SXC Health solutions announces record second quarter financial results



    
    2009 guidance revised higher based on solid year-to-date performance and
    positive outlook for the remainder of the year
    

    LISLE, IL, Aug. 6 /CNW/ - SXC Health Solutions Corp. ("SXC" or the
"Company") (NASDAQ:   SXCI, TSX: SXC), announces its financial results for the
three- and six-month periods ended June 30, 2009. Financial references are in
U.S. dollars unless otherwise indicated.

    
    Q2 2009 Highlights
    ------------------

    -   Revenue was $320.8 million, compared to $227.8 million in Q2 fiscal
        2008
    -   Gross profit was $47.2 million, compared to $29.8 million in Q2
        fiscal 2008
    -   Adjusted EBITDA(1) was $23.7 million compared, to $9.6 million in Q2
        fiscal 2008
    -   GAAP net income increased to $12.0 million, or $0.47 per share
        (fully-diluted), compared to $3.3 million, or $0.14 per share (fully-
        diluted), in Q2 fiscal 2008
    -   Non-GAAP adjusted earnings per share(1) (diluted), which excludes the
        NMHC transaction-related amortization, was $0.53, compared to $0.21
        in Q2 fiscal 2008
    -   Cash from operations was $19.8 million, compared to $9.0 million in
        Q2 fiscal 2008
    -   Adjusted prescription claim volume(1) for the PBM segment was
        8.9 million in Q2 fiscal 2009
    -   Gross margin per adjusted prescription for the PBM segment was
        $3.88 in Q2 fiscal 2009
    -   Transaction processing volume for the HCIT segment was 98.8 million
        in Q2 fiscal 2009
    -   Closed a multi-year, multi-million dollar agreement with Prime
        Therapeutics LLC
    -   Awarded a contract to provide PBM technology solutions and services
        for the Commonwealth of Virginia's Medicaid drug rebate program
    -   Subsequent to quarter-end, won a contract to provide PBM solutions to
        the Ohio Bureau of Workers' Compensation, the largest workers
        compensation organization in the U.S.
    -   Subsequent to quarter-end, won a PBM services contract with
        Presbyterian Health Plan valued at $150 million annually
    

    "Driven by new contract wins, strong client retention, cross-sell selling
success and operational synergies, we generated record sales and profitability
in the second quarter," said Mark Thierer, President and CEO of SXC. "As the
Technology-Enabled PBM, we continue to benefit from our flexible and
diversified business model which enables us to service a broad number of
market verticals and a wide range of customers within each segment. This
diversification has helped us to grow our business and expand our sales
pipeline during difficult economics times. As a result of our strong financial
and operational performance in the first half of the year and our positive
outlook for the second half, we are once again raising our fiscal 2009
financial targets."

    
    Financial Review
    ----------------

    Revenue and gross profit segmented by PBM and HCIT was as follows:
    

    Effective with the acquisition of NMHC, the Company evaluates segment
performance based on revenue and gross profit. A reconciliation of the
Company's business segments to the consolidated financial statements for the
three- and six-month periods ended June 30, 2009 and 2008 is as follows (in
thousands):

    
    Three months ended June 30, (unaudited, in thousands)

                     PBM                  HCIT              Consolidated
            --------------------- --------------------- ---------------------
             Q2 2009    Q2 2008    Q2 2009    Q2 2008    Q2 2009    Q2 2008
            ---------- ---------- ---------- ---------- ---------- ----------
    Revenue $ 293,906  $ 204,860  $  26,923  $  22,895  $ 320,829  $ 227,755
    Gross
     profit $  34,530  $  16,814  $  12,681  $  13,026  $  47,211  $  29,840
    Gross
     profit
     %          11.7%       8.2%      47.1%      56.9%      14.7%      13.1%


    (2)Six months ended June 30, (unaudited, in thousands)

                      PBM                  HCIT              Consolidated
            --------------------- --------------------- ---------------------
              YTD 09     YTD 08     YTD 09     YTD 08     YTD 09     YTD 08
            ---------- ---------- ---------- ---------- ---------- ----------
    Revenue $ 561,686  $ 204,860  $  50,103  $  47,212  $ 611,789  $ 252,072
    Gross
     profit $  63,312  $  16,814  $  23,083  $  26,506  $  86,395  $  43,320
    Gross
     profit
     %          11.3%       8.2%      46.1%      56.1%      14.1%      17.2%
    

    PBM revenue was $293.9 million for Q2 2009, compared to $204.9 million
for Q2 2008. PBM revenue for the year-to-date (YTD) period was $561.7 million,
compared to $204.9 million in the prior year.
    Q2 2009 HCIT revenue was $26.9 million, compared to $22.9 million in the
same period in 2008. Recurring revenue consisted of transaction processing
revenue of $15.7 million, compared to $11.9 million in Q2 2008 and maintenance
revenue of $4.5 million, compared to $4.1 million in Q2 2008. Recurring
revenue accounted for 75% of HCIT revenue in Q2 2009, compared to 70% in Q2
2008. Q2 2009 non-recurring revenue consisted of professional service revenue
of $3.8 million, compared to $3.1 million in Q2 2008, and system sales revenue
of $3.0 million, compared to $3.8 million in Q2 2008.
    For the YTD period, HCIT revenue was $50.1 million, compared to $47.2
million in the prior year period. Transaction processing revenue for the YTD
period was $29.4 million, compared to $26.5 million in the prior year period.
Maintenance revenue for the YTD period was $9.0 million, compared to $8.3
million in the prior year period. Recurring revenue in the YTD period
accounted for 77% of HCIT revenue compared to 74% in the prior year period.
Professional services revenue for the YTD period was $7.4 million, compared to
$6.9 million in the prior year period. System sales revenue for the YTD period
was $4.3 million, compared to $5.5 million in the prior year period.

    Product Development Costs

    Product development costs for Q2 2009 were $3.0 million, compared to $2.5
million in Q2 2008. Product development costs for the YTD period were $6.2
million, compared to $4.9 million in the prior year period. Product
development remains a key priority for SXC as the Company seeks to develop
enhancements to existing products and the launch of new offerings.

    Selling, General and Administration ("SG&A") Costs

    SG&A costs for Q2 2009 were $21.9 million, compared to $19.6 million in
Q2 2008. SG&A for the YTD period was $42.7 million, compared to $25.4 million
in the prior year period. The increase is primarily due to the acquisition of
NMHC which occurred in May 2008 and other initiatives to expand the Company's
sales and support capabilities.

    Adjusted EBITDA(1)

    Q2 2009 adjusted EBITDA was $23.7 million, compared to $9.6 million in Q2
2008. Adjusted EBITDA for the YTD period was $40.0 million, compared to $15.9
million in the prior year period. The year-over-year growth in adjusted EBITDA
was due primarily to the addition of the NMHC business, new contract wins,
improved purchasing efficiencies on prescription drugs, and cost synergies
generated from the acquisition.

    Income Taxes

    The Company recognized income tax expense of $5.2 million in Q2 2009,
representing an effective tax rate of 30%, compared to an income tax expense
of $0.5 million in Q2 2008, representing an effective tax rate of 14%. Income
tax expense for the YTD period was $8.1 million, representing an effective tax
rate of 29%, compared to an income tax expense of $2.2 million in the prior
year period, representing an effective tax rate of 25%. The change in the
effective tax rate is due primarily to greater earnings in 2009.

    Net Income

    The Company reported Q2 2009 net income of $12.0 million, or $0.47 per
share (fully-diluted), which included $2.4 million of intangible amortization,
compared to $3.3 million, or $0.14 per share (fully-diluted), which included
$2.4 million of intangible amortization, in Q2 2008. Net income for the YTD
period was $19.7 million, or $0.79 per share (fully-diluted), which also
included $5.2 million of intangible amortization, compared to net income in
the prior year period of $6.6 million, or $0.29 per share (fully-diluted),
which included $2.8 million of intangible amortization.

    Cash from Operations

    SXC continues to generate strong cash from operations. For Q2 2009, the
Company generated $19.8 million of cash through its operations, compared to
$9.0 million during Q2 2008. The Company's quarterly cash flows can be
impacted by the timing of pharmacy deposit and rebate payments it receives for
certain customers. For the YTD period, SXC generated cash from operations of
$31.7 million, compared to $17.0 million in the prior year period.
    At June 30, 2009 and December 31, 2008, SXC had cash and cash equivalents
totalling $96.6 million and $67.7 million, respectively. The Company believes
that its cash on hand, together with cash generated from operating activities
and amounts available under its existing credit facility, will be sufficient
to support planned operations through the foreseeable future.

    
    2009 Financial Guidance

    With today's announcement, SXC is revising its financial targets for
    2009:
    -   Revenue of $1.35-$1.4 billion versus prior estimate of $1.25-$1.35
        billion
    -   Gross profit of $166-$171 million versus prior estimate of $145-$155
        million
    -   Fully-diluted GAAP EPS (including all transaction-related
        amortization) of $1.42-$1.50 versus prior estimate of $0.93-$1.01
    -   Adjusted EBITDA of $78-$81 million versus prior estimate of $57-$60
        million
    -   Fully-diluted Non-GAAP adjusted earnings per share(1) (excluding the
        NMHC transaction-related amortization) of $1.62-$1.70 versus prior
        estimate of $1.13-$1.21
    

    Notice of Conference Call

    SXC will host a conference call on Thursday, August 6, 2009 at 8:30 a.m.
ET to discuss its financial results. Mark Thierer, President and CEO, and Jeff
Park, EVP and CFO will co-chair the call. All interested parties can join the
call by dialing 1-866-250-4909 or 416-646-3095. Please dial in 15 minutes
prior to the call to secure a line. The conference call will be archived for
replay until Thursday, August 13, 2009 at midnight. To access the archived
conference call, please dial 1-877-289-8525 or 416-640-1917 and enter the
reservation code 21311296 followed by the number sign.
    A live audio webcast of the conference call will be available www.sxc.com
and www.newswire.ca. Please connect at least 15 minutes prior to the
conference call to ensure adequate time for any software download that may be
required to join the webcast. An archived replay of the webcast will be
available for 365 days.

    (1) 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. Two such
measures are adjusted earnings per share, 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 expense related to the
acquisition of NMHC, net of tax. Acquisition-related amortization expense is a
non-cash expense arising from the acquisition of intangible assets in
connection with the acquisition. SXC excludes acquisition-related amortization
expense 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. The 2009 guidance of adjusted earnings
per share was computed by taking the Company's GAAP earnings per share
guidance and adding back the expected impact of acquisition-related
amortization expense, net of tax.
    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, stock-based
compensation, and certain other one-time charges. 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. In addition, management believes it is useful to exclude
stock-based compensation as this is not a cash expense. Lastly, certain other
one-time charges (including losses on disposals of capital assets) are
excluded as these are not considered to be recurring items.
    Adjusted prescription volume equals SXC's Mail Service prescriptions
multiplied by three, plus its retail and specialty prescriptions. The Mail
Service prescriptions are multiplied by three to adjust for the fact that they
typically include approximately three times the amount of product days
supplied compared with retail prescriptions.
    Management believes that adjusted earnings per share, adjusted EBITDA and
adjusted prescription volume 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 these 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 and adjusted EBITDA.
    Adjusted earnings per share and adjusted EBITDA do not have standardized
meanings prescribed by GAAP. The Company's method of calculating these items
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 EBITDA to net income and adjusted net income to net
income is shown below:


    
                               For the three months      For the six months
                                   ended June 30,          ended June 30,
                                  2009        2008        2009        2008
                              ----------- ----------- ----------- -----------
                                          (unaudited)  (in thou-
                                                           sands)

    Adjusted EBITDA           $   23,657  $    9,576  $   39,988  $   15,909

    Amortization of Intangible
     Assets                       (2,415)     (2,432)     (5,240)     (2,828)

    Depreciation of Property
     & Equipment                  (1,968)     (1,881)     (3,944)     (3,046)

    Stock-Based Compensation        (817)     (1,325)      (1430)     (2,104)

    Other Income (Expense)          (283)        (29)         42         (35)

    Interest Income (Expense),
     Net                            (979)       (116)     (1,689)        903

    Income Tax Expense            (5,218)       (526)     (8,068)     (2,175)
                              ----------- ----------- ----------- -----------

    Net Income                $   11,977  $    3,267  $   19,659  $    6,624
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

                                                            For the 3 months
    Non-GAAP Adjusted Earnings Per Share                 ended June 30, 2009

    (unaudited)
    (in thousands, except per share data)

    Net Income                                                    $   11,977

    Amortization of NMHC Intangibles (Net of Taxes)                    1,320
                                                                  -----------

    Adjusted Net-Income                                           $   13,297
                                                                  -----------
                                                                  -----------

    Adjusted EPS (diluted)                                        $     0.53

    (2) On April 30, 2008, SXC closed the acquisition of NMHC. As a result,
    SXC has introduced some new segmentation and presentation of its
    financial results. Revenue is now segmented into two groups: Pharmacy
    Benefits Management ("PBM") which includes informedRx as well as mail-
    order and specialty pharmacies, and Healthcare Information Technology
    ("HCIT"). SXC records PBM revenue from NMHC exclusively on a gross basis
    which equates to the prescription price paid by consumers plus an
    administrative fee. The HCIT business records revenue only on the basis
    of the administrative fee; drug ingredient cost is not included in
    revenues or cost of claims.
    

    The net effect is that SXC's year-over-year revenues have increased
dramatically while gross profit margin and adjusted EBITDA have increased in
absolute dollar terms, but have declined as a percentage of total sales. These
changes do not affect profitability on an absolute dollar or per share basis.

    About SXC Health Solutions Corp.

    SXC Health Solutions Corp. is a leading provider of pharmacy benefit
management (PBM) services and Healthcare Information Technology (HCIT)
solutions to the healthcare benefits management industry. As the industry's
"Technology-Enabled PBM"(TM), SXC's product offerings and solutions combine a
wide range of advanced PBM services, software applications, application
service provider (ASP) processing services, and professional services to help
healthcare organizations reduce the cost of prescription drugs and deliver
better healthcare to their members. SXC serves many of the largest
organizations in the pharmaceutical supply chain, such as health plans;
employers; Federal, provincial, and state governments; institutional
pharmacies; pharmacy benefit managers; and retail pharmacy chains. SXC is
headquartered in Lisle, Illinois with multiple locations in North America.
Learn more at www.sxc.com.

    Forward-Looking Statements

    Certain statements included herein, including those that express
management's expectations or estimates of our 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. We caution that such forward-looking
statements involve known and unknown risks, uncertainties and other risks that
may cause our actual financial results, performance, or achievements to be
materially different from our 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, our ability to
achieve increased market acceptance for our product offerings and penetrate
new markets; consolidation in the healthcare industry; the existence of
undetected errors or similar problems in our software products; our ability to
identify and complete acquisitions, manage our growth and integrate
acquisitions; our ability to compete successfully; potential liability for the
use of incorrect or incomplete data; the length of the sales cycle for our
healthcare software solutions; interruption of our operations due to outside
sources; our dependence on key customers; maintaining our intellectual
property rights and litigation involving intellectual property rights; our
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 our security by third parties; our dependence on the
expertise of our key personnel; our access to sufficient capital to fund our
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 our
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, including the risks and uncertainties discussed under
that captions "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our 2008 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 our behalf are expressly qualified in
their entirety by this notice. We disclaim 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 our existing customers
and contracts, our ability to market our products successfully to anticipated
customers, the impact of increasing competition, the growth of prescription
drug utilization rates at predicted levels, the retention of our key
personnel, our customers continuing to process transactions at historical
levels, that our systems will not be interrupted for any significant period of
time, that our products will perform free of major errors, our ability to
obtain financing on acceptable terms and that there will be no significant
changes in the regulation of our business.

    

                         SXC HEALTH SOLUTIONS CORP.
                         Consolidated Balance Sheets
                      (in thousands, except share data)

                                                       June 30,  December 31,
                                                      ----------- -----------
                                                         2009        2008
                                                      ----------- -----------
                                                     (unaudited)
    ASSETS

    Current assets
      Cash and cash equivalents                       $   96,634  $   67,715
      Restricted cash                                     14,135      12,498
      Accounts receivable, net of allowance for
       doubtful accounts of $3,133 (2008 - $3,570)        81,013      80,531
      Rebates receivable                                  22,512      29,586
      Unbilled revenue                                         -          73
      Prepaid expenses and other assets                    5,580       4,382
      Inventory                                            6,108       6,689
      Income tax recoverable                               1,327       1,459
      Deferred income taxes                                8,209      10,219
                                                      ----------- -----------
        Total current assets                             235,518     213,152

    Property and equipment, net of accumulated
     depreciation of $23,566 (2008 - $19,449)             20,778      20,756
    Goodwill                                             143,852     143,751
    Other intangible assets, net of accumulated
     amortization of $19,339 (2008 - $14,099)             42,066      46,406
    Deferred financing charges                             1,259       1,481
    Deferred income taxes                                  1,852       1,323
    Other assets                                           1,310       1,474
                                                      ----------- -----------
    Total assets                                      $  446,635  $  428,343
                                                      ----------- -----------
                                                      ----------- -----------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Accounts payable                                $    8,386  $    8,302
      Customer deposits                                   12,647      11,875
      Salaries and wages payable                          12,509      15,681
      Accrued liabilities                                 25,751      32,039
      Pharmacy benefit management rebates payable         45,856      36,326
      Pharmacy benefit claim payments payable             41,940      51,406
      Deferred revenue                                     8,493       7,978
      Current portion of long-term debt                    4,800       3,720
                                                      ----------- -----------
        Total current liabilities                        160,382     167,327

    Long-term debt, less current installments             41,520      43,920
    Deferred income taxes                                 15,538      15,060
    Deferred lease inducements                             2,986       3,217
    Deferred rent                                          1,323       1,461
    Other liabilities                                      3,103       3,195
                                                      ----------- -----------
        Total liabilities                                224,852     234,180
                                                      ----------- -----------

    Shareholders' equity
      Common stock: no par value, unlimited shares
       authorized; 24,639,093 shares issued and
       outstanding at June 30, 2009 (2008 -
       24,103,032 shares)                                153,320     146,988
      Additional paid-in capital                          13,407      11,854
      Retained earnings                                   55,410      35,751
      Accumulated other comprehensive loss                  (354)       (430)
                                                      ----------- -----------
        Total shareholders' equity                       221,783     194,163

                                                      ----------- -----------
    Total liabilities and shareholders' equity        $  446,635  $  428,343
                                                      ----------- -----------
                                                      ----------- -----------



                         SXC HEALTH SOLUTIONS CORP.
                    Consolidated Statements of Operations
                    (in thousands, except per share data)

                                     Three months           Six months
                                     ended June 30,        ended June 30,
                              ----------------------- -----------------------
                                  2009       2008         2009        2008
                              ----------------------- -----------------------
                                   (unaudited)              (unaudited)
    Revenue:
      PBM                     $  293,906  $  204,860  $  561,686  $  204,860
      HCIT:
        Transaction processing    15,663      11,888      29,390      26,536
        Maintenance                4,477       4,130       8,951       8,340
        Professional services      3,801       3,066       7,443       6,857
        System sales               2,982       3,811       4,319       5,479
                              ----------- ----------- ----------- -----------
    Total revenue                320,829     227,755     611,789     252,072

    Cost of revenue:
        PBM                      259,376     188,046     498,374     188,046
        HCIT                      14,242       9,869      27,020      20,706
                              ----------- ----------- ----------- -----------
    Total cost of revenue        273,618     197,915     525,394     208,752
                              ----------- ----------- ----------- -----------
    Gross profit                  47,211      29,840      86,395      43,320

    Expenses:
      Product development
       costs                       3,027       2,480       6,190       4,939
      Selling, general and
       administrative             21,907      19,557      42,704      25,428
      Depreciation of property
       and equipment               1,405       1,433       2,887       2,194
      Amortization of
       intangible assets           2,415       2,432       5,240       2,828
                              ----------- ----------- ----------- -----------
                                  28,754      25,902      57,021      35,389

                              ----------- ----------- ----------- -----------
    Operating income              18,457       3,938      29,374       7,931

    Interest income                 (225)       (647)       (471)     (1,701)
    Interest expense               1,204         763       2,160         798
                              ----------- ----------- ----------- -----------
      Net interest expense
       (income)                      979         116       1,689        (903)

    Other (income) expense           283          29         (42)         35

                              ----------- ----------- ----------- -----------
    Income before income taxes    17,195       3,793      27,727       8,799

    Income tax expense:
      Current                      4,403         597       6,604       1,979
      Deferred                       815         (71)      1,464         196
                              ----------- ----------- ----------- -----------
                                   5,218         526       8,068       2,175

                              ----------- ----------- ----------- -----------
    Net income                $   11,977  $    3,267  $   19,659  $    6,624
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Earnings per share:
      Basic                   $     0.49  $     0.14  $     0.81  $     0.30
      Diluted                 $     0.47  $     0.14  $     0.79  $     0.29

    Weighted average number
     of shares used in
     computing earnings
     per share:
      Basic                   24,638,986  22,948,940  24,417,241  21,972,315
      Diluted                 25,270,639  23,558,446  25,001,382  22,510,153



                         SXC HEALTH SOLUTIONS CORP.
                    Consolidated Statements of Cash Flows
                               (in thousands)

                                     Three months           Six months
                                     ended June 30,        ended June 30,
                              ----------------------- -----------------------
                                  2009       2008         2009        2008
                              ----------------------- -----------------------
                                   (unaudited)              (unaudited)
    Cash flows from operating
     activities:
      Net income              $   11,977  $    3,267  $   19,659  $    6,624
      Adjustments to reconcile
       net income to net cash
       provided by operating
       activities:
        Stock-based
         compensation                817       1,325       1,430       2,104
        Depreciation of
         property and
         equipment                 1,968       1,881       3,944       3,046
        Amortization of
         intangible assets         2,415       2,432       5,240       2,828
        Deferred lease
         inducements and rent       (324)        (43)       (369)       (107)
        Deferred income taxes        815         (71)      1,464         196
        Tax benefit on option
         exercises                  (544)        (59)     (2,106)        (80)
        (Gain) loss on foreign
         exchange                     68         (35)        (26)        (21)
      Changes in operating
       assets and liabilities,
       net of effects from
       acquisition:
        Accounts receivable        3,489      11,618        (374)     12,828
        Rebates receivable         1,375       1,153       7,074       1,153
        Restricted cash             (507)     (4,325)     (1,637)     (4,325)
        Unbilled revenue               1         (77)         73         101
        Prepaid expenses            (743)      1,789      (1,164)      1,322
        Inventory                    (60)       (249)        597        (264)
        Income tax recoverable     2,150        (663)      2,238         354
        Accounts payable           1,282       1,858          84       1,264
        Accrued liabilities        2,601      (6,108)     (6,016)     (5,715)
        Deferred revenue          (2,775)       (943)        472        (254)
        Pharmacy benefit claim
         payments payable         (9,951)     (1,298)     (9,466)     (1,536)
        Pharmacy benefit
         management rebates
         payable                   6,989      (3,860)      9,530      (2,448)
        Customer deposits         (1,402)      1,546         772         102
        Other                        197        (131)        261        (131)
                              ----------- ----------- ----------- -----------
          Net cash provided
          by operating
          activities              19,838       9,007      31,680      17,041

    Cash flows from investing
     activities:
      Purchases of property
       and equipment              (2,457)       (810)     (5,746)     (3,414)
      Lease inducements
       received                        -         373           -         373
      Acquisitions, net of
       cash acquired              (1,996)   (101,670)     (2,176)   (101,670)
                              ----------- ----------- ----------- -----------
        Net cash used in
         investing activities     (4,453)   (102,107)     (7,922)   (104,711)

    Cash flows from financing
     activities:
      Issuance of long-term
       debt                            -      48,000           -      48,000
      Payment of financing
       costs                           -      (1,518)          -      (1,518)
      Proceeds from exercise
       of options                  2,003         137       4,349         333
      Tax benefit on option
       exercises                     544          59       2,106          80
      Repayment of long-term
       debt                       (1,200)       (120)     (1,320)       (120)
                              ----------- ----------- ----------- -----------
        Net cash provided by
         financing activities      1,347      46,558       5,135      46,775

    Effect of foreign exchange
     on cash balances                (68)         35          26          21

                              ----------- ----------- ----------- -----------
    Increase in cash and cash
     equivalents                  16,664     (46,507)     28,919     (40,874)

    Cash and cash equivalents,
     beginning of period          79,970      96,562      67,715      90,929

                              ----------- ----------- ----------- -----------
    Cash and cash equivalents,
     end of period            $   96,634  $   50,055  $   96,634  $   50,055
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------
    

    %SEDAR: 00001439E




For further information:

For further information: Jeff Park, Chief Financial Officer, SXC Health
Solutions, Inc., Tel: (630) 577-3100, investors@sxc.com; Dave Mason, Investor
Relations - Canada, The Equicom Group Inc., (416) 815-0700 ext. 237,
dmason@equicomgroup.com; Susan Noonan, Investor Relations - U.S., The SAN
Group, LLC, (212) 966-3650, susan@sanoonan.com

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