SXC Health Solutions announces second quarter financial results



    - Adjusted EBITDA increases to $9.6 million from $4.9 million -

    LISLE, IL, Aug. 7 /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, 2008. Financial references are in
U.S. dollars unless otherwise indicated.
    SXC completed the acquisition of National Medical Health Card Systems,
Inc. ("NMHC") on April 30, 2008. Therefore, financial results reported for
Q2 2008 and for the six months ended June 30, 2008 ("year-to-date" or "YTD")
include two months of contribution from the acquired NMHC business.

    
    Q2 2008 Operational Highlights

    -   Revenue was $227.8 million, compared to $23.1 million in Q2 2007
    -   Gross profit was $29.8 million compared to $13.4 million in Q2 2007
    -   Adjusted EBITDA(1) was $9.6 million compared to $4.9 million in
        Q2 2007
    -   Net income was $3.3 million, or $0.14 per share, compared to
        $3.0 million, or $0.14 per share, in Q2 2007
    -   Non-GAAP adjusted earnings per share(1) (diluted), which excludes the
        NMHC transaction-related amortization, was $0.21 for the quarter
    -   Adjusted prescription claim volume(1) for the PBM segment was
        7.2 million
    -   Transaction processing volume for the HCIT segment, which no longer
        includes contribution from informedRx, was 100.5 million
    -   Awarded a three-year $35.0 million contract with the State of
        Tennessee
    -   Entered into a three-year $7.5 million agreement with Prescription
        Solutions Inc., a UnitedHealth Group company
    -   Completed a 36-month renewal agreement with The University of
        Michigan
    -   Announced a five and a half year informedRx PBM services contract
        with The University of Toledo
    -   Won a multi-million dollar license fee agreement, and renewal of a
        three-year maintenance and service agreement with CVS
    

    "The integration of NMHC is proceeding according to plan and we are well
on track to reach our deal-related financial and operational milestones," said
Mark Thierer, President and CEO of SXC. "Against this backdrop, we had a
strong quarter of sales activity generated from customers in a variety of
target markets. This activity validates our business strategy by demonstrating
that we are a valued provider of technology and pharmacy benefit services to a
broad cross-section of health care organizations. With two solid quarters
under our belt and a promising sales pipeline in multiple markets, we believe
that we are now on pace to reach the higher end of the range for our 2008
guidance."

    Q2 and Year-to-date Financial Review

    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 Benefit Manager
("PBM") which includes informedRx, mail-order operations and specialty
pharmacy, and Health Care 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. NMHC's PBM
revenue was originally expected to have been recorded on a combination of a
gross and net basis. As a result, using this accounting treatment has
increased our expected revenue guidance range, but has not impacted the gross
profit guidance range. The HCIT business continues to record 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 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.

    Revenue and Gross Profit

    Revenue for Q2 2008 was $227.8 million compared to $23.1 million in
Q2 2007. For the YTD period, revenue was $252.1 million compared to
$47.4 million in the same period last year.
    Gross profit for Q2 2008 was $29.8 million, or 13.1% of revenue, compared
to $13.4 million, or 58.2% of revenue, in Q2 2007. For the YTD period, gross
profit was $43.3 million, or 17.2% of revenue, compared to $28.1 million, or
59.2% of revenue, in the same period last year.

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

                                                                Consolidated
    (in millions)            PBM Segment      HCIT Segment            Totals
    three months ended  ----------------- ----------------- -----------------
     June 30,              2008     2007     2008     2007     2008     2007
      Revenue           $204.90  $     -  $ 22.90  $ 23.10  $227.80  $ 23.10
      Gross profit      $ 16.80  $     -  $ 13.00  $ 13.40  $ 29.80  $ 13.40
      Gross profit %      8.20%        -   56.90%   58.20%   13.10%   58.20%


                                                                Consolidated
    (in millions)            PBM Segment      HCIT Segment            Totals
    six months ended    ----------------- ----------------- -----------------
     June 30,              2008     2007     2008     2007     2008     2007
      Revenue           $204.90  $     -  $ 47.20  $ 47.40  $252.10  $ 47.40
      Gross profit      $ 16.80  $     -  $ 26.50  $ 28.10  $ 43.30  $ 28.10
      Gross profit %      8.20%        -   56.10%   59.20%   17.20%   59.20%

    (*) In reviewing the above tables, it is important to note that the
        revenue for SXC's legacy informedRx business is captured in the HCIT
        segment for 2007 and in the PBM segment for 2008. As a result, the
        HCIT segment shows a slight decline in revenue for the three- and
        six-month periods ended June 30, 2008, due to the inclusion of some
        of the previously classified HCIT business now recorded in the new
        PBM segment.
    

    PBM revenue was $204.9 million for the Q2 2008 and YTD periods. This
figure reflects the addition of the NMHC business, as well as the existing
informedRX business of SXC and includes a new SXC PBM contract that went live
on April 1, 2008. The PBM segment revenue totals were higher than expected for
the period due to the NMHC PBM revenue being recorded exclusively on a gross
basis. This has had no impact on the dollar value of gross margin, but does
have the effect of decreasing gross margin percentage.
    Q2 2008 revenue for the HCIT segment consisted of $16.0 million of
recurring revenue and $6.9 million of non-recurring revenue, compared to
$17.2 million and $5.9 million, respectively, in the same period last year.
Recurring revenue consisted of transaction processing revenue of
$11.9 million, down 9% from $13.1 million in Q2 2007, and maintenance revenue
of $4.1 million, consistent with $4.1 million in Q2 2007. The decline in
transaction processing revenue is due to the fact that informedRx revenue is
reported in the PBM segment for 2008 and was reported in the HCIT segment in
2007. Overall, recurring revenue accounted for 70% of HCIT revenue in Q2 2008,
compared to 75% in Q2 2007.
    Q2 2008 non-recurring revenue consisted of system sales revenue of
$3.8 million, up 48% from $2.6 million last year, and professional service
revenue of $3.1 million, down from $3.3 million in Q2 2007. The increase in
system sales revenue is primarily due to the multi-million dollar license
agreement completed with CVS during the quarter.
    Revenue for the YTD period in the HCIT segment was comprised of
$34.9 million of recurring revenue and $12.3 million of non-recurring revenue,
compared to $35.1 million and $12.3 million, respectively, in the same period
last year. Recurring revenue consisted of transaction processing revenue of
$26.5 million, down 1% from $26.9 million last year, and maintenance revenue
of $8.3 million compared to $8.2 million last year. Overall, recurring revenue
accounted for 74% of HCIT revenue for the YTD period, compared to 74% in the
same period last year.
    Non-recurring revenue for the YTD period consisted of system sales
revenue of $5.5 million, down from $5.7 million last year, and professional
service revenue of $6.9 million, up from $6.6 million last year.

    Product Development Costs

    Q2 2008 product development costs were $2.5 million compared to
$2.6 million for Q2 2007. Product development costs for the YTD period were
$4.9 million, compared to $5.6 million in the prior year period.

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

    Q2 2008 SG&A costs were $19.6 million compared to $7.0 million for
Q2 2007. SG&A for the YTD period was $25.4 million compared to $13.2 million
in the same period last year. $10.7 million of the increase for the Q2 and YTD
periods is attributable to the operating expenses related to the April 2008
purchase of NMHC. Also included in the Q2 and YTD SG&A totals is approximately
$1.8 million in severance expense.

    Adjusted EBITDA(1)

    Q2 2008 adjusted EBITDA was $9.6 million compared to $4.9 million for
Q2 2007. For the YTD period, adjusted EBITDA was $15.9 million compared to
$11.2 million in the same period last year. Adjusted EBITDA increased
year-over-year due in part to the addition of the NMHC business, the increase
in overall revenue, in particular the multi-million dollar high margin systems
sales contract with CVS, synergies generated from the acquisition, and offset
in part by the operating expenses related to the purchase of NMHC and the
$1.8 million of severance expense.

    Income Taxes

    Q2 2008 income tax expense was $0.53 million representing an effective
tax rate of 14% compared to a $1.2 million income tax expense representing an
effective tax rate of 28% in Q2 2007. For the YTD period, income tax expense
was $2.2 million representing an effective tax rate of 25% compared to a
$2.9 million income tax expense representing an effective tax rate of 30% in
the same period last year. The change in the effective tax rate is due
primarily to the acquisition and the ability to utilize tax losses. For fiscal
2008, SXC expects to have an effective tax rate of approximately 25%.

    Net Income

    Q2 2008 net income was $3.3 million, or $0.14 per share (diluted),
compared to $3.0 million, or $0.14 per share (diluted) in Q2 2007. Net income
for the YTD period was $6.6 million, or $0.29 per share (diluted), compared to
$6.7 million, or $0.31 per share (diluted) in the same period last year.
    Q2 2008 non-GAAP adjusted earnings per share(1) was $0.21 per share
(diluted). Non-GAAP adjusted earnings per share(1) for the YTD period was
$0.37 per share (diluted).
    SXC continues to generate strong cash from operations. In Q2 2008, the
Company generated cash from operations of approximately $9.0 million, compared
to cash used in operations of $4.7 million in Q2 2007. For the YTD period, SXC
generated cash from operations of approximately $17.0 million, compared to
$5.2 million in the same period last year. The Company's quarterly cash flows
can be impacted by the timing of pharmacy deposit and rebate payments it
receives for certain customers. Net of pharmacy deposits and rebates payments,
Q2 2008 and YTD cash from operations were approximately $14.2 million and
$21.0 million, respectively. This compares to cash from operations of
$3.0 million and $8.7 million in the corresponding periods of the prior year.
    At June 30, 2008 and December 31, 2007, the Company had cash and cash
equivalents totalling $50.1 million and $90.9 million, respectively. The
decrease is primarily related to cash paid in the acquisition of NMHC
($101.7 million), partially offset by borrowings under the term loan
($46.5 million).

    2008 Financial Guidance

    With today's announcement, SXC is increasing its consolidated revenue
guidance from a range of $545-600 million to $825-$875 million. Based on its
original forecast, the Company is also now guiding to the higher end of the
following ranges:

    
    -   Gross profit of $106-$114 million
    -   Adjusted EBITDA of $35-$39 million
    -   GAAP EPS (diluted) of $0.41-$0.50 (including the amortization
        directly related to the NMHC acquisition)
    -   Non-GAAP adjusted earnings per share(1) (diluted) of $0.61-$0.70
        (excluding the NMHC transaction-related amortization)
    

    The Company reconfirms its objective of generating $6.0-$8.0 million of
synergies in the first 12 months following closing of the NMHC transaction,
and $12-$14 million of synergies in the subsequent 12 months.

    Notice of Conference Call

    SXC will host a conference call on August 7, 2008 at 8:30AM (ET) to
discuss its financial results. Mark Thierer, President and CEO, and Jeff Park,
Senior Vice President Finance and CFO will co-chair the call. All interested
parties can join the call by dialing 416-644-3426 or 1-800-588-4490. Please
dial in 15 minutes prior to the call to secure a line. The conference call
will be archived for replay until Thursday, August 14, 2008 at midnight. To
access the archived conference call, please dial 416-640-1917 or
1-800-718-6306 and enter the reservation code 21278499 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. Three
such measures are adjusted earnings per share, adjusted EBITDA, and adjusted
prescription volume 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 acquisition-related amortization
expense, 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 2008 guidance of adjusted earnings
per share were computed by taking the Company's GAAP earnings per share
guidance of $0.61-$0.70 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, debt service, 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, debt service and certain other one-time charges (including
lease termination charges and losses on disposals of capital assets) are
excluded as these are not recurring items.
    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 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.
    Adjusted earnings per share, adjusted EBITDA and adjusted prescription
volume 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 is shown below (in thousands):

    
                                For the three months      For the six months
                                       ended June 30,          ended June 30,
                                    2008        2007        2008        2007
                              ----------- ----------- ----------- -----------
                                          (unaudited)  (in thou-
                                                           sands)

    Adjusted EBITDA           $    9,576  $    4,900  $   15,909  $   11,184

    Amortization of Deal-
     Related Intangibles          (2,036)                 (2,036)

    Depreciation &
     Amortization                 (2,277)     (1,357)     (3,838)     (2,692)

    Stock-Based Compensation      (1,325)       (747)     (2,104)     (1,150)

    Net Loss on Disposal of
     Assets                            -           -           -        (133)

    Other Income (Expense)           (29)        196         (35)        198

    Interest Income
     (Expense), Net                 (116)      1,131         903       2,157

    Income Tax Expense              (526)     (1,168)     (2,175)     (2,875)
                              ----------- ----------- ----------- -----------

    Net Income                $    3,267  $    2,955  $    6,624  $    6,689
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------



                                                        For the three months
    Non-GAAP Adjusted Earning Per Share                  ended June 30, 2008
                                                        ---------------------

    Net Income                                                    $    3,267

    Deal-Related Amortization (Net of Taxes)                           1,753
                                                                  -----------

    Adjusted Net-Income                                                5,020
                                                                  -----------
                                                                  -----------

    Adjusted EPS (diluted)                                              0.21
    

    About SXC Health Solutions Corp.

    SXC Health Solutions Corp. is a leading provider of pharmacy benefits
management (PBM) services and Health Care Information Technology (HCIT)
solutions to the healthcare benefits management industry. The Company's
product offerings and solutions combine a wide range of software applications,
application service provider (ASP) processing services and professional
services, designed for many of the largest organizations in the pharmaceutical
supply chain, such as Federal, provincial, and, state and local governments,
pharmacy benefit managers, managed care organizations, retail pharmacy chains
and other healthcare intermediaries. SXC is headquartered in Lisle, Illinois
with 13 locations in the US and Canada. For more information please visit
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 in our
2007 Annual Report on Form 10-K, which is 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 of U.S. dollars except share data)

                                                    (unaudited)
                                                       June 30,  December 31,
                                                          2008          2007
                                                   ------------  ------------
    ASSETS

    Current assets
      Cash and cash equivalents                    $    50,055   $    90,929
      Restricted cash                                   17,455             -
      Accounts receivable, net of allowance for
       doubtful accounts of $3,537 (December 31,
       2007 - $605)                                     75,541        17,990
      Rebates receivable                                26,050             -
      Unbilled revenue                                   1,094         1,195
      Prepaid expenses and other                         3,167         2,361
      Inventory                                          6,870           242
      Income tax recoverable                             1,064         1,073
      Deferred income tax asset, current                 4,091         3,246
                                                   ------------  ------------
        Total current assets                           185,387       117,036

    Property and equipment, net of accumulated
     depreciation of $16,049 (December 31, 2007 -
     $13,004)                                           19,852        13,629
    Goodwill                                           158,848        15,996
    Other intangible assets, net of accumulated
     amortization of $7,562 (December 31, 2007 -
     $4,734)                                            51,253         9,661
    Deferred financing charges                           1,701             -
    Deferred income tax asset                            3,939         3,157
    Other assets                                         1,311             -
                                                   ------------  ------------
    Total assets                                   $   422,291   $   159,479
                                                   ------------  ------------
                                                   ------------  ------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Current portion of long-term debt            $     1,560   $         -
      Accounts payable                                   7,771         1,344
      Customer deposits                                 14,973         2,506
      Salaries and wages payable                         9,251         2,909
      Accrued liabilities                               29,645         4,807
      Pharmacy benefit management rebates payable       32,573         2,766
      Pharmacy benefit claim payments payable           58,227         2,059
      Deferred revenue                                   4,030         4,244
                                                   ------------  ------------
        Total current liabilities                      158,030        20,635

    Long-term debt, less current installments           46,320             -
    Accrued liabilities                                  1,985           764
    Deferred income tax liability                       28,135         1,091
    Deferred revenue                                       183           223
    Deferred lease inducements                           3,416         3,222
    Deferred rent                                        1,159         1,087
    Other                                                  868             -
                                                   ------------  ------------
      Total liabilities                                240,096        27,022
                                                   ------------  ------------

    Shareholders' equity
      Common stock: no par value, unlimited shares
       authorized; 23,823,271 issued and
       outstanding at June 30, 2008 (December 31,
       2007 - 20,985,934)                              144,638       103,520
      Additional paid-in capital                        10,295         8,299
      Retained earnings                                 27,262        20,638
                                                   ------------  ------------
        Total shareholders' equity                     182,195       132,457

                                                   ------------  ------------
    Total liabilities and shareholders' equity     $   422,291   $   159,479
                                                   ------------  ------------




                         SXC HEALTH SOLUTIONS CORP.
                    Consolidated Statements of Operations
               (in thousands of U.S. dollars except share data)

                                  Three months ended        Six months ended
                                             June 30,                June 30,
                                    2008        2007        2008        2007
                              ----------- ----------- ----------- -----------
                                    (unaudited)             (unaudited)
    Revenue:
      PBM revenue             $  204,860  $        -  $  204,860  $        -
      HCIT revenue:
        Transaction
         processing               11,888      13,094      26,536      26,926
        Maintenance                4,130       4,113       8,340       8,188
        Professional services      3,066       3,302       6,857       6,607
        System sales               3,811       2,579       5,479       5,688
                              ----------- ----------- ----------- -----------
    Total revenue                227,755      23,088     252,072      47,409

    Cost of revenue              197,915       9,648     208,752      19,322
                              ----------- ----------- ----------- -----------
    Gross profit                  29,840      13,440      43,320      28,087

    Expenses:
      Product development
       costs                       2,480       2,642       4,939       5,580
      Selling, general and
       administration             19,557       7,016      25,428      13,205
      Depreciation of
       property and equipment      1,433         590       2,194       1,168
      Amortization of
       intangible assets           2,432         396       2,828         792
      Net loss on disposal of
       capital assets                  -           -           -         133
                              ----------- ----------- ----------- -----------
                                  25,902      10,644      35,389      20,878

                              ----------- ----------- ----------- -----------

    Operating income               3,938       2,796       7,931       7,209

    Interest income                 (647)     (1,159)     (1,701)     (2,216)
    Interest expense                 763          28         798          59
                              ----------- ----------- ----------- -----------
      Net interest income
       (expense)                     116      (1,131)       (903)     (2,157)


    Other expense(income)             29        (196)         35        (198)
                              ----------- ----------- ----------- -----------
    Income before income
     taxes                         3,793       4,123       8,799       9,564

    Income tax expense
     (recovery):
      Current                        597       1,279       1,979       3,125
      Deferred                       (71)       (111)        196        (250)
                              ----------- ----------- ----------- -----------
                                     526       1,168       2,175       2,875

                              ----------- ----------- ----------- -----------
    Net income and
     comprehensive income     $    3,267  $    2,955  $    6,624  $    6,689
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Earnings per share:
      Basic                   $     0.14  $     0.14  $     0.30  $     0.32
      Diluted                 $     0.14  $     0.14  $     0.29  $     0.31

    Weighted average number
     of shares used in
     computing earnings per
     share:

      Basic                   22,948,940  20,687,468  21,972,315  20,620,263
      Diluted                 23,558,446  21,751,463  22,510,153  21,646,475




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

                                  Three months ended        Six months ended
                                             June 30,                June 30,
                                    2008        2007        2008        2007
                              ----------- ----------- ----------- -----------
                                    (unaudited)             (unaudited)
    Cash flows from operating
     activities:
      Net income              $    3,267  $    2,955  $    6,624  $    6,689
      Items not involving
       cash, net of effects
       from acquisition:
        Stock-based
         compensation              1,325         747       2,104       1,150
        Depreciation of
         property and
         equipment                 1,881         961       3,046       1,900
        Amortization of
         intangible assets         2,432         396       2,828         792
        Deferred lease
         inducements and rent        (43)        197        (107)        385
        Loss on disposal of
         property and
         equipment                                             -         133
        Deferred income taxes        (71)       (111)        196         270
        Gain on foreign
         exchange                    (35)       (122)        (21)       (135)
      Changes in operating
       assets and liabilities,
       net of effects from
       acquisition:
        Accounts receivable       11,618       1,235      12,828        (176)
        Rebates receivable         1,153           -       1,153           -
        Restricted cash           (4,325)          -      (4,325)          -
        Unbilled revenue             (77)        610         101          13
        Prepaid expenses           1,789        (279)      1,322         244
        Inventory                   (249)         17        (264)         (6)
        Income tax
         recoverable                (722)       (738)        274        (738)
        Income taxes payable           -      (2,271)          -        (594)
        Accounts payable           1,858      (1,046)      1,264        (692)
        Accrued liabilities       (6,108)      1,352      (5,715)          -
        Pharmacy benefit
         claim payments
         payable                  (1,298)     (5,717)     (1,536)     (2,961)
        Pharmacy benefit
         management rebates
         payable                  (3,860)     (1,943)     (2,448)       (594)
        Deferred revenue            (943)     (1,429)       (254)       (841)
        Customer deposits          1,546         532         102         314
        Other                       (131)          -        (131)          -
                              ----------- ----------- ----------- -----------
          Net cash provided
           by operating
           activities              9,007      (4,654)     17,041       5,153

    Cash flows from investing
     activities:
      Purchases of property
       and equipment                (810)     (1,290)     (3,414)     (6,181)
      Lease inducements
       received                      373         143         373         391
      Acquisition               (101,670)          -    (101,670)          -
      Proceeds from disposal
       of property and
       equipment                       -           -           -           9
                              ----------- ----------- ----------- -----------
        Net cash used in
         investing activities   (102,107)     (1,147)   (104,711)     (5,781)

    Cash flows from financing
     activities:
      Issuance of long-term
       debt                       48,000           -      48,000           -
      Payment of financing
       costs                      (1,518)          -      (1,518)          -
      Repayment of long-term
       debt                         (120)          -        (120)          -
      Proceeds from exercise
       of options                    137       1,191         333       2,029
      Tax benefit on option
       exercises                      59       2,216          80       2,216
                              ----------- ----------- ----------- -----------
        Net cash provided by
         financing activities     46,558       3,407      46,775       4,245

    Effect of foreign
     exchange on cash
     balances                         35         122          21         135

                              ----------- ----------- ----------- -----------
    Increase(decrease) in
     cash and cash
     equivalents                 (46,507)     (2,272)    (40,874)      3,752

    Cash and cash
     equivalents, beginning
     of period                    96,562      76,967      90,929      70,943

                              ----------- ----------- ----------- -----------
    Cash and cash
     equivalents, end of
     period                   $   50,055  $   74,695  $   50,055  $   74,695
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------
    

    %SEDAR: 00001439E




For further information:

For further information: Jeff Park, Chief Financial Officer, SXC Health
Solutions Inc., Tel: (630) 577-3206, 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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