MOUNT LAUREL, N.J., Aug. 8 /PRNewswire-FirstCall/ -- MedQuist
Inc.,(Nasdaq: MEDQ) the largest Medical Transcription Service Organization
(MTSO) in the world, today announced its results for the quarter ended June
30, 2008. Revenue for the second quarter of 2008 was $82.5 million compared
with $88.7 million in the second quarter of 2007. The decrease in revenue of
$6.2 million or 7% from the prior year period was primarily due to customer
losses experienced during the second half of 2007. Operating income for the
quarter decreased to $1.8 million compared to operating income of $4.2 million
in the second quarter of 2007. Operating income in the second quarter of 2007
was positively impacted by the recognition of $11.9 million of insurance
recoveries which were exhausted by the end of 2007.
Non-GAAP Operating income (excluding the cost of the billing investigation
and legal proceedings, net) increased by $6.1 million to $3.6 million in the
second quarter of 2008 compared to a non-GAAP operating loss of $2.5 million
in the second quarter of 2007. "This improvement reflects the significant
progress we have made in streamlining both our fixed and variable cost
structures. In addition, notable orders in the quarter included multimillion
dollar outsourced transcription expansions at two leading academic medical
center customers and the return of a large midwestern academic medical center
customer who had left us in 2004," said Mark Ivie, the company's Interim
President and Chief Executive Officer.
Cost of revenue was reduced by $8.3 million or 13% to $58.0 million in the
second quarter of 2008 compared to $66.3 million in the second quarter of
2007. This resulted in a decrease in cost of revenue as a percentage of
revenue to 70% compared to 75% in the second quarter of 2007.
Selling general and administrative expenses declined $5.1 million or 29%
to $12.8 million in the second quarter of 2008 compared to $17.9 million in
the second quarter of 2007. This decline reflects both the unusually high
expenses incurred in the second quarter of 2007 as the company worked to
complete the audits of 2003-2006, as well as the benefits of the restructuring
actions taken by the company during 2007.
Cost of investigation and legal proceedings, net, increased to $1.7
million in the second quarter of 2008 compared to negative $6.6 million in the
second quarter of 2007. The second quarter of 2007 included the benefit of
$11.9 million of insurance recoveries which were exhausted by the end of 2007.
Excluding the impact of the insurance recovery in the second quarter of 2007,
the Costs of investigation and legal proceedings, net, declined from $5.2
million in the second quarter of 2007 to $1.7 million in the second quarter of
2008.
As of June 30, 2008, the company had $151.1 million of cash and cash
equivalents on hand and no debt. Subsequently, on August 4, 2008 the company
paid a cash dividend of $2.75 per share or $103.3 million.
Additionally, on August 6, 2008, Koninklijke Philips Electronics N.V.
(Philips) completed the sale of its 69.5% majority stake in the company to
CBAY Systems Holdings Limited. "We are very pleased to have CBAY Systems
Holdings Limited as a new investor and we look forward to exploring mutual
synergies with the CBAY Systems Holdings Limited group in the future," said
Ivie.
In addition to the United States generally accepting accounting
principles, or GAAP, results provided throughout this document, MedQuist has
provided non-GAAP financial measurements. Management believes that the non-
GAAP financial measures used to manage the business may provide users
additional useful information. The tables attached to this press release
include a reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP financial measures and a description of why the non-
GAAP financial measures are useful to investors.
Forward-Looking Statements
This report contains forward-looking statement 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 (Securities Act) and
Section 21E of the Exchange Act. 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, 2007, 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,
2008 2007 2008 2007
Net revenues $82,454 $88,692 $166,179 $177,758
Operating costs and expenses:
Cost of revenues 58,015 66,283 119,273 134,628
Selling, general and
administrative 12,804 17,917 25,899 32,610
Research and development 3,735 2,823 7,854 6,265
Depreciation 2,996 2,640 5,924 5,179
Amortization of intangible assets 1,373 1,358 2,734 2,704
Cost of investigation and legal
proceedings, net 1,728 (6,638) 8,126 (4,897)
Restructuring charges (45) 125 (45) 381
Total operating costs and
expenses 80,606 84,508 169,765 176,870
Operating income (loss) 1,848 4,184 (3,586) 888
Equity in income of affiliated
company 25 63 41 323
Other income - - 438 -
Interest income, net 895 2,073 2,183 4,175
Income (loss) before income
taxes 2,768 6,320 (924) 5,386
Income tax provision 933 434 1,658 1,386
Net income (loss) $1,835 $5,886 $(2,582) $4,000
Net income (loss) per share:
Basic $0.05 $0.16 $(0.07) $0.11
Diluted $0.05 $0.16 $(0.07) $0.11
Weighted average shares outstanding:
Basic 37,544 37,484 37,544 37,484
Diluted 37,553 37,497 37,544 37,499
MedQuist Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
Unaudited
June 30, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $151,095 $161,582
Accounts receivable, net of allowance of
$4,417 and $4,359, respectively 48,215 48,725
Income tax receivable 716 815
Other current assets 8,757 7,920
Total current assets 208,783 219,042
Property and equipment, net of accumulated
depreciation of $38,825 and $38,772,
respectively 18,920 21,366
Goodwill 125,418 125,505
Other intangible assets, net of accumulated
amortization of $44,610 and $45,209,
respectively 41,363 42,262
Deferred income taxes 2,722 2,712
Other assets 6,117 6,885
Total assets $403,323 $417,772
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $11,137 $12,754
Accrued expenses 13,501 18,989
Accrued compensation 14,495 14,826
Customer accommodation and quantification 12,242 18,459
Deferred income tax liability - current 4,783 4,783
Deferred revenue 16,280 16,023
Total current liabilities 72,438 85,834
Deferred income taxes 16,635 15,151
Other non-current liabilities 2,065 2,143
Commitments and contingencies
Shareholders' equity:
Common stock - no par value; authorized
60,000 shares; 37,544 and 37,544
shares issued and outstanding, respectively 236,574 236,412
Retained earnings 70,294 72,876
Accumulated other comprehensive income 5,317 5,356
Total shareholders' equity 312,185 314,644
Total liabilities and shareholders' equity $403,323 $417,772
MedQuist Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
Six months ended
June 30,
2008 2007
Operating activities:
Net income (loss) $(2,582) $4,000
Adjustments to reconcile net income (loss)
to cash provided by (used in)
operating activities:
Depreciation and amortization 8,658 7,883
Equity in income of affiliated company (41) (323)
Deferred income tax provision 1,491 974
Stock option expense 162 207
Provision for doubtful accounts 1,205 2,431
Loss on disposal of property and equipment 38 61
Changes in operating assets and liabilities
excluding effects of acquisitions:
Accounts receivable (1,334) (4,088)
Income tax receivable 99 (267)
Insurance receivable - (11,143)
Other current assets (837) (511)
Other non-current assets 116 (52)
Accounts payable (2,065) 1,613
Accrued expenses (5,405) (8,060)
Accrued compensation (309) 297
Customer accommodation and quantification (5,593) (2,976)
Deferred revenue 172 (1,210)
Other non-current liabilities 8 1,962
Net cash used in operating activities $(6,217) $(9,202)
Investing activities:
Purchase of property and equipment (3,078) (4,137)
Capitalized software (1,862) (824)
Proceeds from sale of investments 692 -
Net cash used in investing activities (4,248) (4,961)
Financing activities:
Net cash provided by financing activities - -
Effect of exchange rate changes (22) 32
Net decrease in cash and cash equivalents (10,487) (14,131)
Cash and cash equivalents - beginning of period 161,582 175,412
Cash and cash equivalents - end of period $151,095 $161,281
Supplemental cash flow information:
Cash paid for income taxes $263 $276
Accommodation payments paid with credits $611 $1,288
MedQuist Inc. and Subsidiaries
Reconciliation of GAAP financial measures to the aforementioned non-GAAP
measures
Operating Income (Loss), excluding cost of investigation and legal
proceedings, net
(In thousands, except per share amounts)
Unaudited
Three months ended Six months ended
March 31, June 30,
2008 2007 2008 2007
GAAP operating income (loss) $1,848 $4,184 $(3,586) $888
Add: Cost of investigation and legal
proceedings, net 1,728 (6,638) 8,126 (4,897)
Non-GAAP operating income (loss),
excluding Cost of investigation
and legal proceedings, net $3,576 $(2,454) $4,540 $(4,009)
MedQuist Inc. and Subsidiaries
Reconciliation of GAAP financial measures to the aforementioned non-GAAP
measures
Cost of investigation and legal proceedings, excluding insurance recoveries
(In thousands, except per share amounts)
Unaudited
Three months ended Six months ended
March 31, June 30,
2008 2007 2008 2007
GAAP Cost of investigation and legal
proceedings, net $1,728 $(6,638) $8,126 $(4,897)
Add: Insurance recoveries - 11,850 - 15,386
Non-GAAP Cost of investigation and
legal proceedings, excluding
insurance recoveries $1,728 $5,212 $8,126 $10,489
Operating income (loss), excluding Cost of investigation and legal
proceedings, net, and Cost of investigation and legal proceedings, excluding
insurance recoveries, are financial measures not computed in accordance with
United States generally accepted accounting principles, or GAAP. The Company
believes that these non-GAAP measures, when presented in conjunction with
comparable GAAP measures, are 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 Operating income (loss), excluding Cost of investigation
and legal proceedings, net, and Cost of investigation and legal proceedings,
excluding insurance recoveries, are 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 Operating income
(loss), excluding Cost of investigation and legal proceedings, net, and Cost
of investigation and legal proceedings, excluding insurance recoveries 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 Operating income (loss), excluding Cost of investigation and
legal proceedings, net, to Operating income (loss) is provided above. A
reconciliation of Cost of investigation and legal proceedings, excluding
insurance recoveries, to Cost of investigation and legal proceedings, net, is
provided above.
.gif)
