MedQuist Holdings Inc. (NASDAQ: MEDH):
Fourth Quarter
Highlights
- Total clinical documentation volume
increased 37% to 850 million lines
- Adjusted EBITDA increased 66% to
$27.6 million, or 25% of net revenues
- Adjusted Net Income per diluted
share - adjusted for the IPO and exchange offer up 22% to
$0.28
- Percentage of total clinical
documentation volume produced offshore and edited post speech
recognition reaches 42% and 71%
- Issues performance goals for
2011
Capital Structure and Liquidity
Highlights
- Full year free cash flow exceeded
60% of Adjusted EBITDA
- Improved liquidity with new $200
million term loan, $25 million credit facility and $85 million in
Senior Notes
- Sale of A-Life Medical and Patient
Financial Services generated $32 million in proceeds
- Closed IPO totaling 4.5 million
shares, including 3.0 million primary shares and 1.5 million
secondary shares
- Completed exchange offers that
result in approximately 97% ownership of MedQuist Inc.
The highlights above, as well as the discussion below, contain
certain non-GAAP financial measures that, together with applicable
GAAP financial measures, we utilize to evaluate the results of our
performance. Refer to the section of this release entitled
“Non-GAAP Financial Measures” for further discussion, as well as
the tables attached to this release that reconcile these non-GAAP
financial measures to applicable GAAP financial measures.
MedQuist Holdings Inc. (NASDAQ: MEDH), a leading provider of
integrated clinical documentation solutions for the U.S. healthcare
industry, announced its financial results for the fourth quarter
and full year ended December 31, 2010. The Company’s consolidated
statements of operations contained herein give effect to the
reclassification of the Patient Financial Services business into
discontinued operations.
Fourth Quarter Results
Net revenues increased 29% to $110.5 million for the three
months ended December 31, 2010, compared with $85.8 million for the
three months ended December 31, 2009, including $29.9 million in
net revenues contributed by the acquisition of Spheris in April
2010. Total clinical documentation volume for the fourth quarter of
2010 increased 37% to 850 million lines compared with 620 million
lines in the prior-year period. The revenue trend reflects our
efforts to offer lower pricing to our customers in exchange for
increased offshore production and speech recognition; ensuring
higher customer retention at higher margins.
Adjusted EBITDA for the fourth quarter of 2010 improved to $27.6
million, or 25.0% of net revenues, compared with $16.7 million, or
19.5% of net revenues, for the prior-year period. The increase in
Adjusted EBITDA and margin is the result of higher utilization of
offshore resources and higher percentage of volume edited post
speech recognition. Increased volumes from the acquisition of
Spheris added to the Company’s scalable platform and allowed the
Company to realize $7 million in synergies during the fourth
quarter.
Adjusted net income for the fourth quarter of 2010 was $14.4
million, or $0.28 per diluted share - adjusted for the IPO and
exchange offer, compared with $11.9 million, or $0.23 per diluted
share - adjusted for the IPO and exchange offer, in the prior-year
period. Net income attributable to common shareholders for the
fourth quarter of 2010 was $1.4 million, or $0.04 per diluted
share, compared with $275,000, or $0.01 per diluted share, reported
in the prior-year period.
Free cash flow for the fourth quarter of 2010 was $13.5 million
compared with $13.1 million in the fourth quarter of 2009.
Fourth Quarter Operating Metrics 2010
2009 Total clinical documentation volume: 850 million lines
620 million lines Transcription volumes processed offshore: 42% 39%
Transcription volumes edited post speech recognition: 71% 53%
Robert Aquilina, Chairman of MedQuist Holdings, said, “Through
our industry leading platform, we are giving our customers the
features, customer service capabilities, and cost savings they
desire. Our higher volumes have enabled us to leverage the scale of
our platform while also realizing the benefits of offshore
resources and post speech recognition editing. The acquisition and
turnaround of two companies in the last two years speaks to the
success of our strategy with a five-fold increase in Adjusted
EBITDA during that period and, most recently, the $7 million of
synergies gained in the fourth quarter, or $28 million annualized,
from the integration of Spheris. We will look to continue this
performance in 2011 as well as organic growth derived from a
relentless focus on new business.”
Full Year 2010 Results
Net revenues increased 18% to $417.3 million for the year ended
December 31, 2010 compared with $353.9 million for the year ended
December 31, 2009, including $88 million in net revenues from the
acquisition of Spheris in April 2010. Total clinical documentation
volume in 2010 increased 24% to 3.1 billion lines compared with 2.5
billion lines in 2009. Revenue trends for 2010 are consistent with
the factors cited above for the fourth quarter.
Adjusted EBITDA increased to $85.5 million, or 20.5% of net
revenues, for 2010, compared with $59.7 million, or 16.9% of net
revenues, for 2009. The increase in Adjusted EBITDA and margin
during 2010 is the result of higher utilization of offshore
resources and higher percentage of volume edited post speech
recognition, as well as increased volumes resulting from the
acquisition of Spheris and related synergies. The full year 2010
results only reflect $12 million of Spheris acquisition synergies
due to timing of the acquisition, of which $7 million was realized
in the fourth quarter.
Adjusted net income for 2010 was $52.3 million, or $1.01 per
diluted share - adjusted for the IPO and exchange offer, compared
with $39.9 million, or $0.79 per diluted share - adjusted for the
IPO and exchange offer, for 2009. Net income attributable to common
shareholders for 2010 was $5.8 million, or $0.16 per diluted
share, compared with a net loss attributable to common shareholders
of $(2.0) million, or $(0.06) per diluted share, for 2009.
Free cash flow for 2010 was $54.5 million compared with $44.2
million in 2009.
Full Year Operating Metrics 2010
2009 Total clinical documentation volume: 3.1 billion lines 2.5
billion lines Transcription volumes processed offshore: 41% 35%
Transcription volumes edited post speech recognition: 65% 48%
Liquidity and Capital
Structure
As of December 31, 2010, the Company had $67 million in cash and
$295 million in debt. During the fourth quarter of 2010, the
Company entered into a credit agreement consisting of a $200
million term loan along with a $25 million revolving credit
facility and borrowed an additional $85 million under a Senior
Subordinated Note. Proceeds were used to refinance existing
indebtedness and pay a special cash dividend of $53.9 million to
shareholders. The Company also improved its liquidity with the sale
of two non-strategic businesses during the quarter. In October, the
Company completed the sale of its interest in A-Life Medical for
cash consideration of $23.6 million of which $4.1 million will be
held in escrow until March 2012, resulting in an $8.8 million gain
in the fourth quarter. In December, the Company also divested its
Patient Financial Services business for total consideration of
$14.8 million, resulting in a $525,000 gain in the fourth quarter.
In addition to the $5 million scheduled principal amortization, the
Company also made an optional $20 million prepayment on its term
loan in the first quarter of 2011, thereby satisfying its principal
amortization obligations on its term loan through the first quarter
of 2012.
Our high level of cash generated as compared to our Adjusted
EBITDA reflects our continued ability to utilize our tax attributes
to absorb current period taxes. As of December 31, 2010, we had
federal net operating loss carry forward amounts of approximately
$102 million plus state net operating loss carry forward amounts of
approximately $286 million available to help off-set future period
taxable income amounts. We also had approximately $194 million of
capitalized tax intangibles that will be amortized against
operating income in future periods. Utilization of the net
operating loss carry forwards and intangible amortization amounts
are subject to annual limitations in future years, but are
anticipated to result in low cash tax amounts paid in the near
term.
Mr. Aquilina, noted, “The proceeds from the IPO and the
continued ability to convert Adjusted EBITDA into high levels of
free cash flow will allow us to execute on our growth initiatives.
Our highly efficient operating model is further enhanced by our
significant net operating loss tax carry forwards, the tax
amortization of acquired intangibles, and modest capital
expenditure requirements.”
On January 27, 2011, the Company changed its name from
CBaySystems Holdings Limited to MedQuist Holdings Inc., delisted
its common stock from the Alternative Investment Market of the
London Stock Exchange (AIM) and redomiciled from a British Virgin
Islands company to a Delaware corporation. On February 4, 2011,
MedQuist Holdings Inc. listed its shares on the NASDAQ and began
trading. MedQuist Holdings Inc. closed its initial U.S. public
offering of 3.0 million primary shares of common stock and 1.5
million secondary shares of its common stock on February 9, 2011.
The Company received approximately $22.3 million in proceeds, net
of the underwriting discount, and incurred approximately $7.5
million in additional fees and expenses associated with the
IPO.
On February 15, 2011, MedQuist Holdings Inc. completed a private
exchange through which it exchanged MedQuist Holdings Inc. shares
for MedQuist Inc. shares and increased its ownership of MedQuist
Inc. from 69.5% to 82.2%. The Company initiated a public exchange
offer for all remaining shares of MedQuist Inc. on February 3,
2011, which was subsequently completed on March 11, 2011 and
brought MedQuist Holdings Inc.’s ownership of MedQuist Inc. to
approximately 97%. The Company estimates that it will pay
additional fees and expenses associated with the exchange offers of
approximately $12.0 million. In accordance with the terms of a
memorandum of understanding entered into in connection with the
settlement of MedQuist Inc. shareholder litigation and subject to
final approval of the settlement by the Court, the remaining issued
and outstanding shares of MedQuist Inc. are expected to be
exchanged on the same terms as the public exchange in a short-form
merger by the end of the second quarter of 2011.
Performance Goals for
2011
The Company expects that volume growth, higher percentage of
volume edited using speech recognition technology and produced
offshore, growth in Adjusted EBITDA and Adjusted Net Income per
share will continue to be the primary metrics for assessing the
Company’s performance. With the completion of the recapitalization,
the Company is now in a position to implement the full integration
of MedQuist Inc. and MedQuist Holdings. To achieve this
integration, the Company is evaluating a potential restructuring
plan and believes a potential charge could range from $2.5 million
to $5.0 million. The restructuring plan will be finalized and
implemented throughout 2011 with the full benefit experienced by
early 2012.
The Company’s Performance Goals noted below include the expected
benefit in the second half of 2011 from additional integration
savings and assumes 52.2 million fully diluted common shares
outstanding for the year. The Performance Goals exclude any impact
from potential acquisitions.
Total clinical documentation volume: 3.5
billion to 3.7 billion lines Adjusted EBITDA: $112 million to $116
million Adjusted Net Income: $1.24 to $1.31 per diluted share -
adjusted for the IPO and exchange offer
Commenting on the 2011 outlook, Mr. Aquilina added, “We expect
to achieve volume growth in 2011 through significant, aggressive
sales efforts, and excellent customer service and retention. We
will also continue to benefit from the synergies from our
successful integration of Spheris, the increase in volume processed
offshore and edited post speech recognition, and our plans for
achieving additional synergies from the integration of MedQuist
Inc. later in the year. While we have made no projections for
acquisitions in our outlook, we will continue to explore potential
opportunities that create synergies through our lower cost
structure, add value to our industry leading platform, and/or
extend the range of solutions we provide.”
Investor Conference Call and Web
Simulcast
MedQuist Holdings will host a conference call on March 16, 2011,
at 9:00 a.m. CT to discuss its results of operations for the fourth
quarter of 2010. The number to call for the interactive
teleconference is (212) 231-2905. A replay of the conference call
will be available through Wednesday, March 23, 2011, by dialing
(402) 977-9140 and entering the confirmation number, 21514728.
A live broadcast of MedQuist Holdings quarterly conference call
will be available online at the Company's website,
www.medquistholdings.com, under Investor Relations or
http://www.videonewswire.com/event.asp?id=77420 on March 16, 2011,
beginning at 9:00 a.m. CT. The online replay will follow
shortly after the call and continue for one year.
About MedQuist Holdings
MedQuist Holdings is a leading provider of integrated clinical
documentation solutions for the U.S. healthcare system, and the
largest provider by revenue of clinical documentation based on
physicians’ dictation of patient interaction, or the physician
narrative, in the United States. MedQuist Holdings serves more than
2,400 hospitals, clinics, and physician practices throughout the
United States, including 40% of hospitals with more than 500
licensed beds.
MedQuist Holdings’ solutions convert the physician narrative
into a high quality and customized electronic record, and enable
hospitals, clinics, and physician practices to improve the quality
of clinical data as well as accelerate and automate the
documentation process. We believe our solutions improve physician
productivity and satisfaction, enhance revenue cycle performance,
and facilitate the adoption and use of electronic
health records. For more information, please visit our website
at www.medquistholdings.com.
Forward-Looking
Statements
Information provided and statements contained in this press
release that are not purely historical, such as statements
regarding our 2011 financial and operating performance, are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act
of 1934 and the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements only speak as of the date of this
press release and MedQuist Holdings Inc. assumes no obligation to
update the information included in this press release. Statements
made in this press release that are forward-looking in nature may
involve risks and uncertainties. Accordingly, readers are cautioned
that any such forward-looking statements are not guarantees of
future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict, including, without
limitation, specific factors discussed herein and in other releases
and public filings made by MedQuist Holdings Inc. (including
filings by MedQuist Holdings Inc. with the SEC). Although MedQuist
Holdings believes that the expectations reflected in such
forward-looking statements are reasonable as of the date made,
expectations may prove to have been materially different from the
results expressed or implied by such forward-looking statements.
Unless otherwise required by law, MedQuist Holdings also disclaims
any obligation to update its view of any such risks or
uncertainties or to announce publicly the result of any revisions
to the forward-looking statements made in this press release.
MedQuist Holdings Inc.
and Subsidiaries Consolidated Statements of Operations
(In thousands, except per share amounts) Unaudited
Three
Months Ended Year Ended December 31, December
31, 2010 2009 2010 2009 Net
revenues $ 110,534 $ 85,812 $ 417,326 $ 353,932 Cost of
revenues 64,308 54,254 259,194
229,701
Gross Profit
46,226 31,558 158,132
124,231
Operating costs and expenses: Selling,
general and administrative 15,398 12,504 61,062 53,089 Research and
development 3,086 2,369 12,030 9,604 Depreciation and amortization
8,872 6,446 32,617 25,366 Cost of legal proceedings and settlements
820 1,403 3,605 14,943 Acquistion and integration related charges
512 1,246 7,407 1,246 Restructuring charges 1,759
2,246 3,672 2,727
Total operating costs and expenses 30,447
26,214 120,393 106,975
Operating income 15,779 5,344 37,739 17,256 Gain on sale of
investment 8,780 8,780 - Equity in income (loss) of affiliated
company 77 (602 ) 693 1,933 Other income (expense) (100 ) 12 460 13
Loss on extinguishment of debt (13,525 ) - (13,525 ) - Interest
expense, net (7,299 ) (2,149 ) (19,268 )
(9,019 )
Income from continuing operations before
income taxes and noncontrolling interests 3,712 2,605 14,879
10,183 Income tax provision (benefit) (2,159 )
(221 ) (2,312 ) 1,012
Net income from continuing
operations
$ 5,871 $ 2,826 $ 17,191 $ 9,171
Discontinued Operations Income (loss) from discontinued
Patient Financial Services business, net of tax 218
(71 ) 556 (1,351 )
Income
(loss) from discontinued operations 218
(71 ) 556 (1,351 )
Net income 6,089
2,755 17,747 7,820 Less: Net income attributable to
noncontrolling interests (4,006 ) (1,793 )
(9,240 ) (7,085 )
Net income attributable to
MedQuist Holdings Inc. $ 2,083 $ 962 $ 8,507
$ 735
Net income (loss) per common share
from continuing operations Basic $ 0.03 $ 0.01 $
0.14 $ (0.02 ) Diluted $ 0.03 $ 0.01 $ 0.14
$ (0.02 )
Net income (loss) per common share from
discontinued operations Basic $ 0.01 $ - $ 0.02
$ (0.04 ) Diluted $ 0.01 $ - $ 0.02 $
(0.04 )
Net income (loss) per common share attributable
to MedQuist Holdings Inc. Basic $ 0.04 $ 0.01 $
0.16 $ (0.06 ) Diluted $ 0.04 $ 0.01 $ 0.16
$ (0.06 ) Weighted average shares outstanding: Basic
35,158 35,013 35,102
34,692 Diluted 36,370 35,013
35,954 34,692
MedQuist Holdings Inc. and
Subsidiaries Consolidated Balance Sheets (In
thousands) Unaudited December 31,
December 31, 2010 2009
Assets Current assets: Cash and cash equivalents $
66,779 $ 29,633 Accounts receivable, net of allowance of $1,466 and
$1,753, respectively 82,038 53,099 Other current assets
23,706 8,739 Total current assets
172,523 91,471 Property and equipment, net 23,018 19,511
Goodwill 90,268 53,187 Other intangible assets, net 107,962 72,838
Deferred income taxes 6,896 2,495 Other assets 14,212
13,566 Total assets $ 414,879 $ 253,068
Liabilities and Equity Current liabilities:
Current portion of long term debt $ 27,817 $ 6,207 Accounts payable
11,358 11,191 Accrued expenses and other current liability 36,917
29,803 Accrued compensation 16,911 16,034 Deferred revenue
10,570 9,924 Total current liabilities 103,574
73,159 Long term debt 266,677 101,133 Deferred income taxes 4,221
2,166 Due to related parties 3,537 2,185 Other non-current
liabilities 2,360 2,124 Total
liabilities 380,368 180,767 Commitments
and contingencies Total equity:
Preferred stock - $0.10 par value;
authorized 25,000 shares; none issued or outstanding
- -
Common stock - $0.10 par value; authorized
300,000 shares; 35,158 and 35,013 shares issued and outstanding,
respectively
3,516 3,501 Additional paid in capital 148,265 149,339 Accumulated
deficit (107,179 ) (115,686 ) Accumulated other comprehensive loss
(663 ) (174 ) Total MedQuist Holdings Inc.
stockholders' equity 43,939 36,980 Noncontrolling interests
(9,428 ) 35,321 Total equity 34,511 72,301
Total liabilities and equity $ 414,880 $ 253,068
MedQuist
Holdings Inc. and Subsidiaries Consolidated Statements of
Cash Flow (In thousands) Unaudited
Years ended December 31,
2010 2009
Operating activities:
Net income $ 17,747 $ 7,820 Adjustments to reconcile net
income to cash provided by operating activities: Depreciation and
amortization 33,454 26,977 Gain on sale of investment (8,780 ) -
Equity in income of affiliated company (693 ) (1,933 ) Deferred
income taxes (3,566 ) 679 Share based compensation 764 856
Provision for doubtful accounts 1,538 2,306 Non-cash interest
expense 4,132 3,272 Loss on extinquishment of debt 13,525 - Other
(963 ) 200 Changes in operating assets and liabilities:
Accounts receivable (9,962 ) 3,816 Other current assets (1,858 )
2,185 Other non-current assets (495 ) (615 ) Accounts payable 981
871 Accrued expenses (5,378 ) (3,634 ) Accrued compensation (4,244
) 1,904 Deferred revenue 569 (2,128 ) Other non-current liabilities
(546 ) 94 Net cash provided by operating
activities $ 36,225 $ 42,670
Investing
activities: Purchase of property and equipment (7,152 ) (6,475
) Proceeds from sale of investments 19,469 - Purchases of
capitalized intangible assets (7,155 ) (2,995 ) Proceeds from sale
of subsidiaries 12,547 - Payments for acquisitions and interests in
affiliates, net of cash acquired (99,793 ) (2,690 )
Net cash used in investing activities (82,084 )
(12,160 )
Financing activities: Proceeds from debt
392,352 659 Repayment of debt (229,727 ) (28,613 ) Dividends paid
to noncontrolling interests (53,913 ) (15,256 ) Debt issuance costs
(21,607 ) (1,201 ) Payments related to initial public offering
(3,745 ) - Net cash provided by (used in)
financing activities 83,360 (44,411 )
Effect of exchange rate changes (355 ) 666
Net increase (decrease) in cash and cash equivalents
37,146 (13,235 ) Cash and cash equivalents -
beginning of period 29,633 42,868
Cash and cash equivalents - end of period $ 66,779 $
29,633
MedQuist Holdings Inc. and Subsidiaries Reconciliation of
Net Income to Adjusted EBITDA (In thousands)
Unaudited
Three Months Ended Year Ended December
31, December 31, 2010 2009
2010 2009 Net income
attributable to MedQuist Holdings Inc. $ 2,083 $ 962 $ 8,507 $ 735
Net income attributable to noncontrolling interest 4,006
1,793 9,240 7,085 (Income) loss from discontinuing operations (218
) 71 (556 ) 1,351 Income tax provision (benefit) (2,159 ) (221 )
(2,312 ) 1,012 Interest expense, net 7,299 2,149 19,268 9,019 Loss
on extinguishment of debt 13,525 - 13,525 - Depreciation and
amortization 8,872 6,446 32,617 25,366 Restructuring charges 1,759
2,246 3,672 2,727 Acquisition and integration related charges 512
1,246 7,407 1,246 Cost of legal proceedings and settlements 820
1,403 3,605 14,943 Accrual reversals - - - (1,864 ) Gain on sale of
investment (8,780 ) - (8,780 ) - Equity in (income) loss of
affiliated company (77 ) 602
(693 ) (1,933 ) Adjusted EBITDA $
27,642 $ 16,697 $ 85,500
$ 59,687 Adjusted EBITDA as a percentage of
net revenues 25.0 % 19.5 % 20.5 % 16.9 %
MedQuist Holdings Inc. and
Subsidiaries Free Cash Flow (In thousands)
Unaudited
Three Months Ended Year Ended December
31, December 31, 2010 2009
2010 2009 Adjusted EBITDA $
27,642 $ 16,697 $ 85,500 $ 59,687
Less:
Interest expense, net
(7,299 ) (2,149 ) (19,268 ) (9,019 )
Non-cash interest expense
803 - 4,132 3,272
Capital expenditures (including
internal-use software)
(4,687 ) (2,331 ) (14,307 ) (9,470 )
Tax (provision) benefit
2,159 221 2,312 (1,012 )
Add:
Deferred tax provision (benefit)
(5,072 ) 693 (3,903 )
695 Free Cash Flow $ 13,546
$ 13,131 $ 54,466 $
44,153
MedQuist
Holdings Inc. and Subsidiaries Adjusted Net Income
(In thousands) Unaudited Adjusted Net Income:
Adjusted EBITDA $ 27,642 $ 16,697 $ 85,500 $ 59,687
Amortization (excluding acquired intangibles) (3,869 ) (3,534 )
(16,482 ) (13,686 )
Cash interest (total expenses less
non-cash)
(6,496 ) (2,149 ) (15,137 ) (5,747 )
Current tax provision (benefit)
(2,913 ) 914 (1,590 )
(333 ) Adjusted Net Income $ 14,364
$ 11,928 $ 52,291 $
39,921 Adjusted Net Income Per Share - Adjusted for
IPO and Exchange Offer: Basic (a) $ 0.28 $ 0.23 $ 1.03 $ 0.79
Diluted (a) $ 0.28 $ 0.23 $ 1.01 $ 0.79 (a) Based on
proforma shares outstanding for the IPO and Exchange Offer. See
Share Calculation below.
MedQuist Holdings Inc. and Subsidiaries Share
Calculation (In thousands) Unaudited
Three
Months Ended Year Ended December 31, December
31, 2010 2009 2010
2009 MedQuist Holdings Shares Basic
outstanding 35,158 35,013 35,012 34,692 Effect of diluted options
1,212 - 942 - Diluted shares 36,370
35,013 35,954 34,692 MedQuist, Inc. Shares Basic outstanding
37,556 37,556 37,556 37,556 Effect of diluted options 34
- - - Diluted shares 37,590 37,556 37,556
37,556 Minority interest - basic (1) 11,455 11,455 11,455
11,455 Minority interest - diluted (1) 11,465 11,455 11,455 11,455
Proforma Shares Outstanding for Exchange Offer Basic 46,613
46,468 46,467 46,147 Diluted 47,835 46,468 47,409 46,147
Proforma Shares Outstanding for IPO and Exchange Offer Basic 50,932
50,787 50,786 50,466 Fully Diluted 52,124 50,787 51,728 50,466
(1) Assumes the issuance of our common stock in exchange for
shares of MedQuist Inc. common stock pursuant to terms of private
and public exchange offers, which will increase our ownership in
MedQuist Inc. from 69.5% to 100%. We have completed our exchange
offers, and we currently own approximately 97% of MedQuist Inc.
Total Clinical Documentation Volume
Management believes that total clinical documentation volume is
an important measure of the Company’s operating results. Total
clinical documentation volume is defined as total lines processed
on our clinical documentation platforms and/or transcribed or
edited by our personnel.
Non-GAAP Financial
Measures
In addition to the United States generally accepted
accounting principles, or GAAP, results provided throughout this
document, MedQuist Holdings Inc. has provided certain
non-GAAP financial measures to help evaluate the results of our
performance. The Company believes that these non-GAAP financial
measures, when presented in conjunction with comparable GAAP
financial 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. The tables attached to this press release
include a reconciliation of these historical non-GAAP financial
measures to the most directly comparable GAAP financial
measures.
We also present Adjusted EBITDA and Adjusted Net Income on a
forward-looking basis as part of our Performance Goals for 2011. We
are unable to present a quantitative reconciliation of these
forward-looking non-GAAP financial measures to the most directly
comparable forward-looking GAAP financial measures because
management cannot predict, with sufficient reliability,
contingencies relating to potential changes in tax valuation
allowances, potential changes to customer accommodation accruals,
potential restructuring impacts, contingencies related to past and
future acquisitions, and changes in fair values of our derivative
instruments, all of which are difficult to estimate primarily due
to dependencies on future events.
Adjusted EBITDA
Adjusted EBITDA, a non-GAAP financial measure, is defined by the
Company as Net Income excluding taxes, interest, equity in income
of an affiliated company, depreciation, amortization, cost of legal
proceedings and settlements, acquisition related charges,
restructuring charges and certain non-recurring accrual
reversals.
Management believes Adjusted EBITDA is useful as a 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 Net income to Adjusted EBITDA is provided
above.
Free Cash Flow
Free Cash Flow, a non-GAAP financial measure, is defined by the
Company as Adjusted EBITDA less interest expense (net of non-cash
interest), less capital expenditures (including capitalized
software development costs), and less current tax provision.
Management believes that utilization of Free Cash Flow is an
important non-GAAP measure of the Company’s ability to convert
operating results into cash.
Adjusted Net Income
Adjusted Net Income, a non-GAAP financial measure, is defined by
the Company as Adjusted EBITDA less amortization expense (net of
amortization related to acquired intangibles), less interest
expense (net of non-cash interest), and less current tax provision.
We measure Adjusted Net Income based on Proforma Shares Outstanding
(see below). Management believes that utilization of Adjusted Net
Income is an important non-GAAP financial measure of our normalized
operating results.
Proforma Shares Outstanding for Exchange Offer
For purposes of evaluating our results on per-share metrics,
many of our computations utilize proforma share computations. Our
measure of proforma shares includes our Basic and Diluted share
computations utilized for GAAP purposes, plus our estimate of the
impacts of minority interest shares outstanding of 11.5 million
shares.
Proforma Shares Outstanding for Initial Public Offering and
Exchange Offer
For purposes of evaluating our results on per-share metrics,
many of our computations utilize proforma share computations. Our
measure of proforma shares include our Basic and Diluted share
computations utilized for GAAP purposes, plus our estimate of the
impacts of minority interest shares outstanding of 11.5 million
shares and 3.0 million primary shares issued by us in our initial
public offering as well as 1.3 million other shares issued after
December 31, 2010.
Medx (CE) (USOTC:MEDH)
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