Allscripts Acquires Extended Care Information Network

January 2, 2008
Company Becomes Leading Provider of Hospital Care Management Solutions, Strengthens Connectivity Across the Entire Care Continuum
CHICAGO, Jan 02, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Allscripts, the leading provider of clinical software, connectivity and information solutions that physicians use to improve healthcare, announced today it has acquired all of the outstanding stock of Extended Care Information Network (ECIN), a leading provider of hospital care management and discharge planning software, for approximately $90 million in cash. The acquisition combines the two industry leaders in care management and enables Allscripts to connect another key component of the healthcare delivery system -- the exchange of patient information between hospital case managers, physicians outside the hospital, and the growing number of post-acute care facilities nationwide.

ECIN's web-based "software as a service" solutions automate and streamline the entire care management process in hospitals, from admission through discharge, resulting in increased productivity, improved patient throughput and better outcomes. The privately-held company has a client base of more than 400 hospitals and nearly 5,000 post-acute care facilities -- nursing homes, assisted living and other facilities to whom hospitals refer patients in need of long-term care or short-term residential-based rehabilitation. Along with Allscripts existing Canopy(R) care management solution, the acquisition gives the company one of the largest installed bases of care management clients in the nation, with nearly 700 combined hospitals, as well as one of the largest networks of post-acute care facilities. Both care management solutions are deployed using an application service provider (ASP) model designed for rapid implementation with minimal use of hospital IT support staff.

"Our acquisition of ECIN represents the convergence of two market leaders and will help connect hundreds of hospitals and thousands of post-acute care facilities to our network of ambulatory physicians, bringing us one step closer to our vision of a truly interconnected healthcare system," said Glen Tullman, Chief Executive Officer of Allscripts. "This combination provides significant leverage for each of our product offerings and broadens Allscripts relationships in the hospital market at a time when hospitals are becoming more important influencers in the Electronic Health Record sales process."

Allscripts also announced the creation of a new Hospital Solutions Group within the company to be directed by Jeff Surges, Chief Executive Officer of ECIN. The new Allscripts business unit will provide a suite of products and services under one umbrella, combining ECIN with the company's emergency department information systems (EDIS) and its existing care management solution, Canopy(R). Allscripts will continue to support both of its care management products for the foreseeable future.

With the addition of ECIN, Allscripts is positioned to benefit from recent trends that are driving the automation of healthcare information and the manner in which it is exchanged between hospitals, physicians outside the hospital, and post-acute care facilities. Recent changes to the federal Stark regulations, for example, now allow hospitals to assist affiliated physicians in adopting Electronic Health Record and Electronic Prescribing to enhance patient safety and quality of care. Allscripts has been a major beneficiary of that change, with hospital systems across the country selecting the company's solutions for their employed physicians as well as affiliated and non-affiliated physicians in their local communities.

At the same time, the federal government and other stakeholders recently proposed requiring the automation of Medicare patient information exchanged between hospitals and the providers to whom they refer discharged patients. However, according to a recent survey by the American Care Management Association, less than 20 percent of hospitals have automated their discharge planning. A 2006 study by Investor Group Services, an Ernst & Young LLP company, estimated the market for care management and discharge planning software in hospitals that will likely consider automating these functions at between $300 million and $400 million per year in recurring fees.

"Allscripts and ECIN provide a broad suite of solutions that will appeal to hospital executives, who are increasingly focused on creating a seamless connection to the ambulatory physicians who provide referrals, and to the post-acute care facilities that accept many of their patients," said Jeff Surges, who brings many years of experience managing high-growth technology within the healthcare industry, including previously serving as President and General Manager of McKesson's Resource Management Group. "ECIN's clients will gain long-term strength and access to more diverse products as well as accelerated connectivity between care management and other hospital departments, payors and post-acute care providers."

ECIN Transaction

Headquartered in Chicago, with over 80 employees, ECIN generated estimated revenues of approximately $19 million in 2007, approximately $7.1 million to $7.4 million of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), not accounting for deal-related expenses, and approximately $4.6 million to $4.9 million of Earnings Before Income Taxes. Allscripts financed the acquisition using cash on hand and through $50 million of borrowings under a new $60 million credit facility.


The Company maintains its outlook for 2008 with annualized growth in total revenue of approximately 20% to 25%, which is reflective of approximately 25% to 30% in annualized growth from software and related services. This target represents annualized growth in GAAP earnings per diluted share of 40% to 50%. Annualized growth in non-GAAP adjusted earnings per diluted share is expected to be 45% to 50%, which contemplates approximately $9 million, or $0.13 per diluted share, of deal-related amortization and approximately $6 million, or $0.09 per diluted share, of stock-based compensation, both net of tax. See "Non-GAAP Financial Measures" below for a discussion of non-GAAP adjusted earnings and earnings per share.

Explanation of Non-GAAP Financial Measures

Allscripts reports its financial results in accordance with generally accepted accounting principles, or GAAP. To supplement this information, Allscripts presents information regarding non-GAAP adjusted earnings (and related per share amounts), which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. Non-GAAP adjusted earnings consists of GAAP net income, excluding acquisition-related amortization and stock-based compensation expense under SFAS No. 123R, in each case net of any related tax benefit.

  • Acquisition-Related Amortization. Acquisition-related amortization expense is a non-cash expense arising from the acquisition of intangible assets in connection with acquisitions or investments. Allscripts excludes acquisition-related amortization expense from non-GAAP adjusted earnings because it believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of Allscripts 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 contributed to revenue in the periods presented and will contribute to future revenue generation and should also note that such expense will recur in future periods.

  • Stock-Based Compensation Expense. Stock-based compensation expense is a non-cash expense arising from the grant of stock awards to employees. Allscripts excludes stock-based compensation expense from non-GAAP adjusted earnings because it believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of Allscripts business operations and (ii) such expenses can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants in connection with acquisitions. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods and should also note that such expense will recur in future periods.

Management also believes that non-GAAP adjusted earnings (and related per share amounts) provides useful supplemental information to management and investors regarding the underlying performance of the Company's business operations and facilitates comparisons to our historical operating results. Management also uses this information internally for forecasting and budgeting as it believes that the measure is indicative of the Company's core operating results. Note, however, that non-GAAP adjusted earnings is a performance measure only, and it does not provide any measure of the Company's cash flow or liquidity. Non-GAAP financial measures are not in accordance with, or an alternative for, measures of financial performance prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Allscripts results of operations as determined in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with GAAP financial measures contained within the attached condensed consolidated financial statements.

About Allscripts

Allscripts (Nasdaq: MDRX) is the leading provider of clinical software, connectivity and information solutions that physicians use to improve healthcare. The company's unique solutions inform, connect and transform healthcare, delivering improved care at lower cost. More than 40,000 physicians and thousands of other healthcare professionals in clinics and hospitals nationwide utilize Allscripts to automate and connect everyday tasks such as writing prescriptions, documenting patient care, managing billing and scheduling, and safely discharging patients. To learn more, visit Allscripts at

This news release may contain forward-looking statements within the meaning of the federal securities laws. Statements regarding future events, developments, the Company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future are forward-looking statements within the meaning of these laws. These forward-looking statements are subject to a number of risks and uncertainties, some of which are outlined below. As a result, actual results may vary materially from those anticipated by the forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: the volume and timing of systems sales and installations; length of sales cycles and the installation process; the possibility that products will not achieve or sustain market acceptance; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; competitive pressures including product offerings, pricing and promotional activities; our ability to establish and maintain strategic relationships; undetected errors or similar problems in our software products; compliance with existing laws, regulations and industry initiatives and future changes in laws or regulations in the healthcare industry; possible regulation of the Company's software by the U.S. Food and Drug Administration; the possibility of product-related liabilities; our ability to attract and retain qualified personnel; our ability to identify and complete acquisitions, manage our growth and integrate acquisitions (including the ECIN acquisition); maintaining our intellectual property rights and litigation involving intellectual property rights; risks related to third-party suppliers; our ability to obtain, use or successfully integrate third-party licensed technology; breach of our security by third parties; and the risk factors detailed from time to time in our reports filed with the Securities and Exchange Commission, including our 2006 Annual Report on Form 10-K available through the Web site maintained by the Securities and Exchange Commission at The Company undertakes no obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Allscripts

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