8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report

(Date of Earliest Event Reported)

April 21, 2003

TRANSCEND SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-18217	33-0378756
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

945 East Paces Ferry Road, Suite 1475

Atlanta, GA 30326

(404) 364-8000

(Address of principal executive offices, zip code,

telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Item 7.    Financial Statements and Exhibits.

a.    Not applicable.

b.    Not applicable.

c.    Exhibits.

Exhibit 99.1 – Press Release announcing the Company’s operating results for the three months ended March 31, 2003 and its financial condition as of March 31, 2003.

Item 9.    Regulation FD Disclosure.

Transcend Services, Inc. (the “Company”) reported its unaudited consolidated results of operations for the three months ended March 31, 2003 and its unaudited financial condition as of March 31, 2003 in a press release dated April 21, 2003 attached hereto as Exhibit 99.1 (the “Earnings Release”).

Item 12.    Results of Operations and Financial Condition.

The information under this caption is furnished by the Company under Item 9 in place of Item 12 of Form 8-K in accordance with interim guidance provided by the Securities and Exchange Commission in Release No. 33-8216 issued March 27, 2003. The Earnings Release reports the financial results of the Company for the quarter ended March 31, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TRANSCEND SERVICES, INC.

By: /s/    Larry G. Gerdes

Larry G. Gerdes,

President, Chief Executive Officer,

and Chief Financial Officer

(Principal Executive and

Financial Officer)

Dated: April 21, 2003

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release announcing the unaudited operating results of Transcend Services, Inc. for the three months ended March31, 2003 and its unaudited financial condition as of March 31, 2003.

EX-99.1

EXHIBIT 99.1

Transcend Services, Inc.

Press Release Dated April 21, 2003

Announcing the unaudited operating results of Transcend Services, Inc. for the three months ended March 31, 2003 and its unaudited financial condition as of March 31, 2003.

(four pages follow)

                  FOR IMMEDIATE RELEASE

Contact:    Larry Gerdes, President & CEO

                  404-364-8000

                   larry.gerdes@trcr.com

April 21, 2003

(BW) (TRANSCEND SERVICES, INC.)(TRCR)

TRANSCEND REPORTS REVENUE INCREASE OF 19.5%

AND SECOND CONSECUTIVE QUARTERLY PROFIT IN FIRST QUARTER 2003

New Account Sales Drive Increased Revenue and Profitability

Atlanta, Georgia, TRANSCEND SERVICES, INC. (TRCR/Nasdaq SmallCap) today announced its results for the three months ended March 31, 2003.

For the three months ended March 31, 2003, Transcend reported revenue of $3.5 million, which represents a 19.5% increase over the comparable prior year quarter. Net income attributable to common stockholders was $80,000, or $0.02 per share, after a reduction of $0.03 per share for preferred stock dividends. For the comparable prior year quarter, the Company reported a loss of $0.05 per share.

Cash totaled $905,000 as of March 31, 2003, which represents an increase of $123,000 during the first quarter of 2003. The weighted average number of days revenue in trade accounts receivable totaled 14 days as of March 31, 2003 compared to 15 days as of December 31, 2002. Transcend has no debt and an unused $1.5 million line of credit.

Tom Binion, chief operating officer, commented on the increase in revenue: “Sales momentum is driving our recurring revenue model business. After installing seven new accounts in the fourth quarter of 2002, we installed fourteen additional new accounts during the first quarter of 2003. Also during the first quarter, we signed contracts to install up to ten more new accounts during the second quarter of 2003. Our highly proficient implementation team can install a new account in just a few days with little or no disruption to a customer’s operations. To capitalize on our sales momentum, we are expanding our sales force and increasing our marketing efforts.”

Larry Gerdes, president and chief executive officer, added comments regarding the results for the first quarter of 2003 and the Company’s financial condition as of March 31, 2003: “For the second consecutive quarter, new account sales drove our profitability and increased revenue. Our production management team, working in concert with our highly-skilled, home-based medical language specialists on our proprietary Internet-based transcription platform, enabled us to improve our gross profit as a percentage of revenue from 27% in the first quarter of 2002 to 32% in the first quarter of 2003. The Company has the infrastructure to handle both the projected and additional new business with relatively little incremental fixed cost. We believe that the improved operating results and continued excellent accounts receivable management are responsible for our improved, debt-free financial condition. We further believe that we are well positioned for continued growth.”

Mr. Gerdes concluded with a comment regarding a financial strategy being pursued by the Company: “To simplify our capital structure and to eliminate the adverse cash and net income effects of the preferred stock dividends, we are soliciting our stockholders’ approval to redeem a portion of our preferred stock and convert the remaining preferred stock to common stock at our annual meeting of stockholders scheduled for May 6, 2003.”

About Transcend Services, Inc.

Transcend believes that accurate, reliable and timely transcription creates the foundation for the patient medical record. To this end, the Company has created Internet-based voice-to-text systems that allow its skilled medical language specialists to securely and quickly produce the highest quality medical documents. The Company’s wide range of transcription services encompass everything needed to securely receive, type, format and distribute electronic copies of physician-dictated medical documents, from overflow projects to complete transcription outsourcing and custom data-center creation packages.

For more information, visit http://www.transcendservices.com.

This press release contains forward-looking statements that involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are competitive pressures, changes in pricing policies, delays in contract start dates, lower-than-expected demand for Transcend’s solutions, business conditions in the integrated healthcare delivery network market, general economic conditions and the risk factors detailed from time to time in Transcend’s periodic reports and registration statements filed with the Securities and Exchange Commission.

(Unaudited Financial Statements Follow)

TRANSCEND SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Amounts in Thousands, Except Per Share Amounts and Percentages

	Three Months Ended March 31,
	2003					2002
	$			% of Rev		$			% of Rev
Revenue	$	3,481		100	%	$	2,913		100	%
Direct costs		2,371		68	%		2,130		73	%
Gross profit		1,110		32	%		783		27	%
Operating expenses:
Marketing and sales		202		6	%		84		3	%
Research and development		111		3	%		84		3	%
General and administrative		599		17	%		590		20	%
Total operating expenses		912		26	%		758		26	%
Operating income		198		6	%		25		1	%
Interest income (expense), net		1		0	%		(1	)	0	%
Income from continuing operations		199		6	%		24		1	%
Loss from discontinued operations		0		0	%		(133	)	-5	%
Net income (loss)		199		6	%		(109	)	-4	%
Dividends on preferred stock		(119	)	-3	%		(120	)	-4	%
Net income (loss) attributable to common stockholders	$	80		2	%	($	229	)	-8	%
Basic income (loss) per share:
From continuing operations	$	0.02				($	0.02	)
From discontinued operations		0.00					(0.03	)
Net income (loss) per share attributable to common stockholders	$	0.02				($	0.05	)
Weighted average shares outstanding (for basic EPS)		4,427					4,513
Diluted income (loss) per share:
From continuing operations	$	0.02				($	0.02	)
From discontinued operations		0.00					(0.03	)
Net income (loss) per share attributable to common stockholders	$	0.02				($	0.05	)
Weighted average shares outstanding (for diluted EPS)		4,486					4,513

TRANSCEND SERVICES, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

MARCH 31, 2003 and DECEMBER 31, 2002

Amounts in Thousands

ASSETS	March 31, 2003		December 31, 2002
Cash and cash equivalents	$	905	$	782
Accounts receivable, net		964		947
Other current assets		212		101
Property and equipment, net		1,280		1,316
Other assets		64		69
	$	3,425	$	3,215
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	$	878	$	794
Stockholders' equity		2,547		2,421
	$	3,425	$	3,215