MOUNT LAUREL, N.J.,
Aug. 11 /PRNewswire-FirstCall/ --
MedQuist Inc., (Nasdaq: MEDQ), a leading provider of medical
transcription services and in the technology-enabled clinical
documentation workflow, announced its financial results for the
second quarter ended June 30,
2010.
On April 22, 2010, MedQuist and
its majority shareholder, CBay Inc. ("CBay"), completed the
acquisition of substantially all of the assets of Spheris, Inc.
("Spheris") out of bankruptcy. MedQuist acquired all the U.S.
assets and the client base of Spheris. CBay acquired the
India-based workforce and
facilities of Spheris, so as to avail MedQuist with additional
offshore capacity. The benefits of this acquisition are not
expected to be fully reflected in results until the fourth quarter
of 2010 and into first quarter 2011.
The purchase price for the Spheris assets acquired by the
Company was approximately $112.4
million, consisting of approximately $98.8 million in cash, plus a promissory note
with a fair value of $13.6
million.
The following results for both the three months and six months
ended June 30, 2010 include the
Spheris results from the acquisition date.
Net revenues for the three months ended June 30, 2010 increased $20.1 million or 25.9% to $97.5 million compared to $77.5 million for the three months ended
June 30, 2009. The acquisition
of Spheris contributed $26.4 million
in incremental revenue for both the three-months and six-months,
offset by value-based price reductions and lower product and field
service revenues.
Prior to its acquisition, Spheris had been experiencing
significant client defections, in large part, due to the adverse
impact of its deteriorating financial condition. The revamped
senior executive team has begun to integrate MedQuist methodologies
and processes into the Spheris service delivery model to better
address client needs and stabilize the risk of future client
defections. However, the lag effect of client terminations may
negatively impact our post-acquisition revenue through at least the
fourth quarter 2010.
Operating income for the second quarter of 2010 improved to
$4.6 million when compared to
$1.0 million reported for the second
quarter of 2009.
Total operating costs and expenses increased by 21.5% to
$93.0 million from $76.5 million reported in the prior year second
quarter primarily due to the inclusion of Spheris operating costs,
and acquisition related costs of $4.8
million. Also included in second quarter costs and expenses
were legal proceedings and settlement expenses and restructuring
charges in the amount of $1.1 and
$0.9 million, respectively.
Net income for the second quarter of 2010 was $0.9 million or $0.02 per diluted share compared to $0.8 million and $0.02 per diluted share reported in the prior
year comparable period.
Net revenues for the six months ended June 30, 2010 increased by $15.1 million to $171.5 million compared to
$156.4 million for the six months
ended June 30, 2009. The $26.4 million of incremental revenue from Spheris
since its acquisition was offset by value-based price reductions
and lower product and field service revenues. Operating
income increased $3.7 million, up 45%
over prior year results.
Net income for the six-months was $8.2
million or $0.22 per diluted
share compared to $7.7 million and
$0.20 per diluted share reported in
the prior year comparable period.
Adjusted EBITDA increased $3.1 million to
$17.1 million for the second quarter of 2010, compared to
$14.0 million for the second quarter
of 2009. For the six-month period, Adjusted EBITDA increased
$3.9 million to $30.2 million
compared to $26.3 million in the
comparable period. (For more information regarding the Adjusted
EBITDA and our use of this non-GAAP financial measure, see below
under the heading "Use of non-GAAP Financial Information")
"We are pleased with our operating performance for the second
quarter of 2010; reflecting our ability to provide a value
proposition to our clients and our progress to date in the
integration of Spheris," said CEO Peter
Masanotti.
"We increased Adjusted EBITDA by 22.3% over the prior year same
quarter, despite an increasingly competitive market environment, as
the Spheris acquisition helped expand our client base and provides
us continuing opportunities to realize operating efficiencies
through the increased use of technology and an expanded use of
offshore labor.
"Integration savings of approximately $7
million, resulting from the scale made available through the
Spheris acquisition, are expected to be realized in the fourth
quarter of 2010. The Company anticipates that its integration
activities will be substantially completed during the first quarter
of 2011."
Since CBay became our majority owner in August 2008, we have focused our efforts on
stabilizing our existing client base and creating a value
proposition for our clients through:
- increasing use of technology applications in both our processes
and those of our clients - including, tailoring our proprietary
clinical documentation workflow management system for client
specific solutions and increased integration of speech recognition
technology
- increasing use of offshore transcription and editing work
- delivering unparalleled, high quality services and
opportunities to drive down price for our clients
The size of our global medical transcriptionist and editor pool
allows us to quickly and efficiently provide our clients with the
labor resources necessary to implement comprehensive, scalable
solutions.
We expect that the impact of the above actions and the increased
scale from the Spheris acquisition will continue to be reflected in
lower operating costs and improved margins; as we continue to share
the benefits of a shrinking cost base and enhanced technologies
with our clients through profitable, competitive pricing.
Use of non-GAAP Financial Information.
In addition, to the United States generally accepted
accounting principles, or GAAP, results provided throughout this
document, MedQuist has provided Adjusted EBITDA data that
is a non-GAAP financial measurement. Adjusted EBITDA is Net income
excluding taxes, interest, equity in income of an affiliated
company, depreciation, amortization, cost of legal proceedings and
settlements, acquisition and integration related charges,
restructuring charges and certain non-recurring accrual
reversals.
Management believes that this non-GAAP financial measure used to
manage the business may provide our investors with useful
information in addition to the GAAP financial measures presented
here. The tables attached to this press release include a
reconciliation of this non-GAAP financial measure to the most
directly comparable GAAP financial measure and a description of why
we believe the non-GAAP financial measure is useful to
investors.
Forward-Looking Statements
This report contains forward-looking statements that are based
on current expectations, estimates, forecasts and projections about
us, the industry in which we operate and other matters, as well as
management's beliefs and assumptions and other statements regarding
matters that are not historical facts. These statements include, in
particular, statements about our plans, strategies and prospects.
For example, when we use words such as "projects," "expects,"
"anticipates," "intends," "plans," "believes," "seeks,"
"estimates," "should," "would," "could," "will," "opportunity,"
"potential" or "may," variations of such words or other words that
convey uncertainty of future events or outcomes, we are making
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. These statements are only predictions and, as such,
are not guarantees of future performance and involve risks,
uncertainties and assumptions that are difficult to predict. For a
discussion of these risks, uncertainties and assumptions, any of
which could cause our actual results to differ from those contained
in the forward-looking statement, see the section
of MedQuist's Annual Report on Form 10-K for the year
ended December 31, 2009, entitled "Risk Factors" and
discussions of potential risks and uncertainties in MedQuist's
subsequent filings with the Securities and Exchange
Commission.
MedQuist Inc. and
Subsidiaries
|
|
Consolidated Statements of
Operations
|
|
(In thousands, except per share
amounts)
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months ended
|
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$ 97,528
|
|
$ 77,471
|
|
$ 171,509
|
|
$ 156,415
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
67,090
|
|
51,357
|
|
116,923
|
|
105,225
|
|
|
Selling, general and
administrative
|
10,020
|
|
8,451
|
|
18,817
|
|
17,889
|
|
|
Research and
development
|
3,312
|
|
2,380
|
|
5,593
|
|
4,796
|
|
|
Depreciation
|
2,786
|
|
2,669
|
|
4,696
|
|
5,221
|
|
|
Amortization of intangible
assets
|
3,015
|
|
1,504
|
|
4,835
|
|
3,015
|
|
|
Cost of legal proceedings and
settlements
|
1,109
|
|
10,134
|
|
2,152
|
|
12,058
|
|
|
Acquisition and integration
related charges
|
4,765
|
|
-
|
|
5,659
|
|
-
|
|
|
Restructuring charges
|
870
|
|
-
|
|
930
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and
expenses
|
92,967
|
|
76,495
|
|
159,605
|
|
148,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
4,561
|
|
976
|
|
11,904
|
|
8,211
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of affiliated
company
|
32
|
|
356
|
|
546
|
|
428
|
|
Interest income
(expense)
|
(3,633)
|
|
19
|
|
(3,779)
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
960
|
|
1,351
|
|
8,671
|
|
8,704
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
80
|
|
515
|
|
447
|
|
1,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
880
|
|
$
836
|
|
$ 8,224
|
|
$ 7,690
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$ 0.02
|
|
$ 0.02
|
|
$
0.22
|
|
$
0.20
|
|
|
Diluted
|
$ 0.02
|
|
$ 0.02
|
|
$
0.22
|
|
$
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
37,556
|
|
37,556
|
|
37,556
|
|
37,556
|
|
|
Diluted
|
37,556
|
|
37,556
|
|
37,556
|
|
37,556
|
|
|
|
|
|
|
|
|
|
|
|
MedQuist Inc. and
Subsidiaries
|
|
Consolidated Balance
Sheets
|
|
(In thousands)
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$ 17,246
|
|
$
25,216
|
|
|
Accounts receivable, net of
allowance of $3,495 and $3,159, respectively
|
62,908
|
|
43,627
|
|
|
Income tax receivable
|
213
|
|
772
|
|
|
Other current assets
|
11,414
|
|
4,940
|
|
|
|
Total current assets
|
91,781
|
|
74,555
|
|
|
|
|
|
|
Property and equipment,
net
|
16,947
|
|
11,772
|
|
Goodwill
|
88,991
|
|
40,813
|
|
Other intangible assets,
net
|
84,391
|
|
36,307
|
|
Deferred income taxes
|
1,295
|
|
1,396
|
|
Other assets
|
14,502
|
|
9,818
|
|
|
|
|
|
|
|
|
Total assets
|
$ 297,907
|
|
$
174,661
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
$ 7,425
|
|
$
8,687
|
|
|
Accrued expenses
|
25,507
|
|
21,490
|
|
|
Accrued compensation
|
17,663
|
|
12,432
|
|
|
Current portion of lease
obligations
|
1,624
|
|
-
|
|
|
Current portion of long term
debt
|
30,000
|
|
-
|
|
|
Related party payable
|
5,162
|
|
1,362
|
|
|
Deferred revenue
|
9,584
|
|
10,854
|
|
|
|
Total current
liabilities
|
96,965
|
|
54,825
|
|
Long term debt, net
|
73,570
|
|
-
|
|
Deferred income taxes
|
3,906
|
|
3,240
|
|
Other non-current
liabilities
|
910
|
|
1,848
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
Common stock - no par value;
authorized 60,000 shares;
|
|
|
|
|
|
37,556 and 37,556 shares issued
and outstanding, respectively
|
237,945
|
|
237,848
|
|
|
Accumulated deficit
|
(117,630)
|
|
(125,854)
|
|
|
Accumulated other comprehensive
income
|
2,241
|
|
2,754
|
|
|
|
|
|
|
|
|
|
|
Total shareholders'
equity
|
122,556
|
|
114,748
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
$ 297,907
|
|
$
174,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MedQuist Inc. and
Subsidiaries
|
|
Consolidated Statements of Cash
Flows
|
|
(In thousands)
|
|
Unaudited
|
|
|
|
|
|
|
|
Six months ended
|
|
|
June 30,
|
|
|
2010
|
|
2009
|
|
Operating
activities:
|
|
|
|
|
Net income
|
$ 8,224
|
|
$ 7,690
|
|
Adjustments to reconcile net
income to cash provided by operating activities:
|
|
|
|
|
Depreciation and
amortization
|
9,531
|
|
8,236
|
|
Equity in income of affiliated
company
|
(546)
|
|
(428)
|
|
Deferred income tax
provision
|
669
|
|
435
|
|
Stock option expense
|
96
|
|
96
|
|
Provision for doubtful
accounts
|
1,085
|
|
89
|
|
Loss on disposal of property and
equipment
|
-
|
|
26
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
Accounts receivable
|
2,027
|
|
5,287
|
|
Income tax receivable
|
553
|
|
(29)
|
|
Other current assets
|
(3,552)
|
|
743
|
|
Other non-current
assets
|
854
|
|
(34)
|
|
Accounts payable
|
(1,494)
|
|
361
|
|
Accrued expenses
|
(1,086)
|
|
(3,872)
|
|
Accrued compensation
|
(1,504)
|
|
1,765
|
|
Deferred revenue
|
(1,321)
|
|
(2,045)
|
|
Other non-current
liabilities
|
(1,044)
|
|
112
|
|
Net cash provided by operating
activities
|
12,492
|
|
18,432
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
Purchase of property and
equipment
|
(2,868)
|
|
(2,135)
|
|
Capitalized software
|
(2,613)
|
|
(1,283)
|
|
Investment in A-Life Medical,
Inc.
|
-
|
|
(852)
|
|
Acquisitions, net of cash
acquired
|
(98,834)
|
|
-
|
|
Net cash used in investing
activities
|
(104,315)
|
|
(4,270)
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
Proceeds from debt
|
100,000
|
|
-
|
|
Repayment of long term
debt
|
(10,000)
|
|
-
|
|
Debt issuance costs
|
(6,070)
|
|
-
|
|
Payments of lease
obligations
|
(50)
|
|
-
|
|
Net cash provided by financing
activities
|
83,880
|
|
-
|
|
|
|
|
|
|
Effect of exchange rate
changes
|
(27)
|
|
85
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
(7,970)
|
|
14,247
|
|
|
|
|
|
|
Cash and cash equivalents -
beginning of period
|
25,216
|
|
39,918
|
|
|
|
|
|
|
Cash and cash equivalents - end
of period
|
$ 17,246
|
|
$ 54,165
|
|
|
-
|
|
|
|
Supplemental cash flow
information:
|
|
|
|
|
|
|
|
|
|
Cash (refunded) paid for income
taxes
|
$
(604)
|
|
$
197
|
|
Accommodation payments paid with
credits
|
$
-
|
|
$
82
|
|
Noncash debt incurred in
connection with the Spheris acquisition
|
$ 13,570
|
|
$
-
|
|
|
|
|
|
MedQuist Inc. and
Subsidiaries
|
|
Reconciliation of GAAP financial
measures to the non-GAAP measures
|
|
Adjusted EBITDA
|
|
(In thousands)
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months ended
|
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
$
880
|
|
$
836
|
|
$ 8,224
|
|
$ 7,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Tax provision
|
|
|
|
80
|
|
515
|
|
447
|
|
1,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (Less): Net interest
(income) expense
|
|
3,633
|
|
(19)
|
|
3,779
|
|
(65)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Depreciation
|
|
|
|
2,786
|
|
2,669
|
|
4,696
|
|
5,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Amortization of intangible
assets
|
3,015
|
|
1,504
|
|
4,835
|
|
3,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Restructuring
charges
|
|
|
870
|
|
-
|
|
930
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Acquisition and integration
related charges
|
|
4,765
|
|
-
|
|
5,659
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Cost of legal proceedings
and settlements
|
|
1,109
|
|
10,134
|
|
2,152
|
|
12,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accrual
reversals
|
-
|
|
(1,301)
|
|
-
|
|
(2,254)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Equity in income of
affiliated company
|
|
(32)
|
|
(356)
|
|
(546)
|
|
(428)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
$ 17,106
|
|
$ 13,982
|
|
$ 30,176
|
|
$ 26,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA is a financial measure not computed in
accordance with United States
generally accepted accounting principles, or GAAP. The Company
believes that this non-GAAP measure, when presented in conjunction
with comparable GAAP measures, is useful to both management and
investors in analyzing the Company's ongoing business and operating
performance. The Company believes that providing the non-GAAP
information to investors, in addition to the GAAP presentation,
allows investors to view the Company's financial results in the way
that management views financial results. Management believes
Adjusted EBITDA is useful as supplemental measures of the Company's
financial results because it removes costs not related to the
Company's operating performance. Management believes that Adjusted
EBITDA should be considered in addition to, but not as a substitute
for items presented in accordance with GAAP that are presented in
this press release. A reconciliation of Net income to Adjusted
EBITDA is provided above.
SOURCE MedQuist Inc.
Copyright . 11 PR Newswire