CHICAGO–(BUSINESS WIRE)–Jan. 19, 2006–Allscripts (Nasdaq:MDRX),
the leading provider of clinical software, connectivity and
information solutions that physicians use to improve healthcare, today
announced it has signed a definitive agreement to acquire A4 Health
Systems(R), a leading provider of practice management and electronic
health record (EHR) solutions for small and mid-sized physician
groups, for approximately $272 million in cash and stock. A4, which is
privately held, has a customer base of over 1,600 healthcare
organizations nationally and is a recognized leader in the markets
they serve.
Allscripts also announced that it entered into an Amended
Strategic Alliance Agreement with GE, the parent company of IDX
Systems Corporation (IDX). Under the terms of the amended agreement,
Allscripts existing alliance with IDX will continue through the five
years remaining under the original agreement, supporting the ongoing
integration and compatibility of the Allscripts and IDX products. GE
will continue to offer Allscripts TouchWorks(TM) EHR within the IDX
client base, in addition to its own Centricity(R) Ambulatory EMR. The
Agreement also allows Allscripts to enter the practice management
systems (PMS) market and to offer an integrated practice management
and EHR solution. Depending on the needs and size of the practice,
Allscripts will offer the integrated A4 practice management/electronic
health record solution, its TouchWorks(TM) EHR in combination with the
A4 practice management system, or, for IDX practice management
clients, TouchWorks(TM) EHR integrated with IDX Groupcast or Flowcast
products.
“Our vision is to make our products indispensable to all
physicians, from independent practitioners to the largest physician
practice groups, academic medical centers and specialty groups, and
today we are taking two significant strategic steps towards that
goal,” said Glen Tullman, Chief Executive Officer of Allscripts. “The
new GE/IDX agreement preserves the best parts of our long-term
strategic alliance, while simultaneously opening up significant new
opportunities in the $10 billion physician practice market.”
Mr. Tullman continued: “Our acquisition of A4 adds an established
leader with a strong product offering and robust sales channel in two
significant and largely untapped market segments – small, independent
physician practices and mid-sized medical practice groups. We will
offer an integrated electronic health records/practice management
system or, where appropriate, a combination of A4’s practice
management system with TouchWorks(TM). Together with A4, we will
extend our leadership to all market segments.”
A4 Transaction
The strategic acquisition of A4 will double Allscripts clinical
software revenues and the size of its sales force, while significantly
expanding Allscripts existing product portfolio and providing the
company with an integrated EHR/PMS for small to mid-sized groups.
Headquartered in Cary, NC, with over 400 employees nationwide, A4
also provides emergency room and care management solutions to the
multi-billion dollar hospital emergency department and discharge
planning markets. Both are key points of connection with the
electronic healthcare record.
In 2005, A4 generated revenues in excess of $75 million, EBITDA of
approximately $15.5 million and net income of approximately $8.3
million. The transaction consideration will consist of $215 million in
cash and 3.5 million Allscripts shares valued at approximately $57
million, based on yesterday’s closing price of $16.30 per share.
Allscripts intends to finance the acquisition using cash on hand and
through the issuance of new common shares.
The transaction, which has been unanimously approved by the Board
of Directors of each company, is expected to be accretive to
Allscripts 2007 earnings. The acquisition is subject to A4 shareholder
approval and other customary closing conditions, including the receipt
of financing and regulatory approvals, and is expected to close in the
first half of 2006. Upon closing of the transaction, John McConnell,
A4’s Chief Executive Officer and an industry leader, will join
Allscripts Board of Directors.
McConnell stated: “Allscripts and A4 are a natural fit that will
provide a full suite of solutions to better serve the clinical and
administrative needs of medical groups. The addition of A4’s PMS will
enable the Company to compete more effectively where the majority of
physicians practice, in medical groups with less than 25 physicians,
where approximately 80% of clients purchase a combined solution.”
Amended Strategic Alliance with General Electric
Under the terms of the Amended Strategic Alliance Agreement, GE
and IDX have extended their commitment to support integration and
compatibility of the Allscripts and IDX products for the next five
years and beyond. During the next 18 months, GE and IDX will continue
to market Allscripts TouchWorks(TM) EHR and GE’s Centricity(R)
solution to current customers and Allscripts will continue to market
the combined Allscripts/IDX solution into the IDX base. New IDX
clients will also continue to receive free interfaces from Allscripts.
During this period, Allscripts has agreed not to market any acquired
practice management system to current IDX customers. For new sales
outside the existing IDX base, Allscripts and GE are free to offer
their own respective practice management and EHR solutions without
restriction.
Allscripts royalty obligations for sales to the existing IDX
installed base will be reduced by 50% immediately and will then be
phased out over time.
Tullman said, “The modification of our agreement reaffirms our
commitment to working closely with GE and IDX to support our mutual
clients and cooperate into the future. Clients value the many years we
have invested in working together with IDX to ensure seamless
interfacing and integration of our combined solution. The bottom line
– IDX clients choose Allscripts because of our strong reference sites,
product vision and leadership, rapid deployment experience, and
committed people. Over the last few years, TouchWorks(TM) has become
the proven, safe choice for IDX clients.”
Fourth Quarter Results
Allscripts also announced that it expects to report record total
fourth quarter 2005 sales of approximately $33.7 million. Clinical
software sales are anticipated to be approximately $29.2 million.
Tullman concluded, “Our strong fourth quarter clearly demonstrates
the confidence our prospective and current clients have in Allscripts
and our ability to deliver a world-class solution. These record sales
are a testament to our solid traction in both the IDX and non-IDX
client bases.”
The Company reiterated its earnings estimates of $120 million in
annual revenue and quarterly earnings per share (EPS) of $0.09,
excluding a previously disclosed $0.01 per share option acceleration
expense. A reconciliation of EPS excluding the option acceleration
expense to GAAP EPS is included at the end of this press release.
Lehman Brothers is acting as exclusive financial advisor to
Allscripts on this transaction. Sidley Austin LLP is acting as
Allscripts legal advisor. UBS Investment Bank and Wryick Robbins Yates
and Ponton LLP are serving as exclusive financial and legal advisors
respectively, to A4.
Allscripts will host a live investor call and webcast Thursday,
January 19 at 8:30 a.m. EST to discuss today’s announcement. To access
the call, dial 1-800-374-0526 (international callers dial
706-634-5584) and enter passcode 4488454 or link to
www.allscripts.com. A replay of the call will be available for one
week after the event by dialing 1-800-642-1687 (international callers
dial 706-645-9291) and entering passcode 4488454.
About Allscripts
Allscripts is the leading provider of clinical software,
connectivity and information solutions that physicians use to improve
healthcare. The Company provides unique solutions that inform, connect
and transform healthcare. The Clinical Solutions Group’s award-winning
clinical software applications include Electronic Health Record,
e-prescribing and document imaging solutions. Allscripts Physicians
Interactive Group provides clinical product education and connectivity
solutions for physicians and patients. The Company’s Medication
Services Group provides medication fulfillment services. To learn
more, visit Allscripts on the Web at www.allscripts.com.
This announcement may contain forward-looking statements about
Allscripts Healthcare Solutions that involve risks and uncertainties.
These statements are developed by combining currently available
information with Allscripts beliefs and assumptions. Forward-looking
statements do not guarantee future performance. Because Allscripts
cannot predict all of the risks and uncertainties that may affect it,
or control the ones it does predict, Allscripts’ actual results may be
materially different from the results expressed in its forward-looking
statements. Important factors upon which forward-looking statements
presented in this release are premised include: (a) receipt of
regulatory and shareholder approval and financing without unexpected
delays; (b) timely implementations and execution of merger integration
plans; (c) retention of customers and critical employees; and (d)
successfully leveraging Allscripts/A4 product offerings to the
combined customer base. In addition, the ability of Allscripts/A4 to
achieve the expected revenues and accretion may be affected by
competition, the effects of general economic and other factors beyond
the control of Allscripts/A4.
For a more complete discussion of the risks, uncertainties and
assumptions that may affect Allscripts, see the Company’s 2004 Annual
Report on Form 10-K, available through the Web site maintained by the
Securities and Exchange Commission at www.sec.gov.
Allscripts Earnings Per Share
Reconciliation (Unaudited):
Three Months Ended For the Year Ended
December 31, December 31,
----------------------------------------
2005 2004 2005 2004
----------------------------------------
Diluted net income per share
-GAAP $0.08 $0.03 $0.23 $0.07
Add: Stock-based compensation
charge for acceleration of
options 0.01 - 0.01 -
----------------------------------------
Diluted net income per share
excluding stock-based
compensation charge for
acceleration of options $0.09 $0.03 $0.24 $0.07
========================================
A4 Net Income Reconciliation
($ in millions - unaudited)
For the Year Ended
December 31, 2005
-----------------------
EBITDA $15.5
Depreciation and amortization 1.6
Interest income, net (0.6)
-----------------------
Earnings before income taxes 14.5
Income tax provision 6.2
-----------------------
Net Income $8.3
=======================
CONTACT: Media:
Allscripts
Dan Michelson, 312-506-1217
or
Citigate Sard Verbinnen
Hugh Burns/Jonathan Gasthalter/Renee Soto
212-687-8080
or
Investors:
Allscripts
Bill Davis, 312-506-1211
SOURCE: Allscripts