0000950116-01-501009.txt : 20011030 0000950116-01-501009.hdr.sgml : 20011030 ACCESSION NUMBER: 0000950116-01-501009 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011024 ITEM INFORMATION: Other events FILED AS OF DATE: 20011025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDQUIST INC CENTRAL INDEX KEY: 0000884497 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 222531298 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19941 FILM NUMBER: 1766117 BUSINESS ADDRESS: STREET 1: FIVE GREENTREE CENTRE STE 311 STREET 2: STATE HIGHWAY 73 N CITY: MARLTON STATE: NJ ZIP: 08053 BUSINESS PHONE: 8568108000 MAIL ADDRESS: STREET 1: 5 GREENTREE CENTRE SUITE 311 STREET 2: ATTN BRUCE VAN FOSSEN CITY: MARLTON STATE: NJ ZIP: 08053 8-K 1 eightk.txt 8-K 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): October 24, 2001 MedQuist Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 0-19941 22-2531298 ------------------ ----------- ------------------- (State or other (Commission (I.R.S. Employer jurisdiction File Identification No.) of incorporation Number) or organization) Five Greentree Centre Suite 311 Marlton, NJ 08053 --------------------------------------------------- (address of principal executive offices) (Zip Code) Registrants's telephone number, including area code: (856) 810-8000 Item 5. Other Events. ---------------------- Pursuant to Regulation FD Rules 100-103: Attached as Exhibit 5.1 is the script and related financial information for the Registrant's third quarter investor conference call held on October 24, 2001 at 11:00 a.m. (ET). Attached as Exhibit 5.2 is the Registrant's earnings release for the third quarter ended September 30, 2001. Pursuant to Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, attached as Exhibit 5.3 is a note concerning forward-looking statements and additional information regarding factors that could cause actual results to differ materially from those in such forward-looking statements. -2- SIGNATURE 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. MEDQUIST INC. Date: October 24, 2001 By: /s/Brian J. Kearns -------------------------------------------- Name: Brian J. Kearns Title: Senior Vice President, Treasurer and Chief Financial Officer -3- EX-5.1 3 ex5-1.txt EX-5.1 Exhibit 5.1 Medquist Inc. - 2001 Third Quarter Conference Call: --------------------------------------------------- Good morning everyone. I would like to take this opportunity to thank you for participating in our conference call. My name is David Cohen and I am the Chairman and Chief Executive Officer of the Company. Also on the call today are John Donohoe, our President and Chief Operating Officer, Brian Kearns, our Chief Financial Officer, and John Suender, our General Counsel. I first would like to make a brief opening statement and then open the call to your questions and comments. By now everyone should have received a copy of our earnings release or have had the opportunity to review the information distributed by the wire services. As indicated in our press release, MedQuist generated solid results during the third quarter of 2001, despite the additional technology development expense associated with our April acquisition of Speech Machines. We estimate that the events of September 11 effectively delayed two to three days' revenue in the third quarter with a corresponding effect on the bottom line. I would like to take this time to express our deepest sympathies to the family of Laurie Neira, a MedQuist transcriptionist who was tragically killed in a 9-11 plane crash. Our thoughts and prayers are with her and her family. Recent tragic events notwithstanding, MedQuist still managed to leverage 13% year over year revenue growth into 21% EBITDA growth in the third quarter as a result of margin expansion from disciplined business practices and our "back to basics" initiatives. MedQuist remains an extremely strong company, with a blue chip client base, high recurring revenue, strong earnings and consistent cash flow. Management is enthusiastic about leveraging recent acquisitions and technology enhancements into profitable growth in medical information management services. Since the beginning of the year, MedQuist has acquired the capability to provide digital dictation systems to our customers with DVI, enhanced our reimbursement coding service offering and secured a technology solution for MedQuist's digital transcription platform with Speech Machines. We have also improved our medical transcription service offering through the April acquisition of Your Office Genie, which is progressing according to plan. It's not enough to just talk about a plan as others do, it's necessary to successfully work that plan, which is what MedQuist is doing. As the result of an unauthorized press release by a former competitor, many of you are already aware that MedQuist is also very well positioned to complete the acquisition of Lernout & Hauspie's medical transcription business as our $25 million cash offer for that business was selected as the winning bid by L&H and its creditor committee this past Monday afternoon in New York City. The next step in the L&H transcription acquisition process involves the bankruptcy court providing judgment on our bid. The court is scheduled to hear our case this Friday afternoon. Assuming court approval - we have no reason to believe otherwise - MedQuist could close the acquisition as early as Friday, November 2nd. We are looking forward to working with L&H's transcription business management team in a close partnership. We are also excited about adding the talented L&H transcriptionists to the MedQuist team. Although this business has very low profit margins today, we have a plan in place to increase operating margins to be more in line with MedQuist's over the next 18-24 months. As many of you recall, that is exactly what we did when we acquired MRC in the fall of 1998 with a pretax margin of under 6%. Within two years we brought that business -4- up to MedQuist's pretax margin level in the upper teens. We believe that our current management team has the necessary experience and discipline to do the same thing with the L&H transcription business. At this time, and until we close the acquisition of the L&H transcription business, we are not providing formal updates to our earnings guidance. However, management remains comfortable with our prior guidance of 15% year over year earnings growth. In conclusion, we believe the third quarter and first nine months of 2001 demonstrate that MedQuist continues to make progress on our long-term strategy for growth. MedQuist will continue to move forward in our strategic transition to a full service medical information management company, which we believe will result in profitable growth and increased shareholder value in future years. At this time I would like to turn it over to Brian Kearns for a review of our financial results. Thank you David and good morning everyone. For the third quarter: MedQuist generated revenue of $102.7 million and EBITDA of $23.9 million or 23.3% of revenue. Net income was $10.9 million or $0.29 per share on a diluted basis. There were no non-recurring items in the quarter. At September 30, 2001, MedQuist had more than $145 million in working capital including $90 million in cash. Accounts receivable were $76.6 million and DSO decreased to 68 days, the lowest level in over two years. The Company had roughly $2.5 million of debt and shareholders equity was $354 million. At this time I will turn the presentation over to John Suender, MedQuist's General Counsel. During the conference call management will make forward-looking statements within the meaning of the safe-harbor provisions of the U.S. federal securities laws, such as market estimates, growth and expansion plans and opportunities, potential revenue and cost synergies, revenue and earnings projections, expected growth rates, and the benefits of new technologies. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from these forward-looking statements is set forth in our periodic reports filed with the SEC, including our Form 10-Q's and Form 10-K for the year ended December 31, 2000 and our form 8-K filed in relation to today's call. At this time we would like to open up the call to your questions. Please announce your name before asking your question. Thank you. -5- MedQuist 09/30/01 Financial Overview ------------------------------------
Q3-01 Q3-00(1) 09/30/2001 -------- -------- ---------- Revenues $102,695 $90,648 Cash and Equivalents $ 89,804 Accounts Receivable - Net 76,637 Cost of Revenues 75,435 68,145 Other Current Assets 8,653 % of Revenues 73.46% 75.18% -------- Total Current Assets 175,094 Gross Profit 27,260 22,503 PP&E 34,557 Gross Margin 26.54% 24.82% Intangible Assets 169,466 Other Long-Term Assets 8,363 Selling, General & Administrative 3,328 2,720 -------- % of Revenues 3.24% 3.00% Total Assets 387,480 EBITDA 23,932 19,783 Current Portion of Long-Term Debt 1,427 % of Revenues 23.30% 21.82% Accounts Payable 6,736 Accrued Expenses 21,373 Depreciation Expense 4,378 3,742 -------- % of Revenues 4.26% 4.13% Total Current Liabilities 29,536 Amortization Expense 2,559 1,857 Long Term Debt 1,089 % of Revenues 2.49% 2.05% Other Long-Term Liabilities 2,599 Shareholders Equity 354,256 EBIT 16,995 14,184 -------- % of Revenues 16.55% 15.65% Total Liabilities and Equity $387,480 Interest (Income)/Expense (662) (1,180) Other (Income)/Expense 0 0 Pretax Income 17,657 15,364 % of Revenues 17.19% 16.95% Tax Provision 6,797 6,146 % of Pretax 38.49% 40.00% Net Income 10,860 9,218 % of Revenues 10.58% 10.17% Earnings Per Share $0.29 $0.25 Shares Outstanding 37,870 37,369
Notes: ------ (1) Excludes approximately $6,255 of pretax expenses related to the tender offer by Philips. EX-5.2 4 ex5-2.txt EX-5.2 Exhibit 5.2 ----------- News Release NASDAQ: MEDQ FOR IMMEDIATE RELEASE MEDQUIST REPORTS REVENUE AND EPS FOR THIRD QUARTER 2001 (In thousands, except per share data) MARLTON, NJ October 24, 2001 - MedQuist Inc. reported record revenue of approximately $102.7 million for the three months ended September 30, 2001. EBITDA for the third quarter of 2001 was $23.9 million or 23.3% of revenue, which represents a 21.0% increase versus the third quarter 2000. Net income was $10.9 million or $0.29 per share on a diluted basis. For the nine-month period ended September 30, 2001, MedQuist generated $295.8 million in revenue. Proforma EBITDA for the nine-month period was $68.1 million or 23.0% of revenue. Proforma net income was $32.2 million or $0.85 per share on a diluted basis. Proforma results exclude approximately $3.0 million of pretax income related to a favorable legal settlement and $600,000 of pretax income related to the adjustment of the restructuring reserves established in 1997 and 1998. David A. Cohen, Chairman and Chief Executive Officer, stated, "MedQuist generated solid results during the third quarter of 2001 in spite of increased expenses related to development of our digital platform, which was accelerated by our April acquisition of Speech Machines. We estimate that the events of September 11 effectively delayed two to three days' revenue in the third quarter 2001 with a corresponding effect on the bottom line. Recent tragic events notwithstanding, MedQuist still managed to increase third quarter EBITDA by 21% versus prior year. MedQuist remains an extremely strong company, with a blue chip client base, high recurring revenue, strong earnings and consistent cash flow. Management is enthusiastic about leveraging recent acquisitions and technology enhancements into profitable growth in medical information management services." On October 22nd, 2001, Lernout & Hauspie Speech Products, N.V. and its unsecured creditors committee selected MedQuist's $25 million offer as the winning bid in the auction for L&H's medical transcription business. The sale is subject to bankruptcy court approval. David Cohen added, "We expect this slightly accretive stock purchase to close in early November. We look forward to adding L&H's talented transcriptionists and management to the MedQuist team as we continue to expand the depth of our service offering to our valued hospital customers." MedQuist is the largest electronic medical transcription service company in the United States. Other than historical information set forth herein, this press release contains forward-looking statements, which involve risks and uncertainties. The Company's actual results may differ materially from those anticipated or implied in any such forward-looking statements as a result of various risks, including, without limitation, rapidly changing technology; inability to manage and maintain growth; inability to penetrate new markets; inability to make and successfully integrate acquisitions and transition our business strategy; decreased demand for existing products; lack of a market for new products; and failure to successfully negotiate agreements to take advantage of the opportunities facing MedQuist to broaden its service offering. Additional risks associated with the Company's business can be found in its December 31, 2000 Annual Report on Form 10-K and its other periodic filings with the SEC. Contact: Brian J. Kearns, Chief Financial Officer, MedQuist Inc., 856-810-8000 x-4418 Tables Follow -6- MedQuist Inc. Financial Highlights (unaudited) In thousands, except per share data Three Months Ended September 30, -------------------------------- 2001 2000(2) -------- --------- Revenue $102,695 $90,648 EBITDA (1) 23,932 19,783 Income before income taxes 17,657 15,364 Net Income 10,860 9,218 Income per common share Basic $0.29 $0.25 Diluted $0.29 $0.25 Weighted average shares outstanding ----------------------------------- Basic 36,868 36,519 Diluted 37,870 37,369 Nine Months Ended September 30, -------------------------------- 2001(3) 2000(4) --------- --------- Revenue $295,772 $274,149 EBITDA (1) 68,055 67,269 Income before income taxes 52,277 53,747 Net Income 32,151 32,248 Income per common share Basic $0.87 $0.88 Diluted $0.85 $0.87 Weighted average shares outstanding ----------------------------------- Basic 36,831 36,649 Diluted 37,703 37,131 (1) Earnings before interest, taxes, depreciation and amortization. (2) Excludes approximately $6,255 related to costs associated with Philips' tender offer. (3) Excludes approximately $3,000 of pretax income related to the favorable settlement of a lawsuit and $600 of pretax income related to the adjustment of the restructure reserves established in 1997 and 1998. (4) Excludes approximately $1,013 of pretax income related to the adjustment of the restructure reserves established in 1997 and 1998, with approximately $3,675 of the gain from the sale of an investment and approximately $6,255 related to costs associated with Philips' tender offer. -7- EX-5.3 5 ex5-3.txt EX-5.3 Exhibit 5.3 ----------- Risk Factors Concerning Forward Looking Statements -------------------------------------------------- During our investor conference call held on the date of this filing we referred to, and during future oral disclosures or written statements we may refer to, certain risk factors concerning forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements include forward-looking language such as "will likely result," "may," "are expected to," "is anticipated," "estimated," "projected," "intends to," or other similar words. Our actual results are likely to differ, and could differ materially, from the results expressed in, or implied by, these forward-looking statements. There are many factors that could cause these forward-looking statements to be incorrect, including but not limited to the following risks: risks associated with (1) our ability to recruit and retain qualified transcriptionists; (2) inability to complete and assimilate acquisitions of businesses; (3) dependence on our senior management team; (4) the impact of new services or products on the demand for our services; (5) our dependence on a single line of business; (6) our ability to expand our customer base; (7) our ability to maintain our current growth rate in revenue and earnings; (8) the volatility of our stock price; (9) our ability to compete with others; (10) changes in law, including, without limitation, the Health Insurance Portability and Accountability Act of 1996 (HIPAA); (11) infringement on the proprietary rights of others; (12) our failure to comply with confidentiality requirements, including, without limitation, those imposed under HIPAA; (13) changes in economic conditions; and (14) inherent uncertainties in general relating to predicting future financial results and events. When considering these forward-looking statements, you should keep in mind these risk factors and other cautionary statements, and should recognize that those forward-looking statements speak only as of the date made. MedQuist does not undertake any obligation to update any forward-looking statement included in this Form 8-K or made elsewhere. -8-