addresses a significant issue in healthcare.

“During the third quarter a product delay in our physician business unit and HIPAA related system freezes among selected customers caused revenues to be lower than our expectation. In the physician unit, due to a delay in the introduction of Medisoft Version 8, our production operation was unable to commence shipping the new product until late in the third quarter and could not fulfill all of the record orders we had received.

Further, physician transaction revenue from MedUnite did not grow as planned. In other network markets, we noted that some customers had implemented policies to freeze their information system development to prepare for HIPAA privacy regulations that become effective in April, 2003. Consequently, the acceleration of revenue growth for the third quarter of fiscal 2003 did not materialize at expected levels.

Outlook

“We continue to be well positioned in each of the market segments that we serve and believe we will continue to increase our overall market share. Our business plan for fiscal 2003 assumed substantial acceleration of revenue growth in the second half of the year. Our outlook for the remainder of fiscal 2003, including estimates of revenue, earnings per share, cash flow and other metrics, is subject to the impact of geopolitical and economic events that may occur. Based on the current economic environment, third quarter results, and the timing and expense associated with new product introductions, we estimate that for the full fiscal year 2003, total Company revenue will grow 22% to 23% over the previous year and will be in the range of approximately $430-$435 million. We expect diluted earnings per share to be in the range of $1.34 to $1.39, excluding the impact of the loss on the Company’s investments including MedUnite of $0.41 per share and excluding the total charges related to early extinguishment of debt of approximately $0.04 per share. Including these charges, we expect diluted earnings per share to be in the range of $0.89 to $0.94 per share and that net cash provided by operating activities will be in the range of $85-$90 million for the full fiscal year 2003.”

During the second quarter, NDCHealth completed debt financings that caused interest expense to be significantly higher in the third quarter and for future periods. For consistency in comparison, EBITDA is used to measure the results from operations excluding the impact of interest expense and other items. EBITDA computed using this definition is also a key measurement related to the Company’s debt covenants. As of February 28, 2003, NDCHealth is in compliance with its debt covenants.

⁽¹⁾ EBITDA is defined as income before equity in losses of affiliated companies, plus income taxes, interest expense, depreciation and amortization, and certain other non-cash losses on asset disposition, less minority interest in losses. EBITDA is not a Generally Accepted Accounting Principles (GAAP) measurement and may not be comparable to EBITDA reported by other companies.

NDCHealth is a leading provider of health information services that add value to pharmacy, hospital, physician, pharmaceutical and payer businesses.

This press release contains forward-looking statements concerning the Company’s future operations, performance and financial condition. Actual revenues, revenue growth, margins, and other results will be dependent upon all such factors and results subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These include product demand, market and customer acceptance, the effect of economic conditions, competition, pricing, development difficulties, the ability to consummate and integrate acquisitions, the performance of investments, estimates of the valuation of these investments, economic and market conditions in the pharmaceutical manufacturing and retail pharmacy industries, ability to accelerate revenue growth during the remainder of fiscal 2003, and other risks detailed in the Company’s SEC filings, including its most recent Form 10-K. In addition, the Company is currently unable to assess the impact, if any, on its financial performance that may result from the economic effects of terrorist attacks or from military action in the Middle East. The Company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

###

EX-99.1(B)1

Exhibit 99.1(b) 1

CONSOLIDATED STATEMENTS OF OPERATIONS
NDCHealth Corporation and Subsidiaries

(In thousands, except per share data)

	Three Months Ended
	February 28, 2003			March 1, 2002
Revenues:
Information management	$	41,020		$	38,943
Network services and systems	67,987			50,218
Divested businesses	—			107
	109,007			89,268
Operating expenses:
Cost of service	53,130			44,410
Sales, general and administrative	22,341			19,344
Depreciation and amortization	7,842			5,948
Restructuring, impairment and other charges	2,283			—
	85,596			69,702
Operating income	23,411			19,566
Other income (expense):
Interest and other income	343			445
Interest and other expense	(7,766		)	(2,511		)
Minority interest in losses	185			607
Loss related to investments	(14,955		)	—
Early extinguishment of debt charges	(1,438		)	—
	(23,631		)	(1,459		)
Income (loss) before income taxes and equity in losses of affiliated companies:
Information management	6,749			6,903
Network services and systems	9,424			11,391
Other	(16,393		)	(187		)
	(220		)	18,107
Provision for income taxes	3,121			6,518
Income (loss) before equity in losses of affiliated companies	(3,341		)	11,589
Equity in losses of affiliated companies	(359		)	(344		)
Net income (loss)	$	(3,700	)	$	11,245
Basic earnings (loss) per share:	$	(0.11	)	$	0.33
Shares	34,623			34,135
Diluted earnings (loss) per share:	$	(0.11	)	$	0.31
Shares		34,623			39,721

EX-99.1(B)2

Exhibit 99.1(b) 2

CONSOLIDATED STATEMENTS OF OPERATIONS
NDCHealth Corporation and Subsidiaries

(In thousands, except per share data)

	Nine Months Ended
	February 28, 2003			March 1, 2002
Revenues:
Information management	$	114,694		$	110,226
Network services and systems	199,681			144,291
Divested businesses	—			4,360
	314,375			258,877
Operating expenses:
Cost of service	156,881			127,356
Sales, general and administrative	64,555			57,592
Depreciation and amortization	22,952			18,426
Restructuring, impairment and other charges	2,283			—
	246,671			203,374
Operating income	67,704			55,503
Other income (expense):
Interest and other income	1,088			1,140
Interest and other expense	(14,682		)	(7,156		)
Minority interest in losses	1,216			1,680
Loss related to investments	(14,955		)	—
Early extinguishment of debt charges	(2,359		)	—
	(29,692		)	(4,336		)
Income (loss) before income taxes and equity in losses of affiliated companies:
Information management	18,354			17,562
Network services and systems	36,972			34,175
Other	(17,314		)	(570		)
	38,012			51,167
Provision for income taxes	16,886			18,420
Income (loss) before equity in losses of affiliated companies	21,126			32,747
Equity in losses of affiliated companies	(984		)	(1,750		)
Net income	$	20,142		$	30,997
Basic earnings per share:	$	0.58		$	0.91
Shares	34,561			34,045
Diluted earnings per share:	$	0.58		$	0.87
Shares		34,923			35,595

EX-99.1(B)3

Exhibit 99.1(b) 3

CONSOLIDATED BALANCE SHEETS
NDCHealth Corporation and Subsidiaries

(In thousands, except share data)

	February 28, 2003			May 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	112,138		$	13,447
Accounts receivable	81,087			76,161
Allowance for doubtful accounts	(8,631		)	(5,710		)
Accounts receivable, net	72,456			70,451
Income tax receivable	4,369			2,229
Deferred income taxes	5,294			19,987
Prepaid expenses and other current assets	27,099			23,258
Total current assets	221,356			129,372
Property and equipment, net	116,690			101,566
Intangible assets, net	380,813			377,322
Deferred income taxes	13,607			21,403
Investments	8,100			13,497
Other	30,226			15,024
Total Assets	$	770,792		$	658,184
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	—		$	91,000
Short-term borrowings	—			11,906
Current portion of long-term debt	9,819			963
Obligations under capital leases	1,534			1,296
Accounts payable and accrued liabilities	79,660			76,047
Deferred income	20,739			21,089
Total current liabilities	111,752			202,301
Long-term debt	322,903			151,910
Obligations under capital leases	847			1,779
Deferred income	8,432			—
Other long-term liabilities	21,885			22,592
Total liabilities	465,819			378,582
Commitments and contingencies
Minority interest in equity of subsidiaries	22,463			21,856
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;34,828,992 and 34,643,922 shares issued, respectively.	4,354			4,330
Capital in excess of par value	213,996			212,026
Retained earnings	70,166			54,194
Deferred compensation and other	(5,874		)	(6,743		)
Other comprehensive income	(132		)	(6,061		)
Total stockholders’ equity	282,510			257,746
Total Liabilities and Stockholders’ Equity	$	770,792		$	658,184

EX-99.1(B)4

Exhibit 99.1(b) 4

CONSOLIDATED STATEMENTS OF CASH FLOWS
NDCHealth Corporation and Subsidiaries

(In thousands)

	Nine Months Ended
	February 28, 2003			March 1, 2002
Cash flows from operating activities:
Net income	$	20,142		$	30,997
Adjustments to reconcile net income to cash provided by operating activities:
Equity in losses of affiliated companies	984			1,750
Non-cash restructuring, impairment and other charges	2,283			—
Non-cash early extinguishment of debt charges	1,217			—
Loss related to investments	14,955			—
Depreciation and amortization	22,952			18,426
Deferred income taxes	15,075			2,303
Provision for bad debts	2,115			1,552
Other, net	5,333			(364		)
Changes in assets and liabilities which provided (used) cash, net of the effects of acquisitions:
Accounts receivable, net	(5,307		)	(2,018		)
Prepaid expenses and other assets	(8,612		)	(4,482		)
Accounts payable and accrued liabilities	(1,304		)	(6,275		)
Accrued interest on long term debt	6,490			1,816
Deferred income	(3,896		)	4,695
Income taxes	(2,146		)	667
Net cash provided by operating activities	70,281			49,067
Cash flows from investing activities:
Capital expenditures	(31,767		)	(23,398		)
Investing activities and other non-current assets	(13,831		)	(15,897		)
Net cash used in investing activities	(45,598		)	(39,295		)
Cash flows from financing activities:
Net (repayments) borrowings under lines of credit	(91,000		)	50,000
Net principal payments under capital lease arrangements and other long-term debt	(1,888		)	(2,135		)
Net cash from refinancing activities	168,070			—
Net issuances related to stock activities	1,283			6,192
Dividends paid	(4,170		)	(4,089		)
Net cash provided by financing activities	72,295			49,968
Cash flows from discontinued operations:
Cash provided by tax benefits of discontinued operations	6,106			15,596
Cash used in discontinued operations	(4,393		)	(6,649		)
Net cash provided by discontinued operations	1,713			8,947
Increase in cash and cash equivalents	98,691			68,687
Cash and cash equivalents, beginning of period	13,447			12,420
Cash and cash equivalents, end of period	$	112,138		$	81,107

EX-99.2(A)

Exhibit 99.2 (a)

NDCHealth Corporation
Software Costs
FY02 vs. FY03

FY02	Q1 Total			Q2 Total			Q3 Total			9 Months Total
Total costs associated with software development	$	4,473		$	4,301		$	4,518		$	13,292
Less: capitalization of internally developed software	(2,688		)	(2,844		)	(2,961		)	(8,493		)
Capitalization as a % of revenue	3.2		%	3.3		%	3.3		%	3.3		%
Net software development expense	1,785			1,457			1,557			4,799
Software maintenance expense	2,966			2,551			2,431			7,948
Total net software expense	$	4,751		$	4,008		$	3,988		$	12,747

FY03	Q1						Q2						Q3						9 Months
	Total			Base*			Total			Base*			Total			Base*			Total			Base*
Total costs associated with software development	$	8,737		$	5,164		$	9,222		$	5,199		$	9,345		$	5,375		$	27,304		$	15,738
Less: capitalization of internally developed software	(7,119		)	(3,648		)	(7,154		)	(3,561		)	(7,610		)	(3,752		)	(21,883		)	(10,961		)
Capitalization as a % of revenue				4.0		%				3.7		%				3.7		%				3.8		%
Net software development expense	1,618			1,516			2,068			1,638			1,735			1,623			5,421			4,777
Software maintenance expense	2,501			2,132			2,481			2,067			2,201			1,793			7,183			5,992
Total net software expense	$	4,119		$	3,648		$	4,549		$	3,705		$	3,936		$	3,416		$	12,604		$	10,769

*Base excludes TechRx