Systems Xcellence Announces FOURTH quarter and fiscal 2002 year-end financial results

MILTON, ON, May 2, 2002 -- Systems Xcellence Inc. (TSE: SXC), a leading provider of healthcare information technology solutions throughout the North American pharmaceutical supply chain, today announced financial results for its fiscal fourth quarter and fiscal 2002 year-end. 

Highlights of fiscal 2002 included: 

•  A 55% increase in revenues over fiscal 2001

•  Recurring revenue of 54%, compared to 16% in the prior year

•  Three consecutive quarters of increasingly positive EBITDA

•  Two consecutive quarters of net income profitability before goodwill

•  Repayments of long-term indebtedness totaling $5.5 million

•  Fiscal year ending revenue backlog of $61.8 million

•  Increased productivity boosting revenue per employee by 50%

•  Growth in our pharmacy benefits transaction processing business to over 100 million annual transactions

•  The release and implementation of our third-generation RxEXPRESS® for Windows pharmacy workflow and dispensing system. 

"Our greatest achievement of fiscal 2002 was the acquisition and successful integration of ComCoTec, which has effectively reinvented this Company. In keeping with our objectives, SXC today has a much broader market reach and a vastly stronger ability to generate recurring revenues," said Gordon S. Glenn, President & CEO of SXC. "Going forward, our outlook is promising as we are targeting a high-growth market opportunity with a broad suite of ASP processing services and product solutions while building the financial foundation necessary to support our growth efforts." 

Financial Results - Link to Financial Results (Excel Format)

For the fourth quarter ended February 28, 2002, revenues reached $11.4 million, more than doubling the revenues of $5.4 million achieved for the corresponding period in fiscal 2001. On a sequential quarterly basis for fiscal 2002, revenue grew each quarter rising from $8.0 million in the first quarter to $11.4 million in the fourth quarter. For the year ended February 28, 2002, SXC reported revenues of $39.1 million, up 55.0% from a year ago. Strong revenue performance for the year was largely driven by the acquisition of ComCoTec. 

The Company recorded earnings before interest, taxes, depreciation and amortization (EBITDA) of $2.3 million during the fourth quarter, an increase of nearly $5.8 million over the same period of fiscal 2001. This also represents a 27% increase in EBITDA compared to the third quarter of fiscal 2002, marking the third consecutive quarter of positive EBITDA as SXC continues its drive toward improved financial stability. For the fiscal year ended February 28, 2002, the Company reported positive EBITDA of $1.2 million, which included a $1.5 million restructuring charge.  This compared to negative EBITDA of $1.7 million a year ago.

Net loss for the fourth quarter of fiscal 2002 totalled $1.9 million or ($0.05) per share, compared to a net loss of $4.2 million or ($0.20) per share for the corresponding period in fiscal 2001. For the year ended February 28, 2002, the Company reported a net loss of $16.1 million or ($0.49) per share, which included $11.1 million in goodwill amortization. This compared to a net loss of $3.5 million or ($0.17) per share for fiscal 2001. Higher net losses are directly attributable to goodwill amortization.

During the year, the Company aggressively amortized the goodwill on its acquisition of ComCoTec, eliminating more than 50% of the goodwill associated with the acquisition. As a result, under the new CICA guidelines related to goodwill, SXC does not expect to amortize any goodwill resulting from the acquisition during fiscal 2003. This is expected to have a positive impact on the Company's future bottom line. 

In the fourth quarter of fiscal 2002, the Company generated $2.1 million in cash from operations, compared to $409,225 in the same period of fiscal 2001. For the year ended February 28, 2002, the Company generated $1.9 million in cash from operations versus negative $1.7 million for fiscal 2001.  

At the end of fiscal 2002, the Company's contract-order backlog increased to $61.8 million. Management anticipates that this contracted order backlog will be realized over a three-year period.

Subsequent Events

Subsequent to year-end, SXC repaid the $1.9 million balance of its senior indebtedness through a combination of working capital and the proceeds of the Export Development Corporation (EDC) insurance claim it received in connection with its long-term receivable. This indebtedness consisted of equipment financing and the balance of a term loan issued in connection with its long-term receivable. 

SXC also reached an amended agreement with its primary lender, GATX Capital Corporation (Canada) in connection with the Company's outstanding indebtedness. Terms of the agreement include new financial covenants consistent with the Company's post-acquisition business plan, and increased flexibility in enabling the company to secure additional revolving credit-based financing. The agreement is subject to fulfillment of one condition involving confirmation of the payment and release of security from the Company's bank. Additional details regarding the amended agreements can be found in a separate press release also issued May 2, 2002. 

With its continuing positive cash flow, its $5.5 million reduction in long-term indebtedness in fiscal 2002, its new arrangement with GATX and the repayment of all of its senior bank debt subsequent to fiscal year-end, SXC is poised to successfully execute on its business plan, and focus on improving its liquidity position through new banking relationships. Completion of these initiatives is expected to further position the company for future growth.  

Also subsequent to year-end, SXC announced a three-year, US$1.2 million agreement to provide ASP services to a number of Arizona-based pharmacies owned by a top healthcare organization.

 Outlook

The Company has established the following financial goals for fiscal 2003 - First, it is projecting revenue in a range of $44-47 million; second, EBITDA in a range of $7.2-8.2 million; third, a return to net income profitability with an EPS target range of $0.03-$0.06; and fourth, a continued improvement in the Company's balance sheet. 

SXC is a key player in the U.S. pharmaceutical benefit IT market, which is valued at approximately US$2.1 billion annually. Factors driving growth in this industry include: a rising percentage of Americans who take prescription drugs on a daily basis; the rise in direct-to-consumer advertising; the Bush Administration's pledge to provide drug benefits to senior citizens; and the fact that U.S. healthcare providers and payers must generally be compliant with the regulatory requirements of the Health Insurance Portability and Accountability Act (HIPAA) by October 2003. These forces combined are fuelling demand from healthcare payers in particular, as they look to control the escalating costs of delivering healthcare benefits.

 Notice of Conference Call

SXC will be holding a conference call on Thursday May 2, 2002 at 10AM (ET) to discuss its fourth quarter and fiscal 2002 year-end financial results. Mr. Gordon S. Glenn, President and CEO, will host the call.  

A live audio webcast of the call will be available at www.financialdisclosure.ca and www.sxc.com. Webcast attendees are welcome to listen to the conference in real-time or on-demand at your convenience. A taped replay of the call will be archived at those sites for 90 days. A replay of the call can also be heard by dialling 1-800-408-3053 or 416-695-5800 and entering the reference code 1150754. The taped replay is available until May 9^th.

 About Systems Xcellence Inc:

Systems Xcellence (SXC) is headquartered in Milton, Ontario with offices and processing centres in Lombard, Illinois, Scottsdale, Arizona and Victoria, British Columbia.  SXC is a leading provider of healthcare information technology solutions and services 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 pharmacy benefit managers, managed care organizations, retail pharmacy chains and other healthcare intermediaries.   

The company's products offer its customers comprehensive pharmacy benefits management, claims switching and processing, drug dispensing, data warehousing and analysis, and rebate contract management systems. SXC delivers these solutions to its customers as software products bundled with systems implementation and consulting services, or on an ASP basis from its data centres in Scottsdale, Arizona and Lombard, Illinois. The Company's shares are traded on the Toronto Stock Exchange under the symbol SXC.  SXC can be found on the Internet at www.sxc.com. 

Link to Financial Results (Excel Format)

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.