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MedQuist Reports Results for the Fourth Quarter and 2009
Date:3/12/2010

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.

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