Constant-Dollar Revenue Rises 18 Percent on Strong Operating Results
WESTPORT, Conn., Nov. 11 /PRNewswire/ -- IMS HEALTH (NYSE: RX), the
world's leading provider of information solutions to the pharmaceutical and
healthcare industries, today reported basic earnings per share growth from
recurring operations of 24 percent to $0.41 per share for the quarter ended
September 30, 1998. Diluted earnings per share from recurring operations
increased 21 percent to $0.40 per share. Reported revenue and operating
income from recurring operations rose 13 percent and 21 percent, respectively,
in the 1998 third quarter. Revenue increased 18 percent on a constant-dollar
basis.
"The performance of IMS HEALTH in our first quarter as an independent
company demonstrates the strength of our business as a healthcare information
partner to the global pharmaceutical industry," said Robert E. Weissman,
IMS HEALTH Chairman and CEO. "Our acquisition of the non-U.S. assets of
Pharmaceutical Marketing Services Inc. was successfully completed in August,
positioning the company for future growth."
"IMS HEALTH operating results in the third quarter continued to build on
our record of sustained, consistent growth," said Victoria R. Fash, IMS HEALTH
President and COO. "We expect to be at, or above, the high end of our
21-to-24 percent EPS growth target for 1998."
Financial Reporting Basis
To provide investors with financial statements which reflect the
performance of on-going business operations of IMS HEALTH, results of
recurring operations are presented for the third quarter and first nine months
of 1997 and 1998 (Tables 1 and 2). Recurring operations exclude the results
of Nielsen Media Research, which became an independent company on July 1,
1998, and one-time charges and gains.
Based on the financial structure of the Cognizant Corporation spin-off,
IMS HEALTH is the accounting successor to Cognizant. In accordance with
Generally Accepted Accounting Principles, IMS HEALTH is required to report
Nielsen Media Research as a discontinued operation through the end of 1998,
and to itemize material one-time charges and gains. These financial
statements are presented in Tables 3 and 4.
Third-Quarter Results
For the quarter ended September 30, 1998, reported revenue increased to
$283.6 million, 13 percent above the year-earlier quarter. Constant-dollar
revenue grew 18 percent. Operating income from recurring operations rose
21 percent to $71.3 million in the 1998 third quarter (Table 1).
Net income from recurring operations totaled $66.6 million, or $0.41 basic
earnings per share, compared with $54.0 million, or $0.33 basic earnings per
share in the 1997 third quarter, an increase in basic earnings per share of
24 percent. Diluted earnings per share from recurring operations increased
21 percent to $0.40 per share (Table 1).
Nine-Months Results
For the nine months ended September 30, 1998, reported revenue increased
9 percent to $795.1 million. Constant-dollar revenue rose 13 percent.
Operating income from recurring operations grew 33 percent to $160.4 million
in the 1998 first nine months (Table 2).
Net income from recurring operations for the 1998 first nine months
totaled $159.6 million, or $0.98 basic earnings per share, compared with
$123.4 million, or $0.74 basic earnings per share in the 1997 first nine
months, an increase of 32 percent. Diluted earnings per share from recurring
operations in the 1998 first nine months increased 28 percent to $0.95 per
share (Table 2).
Share Repurchase Program
As of November 10, 1998, IMS HEALTH has purchased 9.2 million of the
9.3 million shares authorized under its second share repurchase program. The
shares were purchased for a total of $557.1 million, or an average cost of
$60.44 per share. A third, systematic share repurchase program authorizing
the purchase of up to 8 million shares, or 5 percent of the company's
outstanding common stock, was authorized by the Board of Directors on
October 20, 1998.
IMS Constant-Dollar Results
IMS is the principal operating unit of IMS HEALTH. On a constant-dollar
basis, IMS revenue increased 15 percent in the 1998 third quarter and
13 percent in the 1998 first nine months. Reported revenue grew 10 percent to
$257.4 million in the 1998 third quarter, and rose 9 percent in the 1998 first
nine months. Constant-dollar IMS operating income from recurring operations
increased 17 percent in the 1998 third quarter and first nine months.
Reported IMS operating income from recurring operations rose 11 percent to
$75.5 million in the 1998 third quarter, and increased 10 percent to $178.8
million in the 1998 first nine months. IMS HEALTH maintains a hedging program
to protect a portion of committed IMS revenue from the impact of currency
fluctuations.
Operating Unit Results
IMS benefited from strong performance of its sales management products in
North America during the quarter, driven in part by the record number of new
drug launches by pharmaceutical company customers. Pharmaceutical Marketing
Services, Inc. (PMSI) businesses, acquired in early August, are being merged
with existing IMS operations to create broadened product offerings in Europe
and Japan. The combination of PMSI and IMS in Europe will enable accelerated
delivery of Xponent(TM), the next generation of sales management products
throughout Europe.
In July 1998, IMS launched a speed-to-market innovation in Japan,
providing customers with pharmaceutical market data reports on a weekly,
rather than a monthly basis. To date, 135 Japanese pharmaceutical wholesalers
have subscribed, representing virtually the entire ethical drug market in
Japan.
New contracts with Purdue Pharma L.P., Pfizer Korea, Roche Brazil and
Bayer plc announced during the quarter are fueling the continued growth of IMS
HEALTH Strategic Technologies, which offers sales and marketing automation
services to pharmaceutical companies worldwide. CORNERSTONE(TM) 3.0 was
released in August, providing leading-edge technology and functionality
enhancements to customers globally. With the acquisition of Walsh
International in June 1998, IMS HEALTH Strategic Technologies operates in
33 countries worldwide.
Cognizant Technology Solutions (CTS) (Nasdaq: CTSH) reported revenue
growth of 130 percent to $16.4 million, and a four-fold increase in operating
income to $2.5 million in the 1998 third quarter. The company added accounts
and expanded services to existing customers for application maintenance,
Web-centric systems and new application development, in addition to its
continuing work on year 2000 projects and Eurocurrency compliance.
Erisco Managed Care Technologies, a provider of software-based
administrative and analytical solutions to the healthcare industry, continues
to generate excellent sales growth. Erisco's revenue grew 21 percent to
$10.0 million, and operating income increased 27 percent to $1.4 million.
A multi-year contract was signed during the quarter with Heartland Regional
Medical Center, a Midwest managed care organization with approximately
45,000 members, to use Erisco's Facets(TM) as its information system solution.
Corporate
IMS HEALTH corporate overhead costs totaled $7.8 million in the 1998 third
quarter and $24.6 million in the 1998 first nine months.
Balance Sheet Highlights
IMS HEALTH's balance sheet at September 30, 1998 reflects cash and cash
equivalents of approximately $312.2 million, and shareholders' equity totaled
$768.9 million (Table 5).
At September 30, 1998, IMS HEALTH actual basic shares outstanding totaled
160.2 million. Year-to-date average basic shares outstanding totaled
163.2 million and year-to-date average diluted shares outstanding totaled
168.6 million at September 30, 1998. Third-quarter 1998 average basic shares
outstanding totaled 164.1 million, and average diluted shares outstanding
totaled 168.8 million for the 1998 third quarter.
IMS HEALTH is the world's leading provider of information solutions to the
pharmaceutical and healthcare industries. With more than $1 billion in 1997
revenue, IMS HEALTH operates in over 90 countries. IMS HEALTH is the largest
pharmaceutical manufacturer information partner, with over 40 years'
experience in the industry. Key products and services integral to customer
day-to-day operations include: market research for prescription and
over-the-counter pharmaceutical products; sales management information to
optimize sales force productivity; technology enabled selling solutions for
sales and marketing decision-making; and technology systems and information
services that support managed care organizations. Additional information is
available at http://www.imshealth.com.
This press release includes statements which may constitute
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although IMS HEALTH
believes the expectations contained in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove
correct. This information may involve risks and uncertainties that could
cause actual results of IMS HEALTH to differ materially from the
forward-looking statements. Factors which could cause or contribute to such
differences include, but are not limited to (i) the risks associated with
operating on a global basis, including fluctuations in the value of foreign
currencies relative to the U.S. dollar, and the ability to successfully hedge
such risks, (ii) the extent in which IMS HEALTH seeks growth through
acquisitions, and the ability to identify and consummate acquisitions on
satisfactory terms, (iii) the ability to develop new or advanced technologies
and systems for its businesses on a cost-effective basis, (iv) regulatory and
legislative initiatives, particularly in the area of medical privacy, and (v)
deterioration in economic conditions, particularly in the pharmaceutical,
healthcare, information technology or other industries in which IMS HEALTH's
customers operate.
Table 1
IMS HEALTH
Income from Recurring Operations*
Three Months Ended September 30
(unaudited, in millions except per share)
1998 1997 % Change Constant $
Growth
Revenue $283.6 $251.1 13% 18%
Operating Income 71.3 59.2 21 --
Interest Income, Net 6.9 3.1 126 --
Gartner Equity Income 16.9 13.8 23 --
Other (Expense), Net (3.4) (0.3) -- --
Income Before Provision
For Income Taxes 91.7 75.8 21 --
Provision for
Income Taxes (25.1) (21.8) (16) --
Net Income From
Recurring Operations $66.6 $54.0 23% --
Basic Earnings Per Share
From Recurring
Operations $0.41 $0.33 24% --
Diluted Earnings Per Share
From Recurring
Operations $0.40 $0.33 21% --
Average Shares
Outstanding, YTD
Basic 163.2 166.1 (2)% --
Diluted 168.6 167.7 1% --
* Recurring operations exclude results of Nielsen Media Research and
one-time charges and gains identified on Table 3.
Table 2
IMS HEALTH
Income from Recurring Operations*
Nine Months Ended September 30
(unaudited, in millions except per share)
1998 1997 % Change Constant $
Growth
Revenue $ 795.1 $ 731.5 9% 13%
Operating Income 160.4 120.1 33 --
Interest Income 15.4 7.7 98 --
Gartner Equity Income 52.8 44.4 19 --
Other Income (Expense) (8.7) (2.2) -- --
Income Before Provision
For Income Taxes 219.8 170.0 29 --
Provision for
Income Taxes (60.2) (46.6) (29) --
Net Income
From Recurring
Operations $159.6 $123.4 29% --
Basic Earnings
Per Share
From Recurring
Operations $0.98 $0.74 32% --
Diluted Earnings
Per Share
From Recurring
Operations $0.95 $0.74 28% --
Average Shares
Outstanding, YTD
Basic 163.2 166.1 (2)% --
Diluted 168.6 167.7 1% --
* Recurring operations exclude results of Nielsen Media Research and
one-time charges and gains identified on Table 4.
Table 3
IMS HEALTH
(Accounting Successor to Cognizant)
Three Months Ended September 30
(unaudited, in millions except per share)
1998 1997
Revenue $283.6 $251.1
Operating Income
Before One-Time
Charges and Gains 71.3 59.2**
Year 2000 Expense* (11.8) --
Acquisition In-Process
R&D Write-Off* (9.2) --
Acquisition Integration
Charge* (43.0) --
Total Operating Income 7.3 59.2
Interest Income, Net 6.9 3.1
Gartner Equity Income 16.9 13.8
Gartner Loss on Sale* (0.9) --
Gartner SAB 51 Gains* 1.5 0.7
Gains from Dispositions, Net* 12.0 4.0
Other (Expense), Net (3.4) (0.4)
Income from Continuing
Operations Before Provision
for Income Taxes 40.3 80.4
Provision for Income Taxes (13.0) (23.1)
Net Income
From Continuing Operations $27.3 $57.3
Net Income From
Discontinued Operations,
Net of Income Taxes* -- 19.8
Net Income $27.3 $77.1
Basic Earnings Per Share
Continuing Operations $0.17 $0.35
Discontinued Operations -- 0.12
Total $0.17 $0.47
Diluted Earnings Per Share
Continuing Operations $0.16 $0.34
Discontinued Operations -- 0.12
Total $0.16 $0.46
Average Shares
Outstanding, YTD
Basic 163.2 166.1
Diluted 168.6 167.7
*Items excluded from recurring operations. One-time charges and gains in
the 1998 third quarter include: year 2000 expense of $11.8 million;
acquisition in-process R&D write-offs of $9.2 million include a $14.2
million write-off for the PMSI acquisition and a $5.0 million reduction
related to the Walsh acquisition; an integration charge related to the
PMSI acquisition of $43.0 million; Gartner SAB 51 gains of $1.5 million;
and a $0.9 million loss on the sale of Gartner's Learning business. One-
time items also include net gains from dispositions of $12.0 million in
the 1998 third quarter, including $2.7 million from the sale of Cognizant
Technology Solutions stock, and $9.3 million in net gains from
dispositions of Enterprises venture fund and other investments.
**Includes operating income impact of year 2000 expense.
Table 4
IMS HEALTH
(Accounting Successor to Cognizant)
Nine Months Ended September 30
(unaudited, in millions except per share)
1998 1997
Revenue $795.1 $731.5
Operating Income
Before One-Time
Charges and Gains 160.4 120.1**
Year 2000 Expense* (34.1) --
Spin-Related Expense* (35.0) --
Acquisition In-Process
R&D Write-Off* (66.2) --
Acquisition Integration
Charge* (48.0) --
Total Operating Income (22.9) 120.1
Interest Income, Net 15.4 7.7
Gartner Equity Income 52.8 44.4
Gartner One-Time Charges* (3.9) --
Gartner SAB 51 Gains* 14.8 0.7
Gains from Dispositions, Net* 35.2 9.4
Other (Expense), Net (8.7) (2.3)
Income from Continuing
Operations Before Provision
for Income Taxes 82.7 180.1
Provision for Income Taxes (49.9) (49.3)
Net Income
From Continuing Operations $32.8 $130.8
Net Income
From Discontinued Operations,
Net of Income Taxes* 42.1 59.3
Net Income $74.9 $190.0
Basic Earnings Per Share
Continuing Operations $0.20 $0.79
Discontinued Operations 0.26 0.35
Total $0.46 $1.14
Diluted Earnings Per Share
Continuing Operations $0.19 $0.78
Discontinued Operations 0.25 0.35
Total $0.44 $1.13
Average Shares
Outstanding, YTD
Basic 163.2 166.1
Diluted 168.6 167.7
*Items excluded from recurring operations. One-time charges and gains in
the 1998 first nine months include: year 2000 expense of $34.1 million;
expense related to the spin-off of IMS HEALTH from Cognizant Corporation
of $35.0 million; write-offs of in-process research and development
associated with the Walsh International and PMSI acquisitions of
$66.2 million; an integration charge related to the Walsh International
and PMSI acquisitions of $48.0 million; Gartner SAB 51 gains of
$14.8 million; and Gartner charges of $3.9 million related to an
in-process R&D write-off in the 1998 first quarter and a loss on the sale
of Gartner's Learning business in the 1998 third quarter ($0.9 million).
One-time items also include net gains from dispositions of $35.2 million
in the 1998 first nine months, including a $15.5 million gain from the
Cognizant Technology Solutions initial public offering, and $19.7 million
in net gains from dispositions of Enterprises venture fund and other
investments.
**Includes operating income impact of year 2000 expense.
Table 5
IMS HEALTH Summary Balance Sheet
(unaudited, dollars in millions)
September 30, December 31,
1998 1997
Assets
Current Assets
Cash and Cash Equivalents $312.2 $312.4
Accounts Receivable, Net 245.9 251.6
Other Current Assets 73.1 65.8
Total Current Assets 631.2 629.8
Investment in Gartner Group 238.6 195.7
Notes Receivable and
Other Investments 104.9 109.7
Property, Plant and
Equipment, Net 177.8 178.5
Computer Software 104.2 99.2
Goodwill 330.2 87.4
Other Assets, Net 69.5 79.0
Net Assets from
Discontinued Operations -- 122.8
TOTAL ASSETS $1,656.4 $1,502.1
Liabilities and
Shareholders' Equity
Current Liabilities $563.0 $397.3
Minority Interests 114.8 101.2
Other Liabilities 209.7 202.0
TOTAL LIABILITIES 887.5 700.5
Total Shareholders' Equity 768.9 801.6
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,656.4 $1,502.1
SOURCE IMS Health
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800-758-5804, ext. 115785
CONTACT:
Michael Gury of IMS Health, 203-222-4230
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