MEDQUIST INC. 
By MOUNT LAUREL, N.J., March 12 /PRNewswire-FirstCall/ -- MedQuist Inc., (Nasdaq: MEDQ), a leading provider of medical transcription services, and a leader in the technology-enabled clinical documentation workflow, today announced its financial results for the fourth quarter and full year ended December 31, 2009.
"We are pleased with our results for the fourth quarter and full year ended 2009 during which we increased Adjusted EBITDA 41% and 75%, respectively," said CEO Peter Masanotti. "Backed by a competitive set of product offerings, strong sales performance and improved customer retention, our transcription volumes have increased year over year. While declining industry price levels have dampened our revenue results, these declines have been matched with systemic unit cost improvements including increased use of technology and an expanded relationship with our affiliate company CBay yielding the positive Adjusted EBITDA results."
Fourth Quarter Results
Net revenues for the fourth calendar quarter of 2009 were $73.9 million, a decline of $5.5 million or 6.9% as compared to the fourth quarter of 2008. We grew transcription volumes during the fourth quarter and experienced lower average pricing.
Operating income for the fourth quarter of 2009 was $7.1 million compared to an operating loss in the fourth quarter of 2008 of $79.6 million. Total operating costs and expenses for the fourth quarter of 2009 were $66.9 million compared to $76.7 million for the same quarter in 2008 (excluding a goodwill impairment charge of $82.2 million). The decline of 12.8% from 2008 to 2009 is largely the result of cost reduction programs that significantly reduced cost of revenues as well as most other categories of expense. Cost control and cost reduction programs are ongoing as the Company addresses a very competitive pricing environment for our products and services.
Net income for the fourth quarter of 2009 was $5.9 million or $0.16 per diluted share compared to a net loss of $60.5 million ($1.61) per diluted share for the fourth quarter of 2008.
Adjusted EBITDA (which is operating earnings (loss) excluding depreciation, amortization of intangible assets, cost of legal proceedings and settlements, net, acquisition related charges, goodwill impairment charge and restructuring charges) increased 41.3% to $15.7 million in the fourth quarter of 2009 as compared to $11.1 million reported in the same quarter for 2008.
Full Year Results:
For the year ended December 31, 2009, the company reported $307.2 million in net revenues or a 6.0% decline when compared to the prior year when $326.9 million in net revenues were reported. The decline in net revenues is due primarily to lower prices realized for our transcription services and declining maintenance revenues associated with legacy systems that are currently being replaced with enhanced technology solutions at certain customer locations.
Total operating costs and expenses for the year ended December 31, 2009 were $283.8 million, substantially lower than total operating costs and expenses of $333.1 million for the year ended December 31 2008 (excluding a goodwill impairment charge of $82.2 million). The decrease in operating costs and expenses of $49.2 million or 14.8% (when excluding the goodwill impairment charge of $82.2 million for the year ended December 31, 2008) was the result of broad cost reduction and restructuring programs that significantly reduced both the cost of revenues and most other categories of expense.
Operating income for the year ended December 31, 2009 was $23.4 million compared to an operating loss of $88.4 million for the same period in 2008. Net income for the year ended December 31, 2009 was $23.3 million or $0.62 per diluted share compared to a net loss of $68.8 million or ($1.83) per diluted share for the same period in 2008.
Adjusted EBITDA for the year ended December 31, 2009 increased 74.8% to $57.9 million when compared to the $33.1 million reported for the same period in 2008.
As of December 31, 2009, the Company had $25.2 million of cash and cash equivalents and no debt.
In addition to the United States generally accepted accounting principles, or GAAP, results provided throughout this document, MedQuist has provided Adjusted EBITDA which is a non-GAAP financial measurement. 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.
Web Site: http://www.medquist.com
MedQuist Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Unaudited
Three months For the year
ended ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Net revenues $73,949 $79,387 $307,200 $326,853
------- ------- -------- --------
Operating costs and expenses:
Cost of revenues 48,272 53,867 206,265 230,375
Selling, general and
administrative 7,622 11,074 33,441 47,520
Research and development 2,369 3,346 9,604 15,848
Depreciation 2,086 3,049 9,504 11,950
Amortization of intangible
assets 1,635 1,409 6,168 5,554
Cost of legal proceedings and
settlements, net 1,403 1,830 14,843 19,738
Acquisition related charges 1,263 - 1,263 -
Goodwill impairment charge - 82,233 - 82,233
Restructuring charges 2,246 2,137 2,727 2,055
Total operating costs and
expenses 66,896 158,945 283,815 415,273
------ ------- ------- -------
Operating income (loss) 7,053 (79,558) 23,385 (88,420)
Equity in income of affiliated
company (567) 36 2,015 236
Other income - - - 438
Interest income (expense), net (170) (163) (134) 2,438
---- ---- ---- -----
Income (loss) before income
taxes 6,316 (79,685) 25,266 (85,308)
Income tax provision 419 (19,234) 1,975 (16,513)
--- ------- ----- -------
Net income (loss) $5,897 $(60,451) $23,291 $(68,795)
====== ======== ======= ========
Net income (loss) per share:
Basic $0.16 $(1.61) $0.62 $(1.83)
----- ------ ----- ------
Diluted $0.16 $(1.61) $0.62 $(1.83)
----- ------ ----- ------
Weighted average shares
outstanding:
Basic 37,556 37,500 37,556 37,549
------ ------ ------ ------
Diluted 37,556 37,500 37,556 37,549
------ ------ ------ ------
MedQuist Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
Unaudited
December 31, December 31,
2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents $25,216 $39,918
Accounts receivable, net 43,627 50,374
Income tax receivable 772 154
Other current assets 4,940 8,053
----- -----
Total current assets 74,555 98,499
Property and equipment, net 11,772 15,785
Goodwill 40,813 40,545
Other intangible assets, net 36,307 39,877
Deferred income taxes 1,396 1,204
Other assets 9,818 6,295
----- -----
Total assets $174,661 $202,205
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $8,687 $7,487
Accrued expenses 22,848 24,049
Accrued compensation 12,432 11,204
Deferred income taxes 4 651
Deferred revenue 10,854 15,630
------ ------
Total current liabilities 54,825 59,021
Deferred income taxes 3,240 799
Other non-current liabilities 1,848 2,033
----- -----
Commitments and contingencies
Shareholders' equity:
Common stock - no par value;
authorized 60,000 shares; 37,556 and
37,556 shares issued and outstanding,
respectively 237,848 237,907
Retained earnings (deficit) (125,854) (99,198)
Accumulated other comprehensive income 2,754 1,643
----- -----
Total shareholders' equity 114,748 140,352
------- -------
Total liabilities and shareholders'
equity $174,661 $202,205
======== ========
MedQuist Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
For the year ended
December 31,
2009 2008
---- ----
Operating activities:
Net income (loss) $23,291 $(68,795)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating
activities:
Depreciation and amortization 15,672 17,504
Equity in income of affiliated company (2,015) (236)
Goodwill impairment charge - 82,233
Deferred income taxes 1,857 (17,091)
Stock option expense 193 1,427
Provision for doubtful accounts 2,306 3,073
Loss on disposal of property and equipment 133 571
Changes in operating assets and liabilities:
Accounts receivable 4,529 (5,781)
Income tax receivable (616) 661
Other current assets 3,391 (154)
Other non-current assets 25 134
Accounts payable 1,038 (5,557)
Accrued expenses (1,200) (12,701)
Accrued compensation 1,192 (3,559)
Deferred revenue (4,939) (272)
Other non-current liabilities (307) (211)
---- ----
Net cash provided by (used in) operating
activities $44,551 $(8,754)
------- -------
Investing activities:
Purchase of property and equipment (4,932) (6,574)
Proceeds from sale of investments - 692
Capitalized software (2,582) (3,411)
Investment in affiliated company (852) -
--- --
Net cash used in investing activities (8,366) (9,293)
------ ------
Financing activities:
Dividends paid (49,949) (103,279)
Debt issuance costs (1,201) -
Proceeds from exercise of stock options - 68
-- --
Net cash used in financing activities (51,150) (103,211)
------- --------
Effect of exchange rate changes 262 (406)
--- ----
Net decrease in cash and cash equivalents (14,703) (121,664)
------- --------
Cash and cash equivalents - beginning of period 39,918 161,582
------ -------
Cash and cash equivalents - end of period $25,216 $39,918
======= =======
Supplemental cash flow information:
Cash paid for income taxes $234 $210
---- ----
Accommodation payments paid with credits $103 $740
---- ----
MedQuist Inc. and Subsidiaries
Reconciliation of GAAP financial measures to the non-GAAP measures
Adjusted EBITDA
(In thousands)
Unaudited
Three months For the year
ended ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
GAAP operating income (loss) $7,053 $(79,558) $23,385 $(88,420)
Add: Depreciation 2,086 3,049 9,504 11,950
Add: Amortization of intangible
assets 1,635 1,409 6,168 5,554
Add: Cost of legal proceedings
and settlements, net 1,403 1,830 14,843 19,738
Add: Acquisition related charges 1,263 - 1,263 -
Add: Goodwill impairment charge - 82,233 - 82,233
Add: Restructuring charges 2,246 2,137 2,727 2,055
------- ------- ------- -------
Adjusted EBITDA $15,686 $11,100 $57,890 $33,110
======= ======= ======= =======
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
Adjusted EBITDA to Operating income (loss) is provided above.
SOURCE MedQuist Inc.
