PRESS RELEASE FOR IMMEDIATE RELEASE - Back to Press ReleasesToronto Stock Exchange Symbol: SXCSystems Xcellence Announces Year-End ResultsComCoTec Acquisition to Nearly Double Sales in Fiscal 2002MILTON, Ontario (May 15, 2001) -- Systems Xcellence Inc. (TSE: SXC) announced today results for the year ended February 28, 2001. Sales for fiscal 2001 were $25.2 million compared to $26.6 million in the prior year. While sales through the first three quarters of the year remained consistent on a comparable basis with the prior year, fourth quarter sales were lower than the comparable quarter of the prior year. This was due primarily to the postponement of certain customer contracts and orders resulting from the economic slowdown in North America. Sales in the fourth quarter were $5.4 million compared to $7.1 million in the prior year. The Company's revenue growth in fiscal 2001 was also adversely impacted by the unexpected acquisition of two of the Company's largest customers early in the fiscal year and recent legislative changes (HIPAA) to the regulatory standards in the US healthcare market that caused many customers to delay purchase decisions. However, a number of potential new clients expressed strong interest in the Company's recently launched transaction-based Application Service Provider (ASP), which signed its first two clients during fiscal 2001. License revenues in fiscal 2001 fell slightly to $16.2 million from $16.5 million last year. Despite this decline, the Company successfully implemented and recognized over $9.3 million of revenue from one of its largest contracts to date in fiscal 2001. Systems integration and consulting revenue fell to $4.6 million from $6.7 million last year, due primarily to the drop in new license sales. Maintenance revenues, however, increased by 60% to $4.0 million from $2.5 million due to fiscal 2000 license customers entering into maintenance agreements. Approximately 90% of sales in fiscal 2001 came from customers based in the United States. The Company produced a net loss for the year of $3.5 million or $0.17 per common share compared to net income of $2.1 million or $0.10 per share in fiscal 2000. The loss for fiscal 2001 compared to the prior year was largely the result of the $1.4 million decline in recognized revenue, and expenses incurred in establishing the Company's ASP offering, which totaled $3.6 million on a before tax basis. The net loss in the fourth quarter was $4.2 million or $0.20 per share compared to net profit of $0.4 million or $0.02 per share in the fiscal 2000 fourth quarter. The loss for the fiscal 2001 fourth quarter compared to the fourth quarter of fiscal 2000 is primarily the result of a $1.6 million decline in revenue and ASP related expenses totaling $1.7 million. In addition, other nonrecurring expenses included a bad debt expense of $0.9 million, derived primarily from a license contract dispute currently in arbitration, and certain inventory and prepaid expense write-downs of $0.4 million. The Company also was more conservative in the fourth quarter by expensing rather than capitalizing significant research & development costs related to on-going ASP product development. On March 8, 2001 the Company acquired the business and substantially all of the assets and certain liabilities of ComCoTec, Inc., a developer of software solutions and an application service provider for the US pharmaceutical industry. In connection with the acquisition, the Company secured $13.0 million from a long-term sale and leaseback agreement and issued special warrants for net proceeds of approximately $12.4 million, prior to certain acquisition related expenses. The acquisition was deemed effective at the close of business on February 28, 2001. Giving effect to these transactions as though they had occurred as of February 28, 2001, the Company's pro-forma balance sheet would have had working capital of $6.4 million, including $9.7 million in cash and short-term investments and shareholders' equity of $26.5 million or $0.70 per common share. Assuming all special warrants are converted to common shares, the Company will have 38.9 million shares issued and outstanding. Goodwill arising from the acquisition is approximately $21.6 million, and will be amortized over the next two fiscal years. The acquisition of ComCoTec transformed Systems Xcellence into North America's largest pharmacy information processing solutions business. Combined pro-forma revenues for the calendar year ended December 31, 2000, assuming ComCoTec had been owned for the full year, would have been $44 million, with approximately 45% of revenues of a recurring nature derived from its ASP offering and from maintenance contracts. Management expects the amount and percentage of recurring revenues to grow as the combined organization expands its ASP processing operations. As announced previously, the Company is currently assessing its combined cost structure to ensure it can deliver the highest quality products and services to its growing customer base while capturing all of the available synergies resulting from the increase in its size and scope. As a result of its restructuring efforts, staff reductions of up to 30% of its combined March 1, 2001 workforce of 286 employees will have been achieved through layoffs and attrition. Other additional cost reduction measures may be taken including facility reductions, asset write-downs and/or workforce changes. The Company estimates the annualized savings resulting from this workforce reduction to be approximately $5.0 million. In connection with this workforce reduction, the Company will provide for a restructuring charge in the first quarter of the new fiscal year, and estimates the magnitude of the restructuring provision to be approximately $1.2 million. "The merger with ComCoTec nearly doubles the size of our Company and while we expect to produce modest revenue growth on a combined basis this year, we anticipate producing positive earnings on a quarterly basis, before goodwill amortization by our fiscal year-end," stated Gordon Glenn, President and CEO. "Our integration efforts are proceeding smoothly, and our combined processing and delivery capabilities are attracting significant attention in our markets. Looking further ahead, we anticipate strong growth from our combined revenue base and continuing improvements in margins and EBITDA as we streamline our costs and overhead expenses." Financial Highlights (financial statements follow)
* Excludes acquisition of ComCoTec, Inc. Management will host a conference call to review the financial results and provide an update on the ComCoTec acquisition on Wednesday May 16, 2001 at 11.00 am ET. To access the conference call, please dial 1-888-799-1277. A re-broadcast of the call can be accessed until midnight on Wednesday, May 23 by calling 1-800-558-5253 and entering reservation number 18726394#. Systems Xcellence is headquartered in Milton, Ontario with offices in Lombard, Illinois, Victoria, British Columbia and Scottsdale, Arizona and provides advanced online transaction processing solutions for the healthcare benefits management industry. The Company combines robust software products, business expertise and services to deliver superior solutions to the ever-changing managed care sector. The Company's shares are traded on the Toronto Stock Exchange under the symbol SXC. Systems Xcellence can be found on the Internet at http://www.sxc.com. This press release contains forward-looking statements based on
current expectations. These forward-looking statements entail various risks and uncertainties that could
cause actual results to differ materially from those reflected in these forward-looking statements. Risks
and uncertainties about the Company's business are more fully discussed in the Management Discussion and
Analysis published in the Company's annual report. For more information, please contact Irwin Studen, Chief Financial Officer, or Gordon Glenn, Chief Executive Officer Email: investors@sx.com |
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