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8-K - FORM 8-K - MModal Inc. | w82864e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Investor Contacts: |
||
Tony James
|
Tripp Sullivan | |
Chief Financial Officer
|
Corporate Communications, Inc | |
tjames@medquist.com
|
tripp.sullivan@cci-ir.com | |
(615) 261-1509
|
(615) 324-7335 |
MedQuist Holdings Reports First Quarter Results
First Quarter Highlights
| Total clinical documentation volume reaches a quarterly high of 866 million lines for the first quarter of 2011; a 39% increase versus prior year same period | ||
| Adjusted EBITDA increases 94% versus prior year same period to $26.8 million |
| Adjusted Net Income per diluted share adjusted for the IPO and exchange offer up 82% versus prior year same period to $0.31 |
| Continued strong free cash flow |
| Customers demand increases offshore volume goal, and volumes edited post speech recognition continue to grow |
| Integration of Spheris completed, and integration of MedQuist Inc. and MedQuist Holdings commences | ||
| Legacy litigation resolved | ||
| Updates guidance to reflect first quarter performance |
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.
FRANKLIN, Tenn. (May 16, 2011) 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 three months ended March 31, 2011.
Operating Results
Net revenues increased 31% to $111.2 million for the first quarter of 2011, including $31.0 million
in net revenues contributed by the acquisition of Spheris compared with $85.1 million for the first
quarter of 2010. The Spheris acquisition was closed in April 2010. Volumes improved versus prior
year same quarter due to the impacts of the Spheris acquisition as well as approximately 3% of
organic growth unrelated to the impacts of the acquisition. Additionally, volumes improved to 866
million lines for the current quarter representing an improvement of 2% versus the fourth quarter
of 2010.
Adjusted EBITDA for the first quarter of 2011 was $26.8 million, or 24% of net revenues, compared
with $13.8 million, or 16% of net revenues, for the first quarter of 2010. The year-over-year
increase in Adjusted EBITDA and margin is the result of higher utilization of offshore resources
and higher percentage of volume edited post speech recognition, as well as synergies realized from
adding volumes from the Spheris acquisition to our scalable platform. Adjusted EBITDA for the first
quarter of 2011 versus
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MEDH Announces First Quarter Results
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the fourth quarter of 2010 reflects the seasonal variations in volumes and
higher employer taxes, as well as movement of volumes to the Companys global production
facilities.
Adjusted net income for the first quarter of 2011 was $16.4 million, or $0.31 per diluted share
adjusted for the IPO and exchange offer, compared with $8.7 million, or $0.17 per diluted share
adjusted for the IPO and exchange offer, in the first quarter of 2010. Net income attributable to
common shareholders for the first quarter of 2011 was $2.3 million, or $0.05 per diluted share,
compared with $1.4 million, or $0.04 per diluted share, reported in the first quarter of 2010.
During the three months ended March 31, 2011, we recorded net restructuring charges of $5.4 million
including approximately $3.2 million from a reduction in workforce and a charge of $1.5 million
representing future lease payments on MedQuist Inc.s former corporate headquarters in Mt. Laurel,
New Jersey, and former data center in Sterling, Virginia, offset by estimated sublease rentals. The
future minimum lease payments on the Mt. Laurel facility total $2.5 million. In addition, we
recorded non-cash stock compensation charges of $0.7 million due to the acceleration of stock
option vesting and the extension of the stock option exercise period for terminated employees. The
benefits from these restructuring efforts are not expected to be fully realized until 2012.
The Company also recognized $9.7 million of income associated with the termination of its customer
accommodation program, offset by $1.8 million in charges of related litigation costs and $0.4
million of fees incurred in connection with the minority shareholder litigation associated with our
exchange offers.
Operating Metrics | Q1 2011 | Q4 2010 | Q1 2010 | |||
Total clinical
documentation
volume: |
866 million lines | 850 million lines | 624 million lines | |||
Transcription
volumes processed
offshore: |
41% | 42% | 41% | |||
Transcription
volumes edited post
speech recognition: |
72% | 71% | 57% |
Peter Masanotti, Chief Executive Officer of MedQuist Holdings, said, We are off to a good start to
2011 and in line with our plan for the year. The sequential and year-over-year volume improvement
came from organic growth and our ability to stabilize the Spheris book of business. The sustained
increase in post speech recognition editing continues to enhance our productivity and our focus on
achieving integration savings is significantly reducing our direct costs.
Customers demand for our offshore resources continues to accelerate, and we are building a
sizable inventory. Given the size and complexity of this new work, we are executing a very
conservative rollout of these conversions. The strong demand gives us increased confidence that we
can reach our goal of 50% offshore by the end of the year.
Liquidity and Capital Structure
As of March 31, 2011, the Company had $75.6 million in cash and $269.5 million in debt and capital
lease obligations. During the first quarter of 2011, the Company paid its scheduled $5 million term
loan payment
plus an additional $20 million in optional prepayment amounts on its senior facility, thereby
satisfying its principal amortization obligations on its term loan through the first quarter of
2012. Free cash flow for the first quarter of 2011 increased to $13.3 million compared with $8.8
million in the first quarter of 2010. The first quarter capital expenditures were higher than
expected average quarterly expenditures for the remainder of the year due to costs associated with
integration work. In the second quarter, the Company expects to pay an additional $12.0 million
related to the IPO and exchange offers.
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The Companys high level of cash generated as compared to its Adjusted EBITDA reflects its
continued ability to utilize available tax attributes to absorb current period taxes. At December
31, 2010, the Company had federal net operating loss carry forward amounts of approximately $102
million with approximately 80% available through 2014 to help off-set future period taxable income
amounts. Additionally, the Company had approximately $194 million of capitalized tax intangibles,
of which approximately 60% are expected to be amortized for tax purposes over the next five years.
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.
In accordance with the terms of a Settlement Stipulation entered into in connection with the
settlement of MedQuist Inc. shareholder litigation and subject to final approval of the settlement
by the Court, the 3% of remaining issued and outstanding shares of MedQuist Inc. not already owned
by MedQuist Holdings Inc. are to be exchanged on the same terms as the public exchange initiated on
February 3, 2011, through a short-form merger that is expected to be completed by the end of the
third quarter of 2011. In connection with this short-form merger and to immediately reduce
duplicate costs of being a public company, MedQuist Inc. delisted its common stock from NASDAQ.
Subsequent to completing the short-form merger, fully diluted shares outstanding will increase to
approximately 52 million.
Performance Goals for 2011
Based on the first quarter results, the Company has updated its previously issued performance goals
for 2011 as noted below:
Total clinical documentation volume:
|
3.5 billion to 3.7 billion lines | |
Adjusted EBITDA:
|
$113 million to $116 million | |
Adjusted Net Income:
|
$1.26 to $1.33 per diluted share adjusted for the IPO and exchange offer |
Commenting on the 2011 outlook, Mr. Masanotti added, Im pleased with the improving outlook for
the year and confident the integration work will allow us to have one set of goals and objectives
across companies, driving efficiencies that will allow us to reduce costs in accordance with our
plan and provide better service to our customers. The current market environment also continues to
play to our strengths as smaller clinical documentation providers are struggling to compete with
our ability to provide end-to-end clinical solutions combined with speech recognition and offshore
resources.
Investor Conference Call and Web Simulcast
MedQuist Holdings will host a conference call on May 16, 2011, at 9:00 a.m. CT to discuss its
results of operations for the first quarter of 2011. The number to call for the interactive
teleconference is (212) 231-2901. A replay of the conference call will be available through Monday,
May 23, 2011, by dialing (402) 977-9140 and entering the confirmation number, 21520377.
A live broadcast of MedQuist Holdings quarterly conference call will be available online at the
Companys website, www.medquistholdings.com, under Investor Relations or
http://www.videonewswire.com/event.asp?id=78513 on May 16, 2011, beginning at 9:00 a.m. CT. The
online replay will follow shortly after the call and continue for one year.
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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.
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MedQuist Holdings Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Unaudited
Consolidated Statements of Operations
(In thousands, except per share amounts)
Unaudited
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net revenues |
$ | 111,236 | $ | 85,087 | ||||
Cost of revenues |
66,021 | 54,615 | ||||||
Gross profit |
45,215 | 30,472 | ||||||
Operating costs and expenses: |
||||||||
Selling, general and administrative |
16,192 | 14,480 | ||||||
Research and development |
2,251 | 2,281 | ||||||
Depreciation and amortization |
8,418 | 6,139 | ||||||
Cost of legal proceedings, settlements and accomodations |
(7,513 | ) | 1,043 | |||||
Acquisition and restructuring |
6,878 | 984 | ||||||
Total operating costs and expenses |
26,226 | 24,927 | ||||||
Operating income |
18,989 | 5,545 | ||||||
Equity in income of affiliated company |
| 514 | ||||||
Other income |
10 | 77 | ||||||
Interest expense, net |
(7,037 | ) | (1,869 | ) | ||||
Income from continuing operations before income taxes and noncontrolling
interests |
||||||||
11,962 | 4,267 | |||||||
Income tax provision (benefit) |
1,144 | (20 | ) | |||||
Net income from continuing operations |
10,818 | 4,287 | ||||||
Income from discontinued operations, net of tax |
| 30 | ||||||
Net income |
10,818 | 4,317 | ||||||
Less: Net income attributable to noncontrolling interests |
(1,506 | ) | (2,229 | ) | ||||
Net income attributable to MedQuist Holdings Inc. |
$ | 9,312 | $ | 2,088 | ||||
Net income per common share from continuing operations |
||||||||
Basic |
$ | 0.06 | $ | 0.04 | ||||
Diluted |
$ | 0.05 | $ | 0.04 | ||||
Net income per common share from discontinued operations |
||||||||
Basic |
$ | | $ | | ||||
Diluted |
$ | | $ | | ||||
Net income per common share attributable to MedQuist Holdings Inc. |
||||||||
Basic |
$ | 0.06 | $ | 0.04 | ||||
Diluted |
$ | 0.05 | $ | 0.04 | ||||
Weighted average shares outstanding: |
||||||||
Basic |
40,933 | 35,013 | ||||||
Diluted |
41,980 | 35,183 | ||||||
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MedQuist Holdings Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
Unaudited
Consolidated Balance Sheets
(In thousands)
Unaudited
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 75,635 | $ | 66,779 | ||||
Accounts receivable, net of allowance of $1,662 and $1,466, respectively |
77,997 | 82,038 | ||||||
Other current assets |
20,164 | 23,706 | ||||||
Total current assets |
173,796 | 172,523 | ||||||
Property and equipment, net |
24,492 | 23,018 | ||||||
Goodwill |
90,250 | 90,268 | ||||||
Other intangible assets, net |
105,080 | 107,962 | ||||||
Deferred income taxes |
7,023 | 6,896 | ||||||
Other assets |
13,621 | 14,212 | ||||||
Total assets |
$ | 414,262 | $ | 414,879 | ||||
Liabilities and Equity |
||||||||
Current liabilities: |
||||||||
Current portion of long term debt |
$ | 7,946 | $ | 27,817 | ||||
Accounts payable |
14,049 | 11,358 | ||||||
Accrued expenses |
37,088 | 36,917 | ||||||
Accrued compensation |
20,071 | 16,911 | ||||||
Deferred revenue |
9,393 | 10,570 | ||||||
Related party payable |
5,000 | | ||||||
Total current liabilities |
93,547 | 103,573 | ||||||
Long term debt |
261,543 | 266,677 | ||||||
Deferred income taxes |
5,307 | 4,221 | ||||||
Related party payable noncurrent |
4,406 | 3,537 | ||||||
Other non-current liabilities |
2,449 | 2,360 | ||||||
Total liabilities |
367,252 | 380,368 | ||||||
Commitments and contingencies |
||||||||
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;
49,168 and 35,158 shares issued and outstanding, respectively |
4,917 | 3,516 | ||||||
Additional paid in capital |
141,287 | 148,265 | ||||||
Accumulated deficit |
(97,867 | ) | (107,179 | ) | ||||
Accumulated other comprehensive loss |
(729 | ) | (663 | ) | ||||
Total MedQuist Holdings Inc. stockholders equity |
47,608 | 43,939 | ||||||
Noncontrolling interests |
(598 | ) | (9,428 | ) | ||||
Total equity |
47,010 | 34,511 | ||||||
Total liabilities and equity |
$ | 414,262 | $ | 414,879 | ||||
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MedQuist Holdings Inc. and Subsidiaries
Consolidated Statements of Cash Flow
(In thousands)
Unaudited
Consolidated Statements of Cash Flow
(In thousands)
Unaudited
Three Months Ended | ||||||||
2011 | 2010 | |||||||
Operating activities: |
||||||||
Net income |
$ | 10,818 | $ | 4,317 | ||||
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
Depreciation and amortization |
8,418 | 6,363 | ||||||
Equity in income of affiliated company |
| (515 | ) | |||||
Deferred income taxes |
1,091 | (359 | ) | |||||
Share based compensation |
978 | 144 | ||||||
Provision for doubtful accounts |
170 | 779 | ||||||
Non-cash interest expense |
858 | | ||||||
Other |
(796 | ) | (139 | ) | ||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
3,458 | (182 | ) | |||||
Other current assets |
(414 | ) | (141 | ) | ||||
Other non-current assets |
(135 | ) | 109 | |||||
Accounts payable |
(1,188 | ) | (1,622 | ) | ||||
Accrued expenses |
(1,837 | ) | (1,246 | ) | ||||
Accrued compensation |
3,136 | (1,577 | ) | |||||
Deferred revenue |
(1,177 | ) | (598 | ) | ||||
Other non-current liabilities |
59 | (151 | ) | |||||
Net cash provided by operating activities |
$ | 23,439 | $ | 5,182 | ||||
Investing activities: |
||||||||
Purchase of property and equipment |
(4,343 | ) | (1,928 | ) | ||||
Purchases of capitalized intangible assets |
(2,345 | ) | (1,109 | ) | ||||
Payments for acquisitions and interests in affiliates, net of cash acquired |
| (7,685 | ) | |||||
Net cash used in investing activities |
(6,688 | ) | (10,722 | ) | ||||
Financing activities: |
||||||||
Proceeds from debt |
| 2,769 | ||||||
Repayment of debt |
(25,789 | ) | (3,085 | ) | ||||
Debt issuance costs |
| (195 | ) | |||||
Net proceeds from issuance of common stock |
22,320 | | ||||||
Payments for offering costs |
(4,504 | ) | | |||||
Net cash used in financing activities |
(7,973 | ) | (511 | ) | ||||
Effect of exchange rate changes |
78 | 125 | ||||||
Net increase (decrease) in cash and cash equivalents |
8,856 | (5,926 | ) | |||||
Cash and cash equivalents beginning of period |
66,779 | 29,633 | ||||||
Cash and cash equivalents end of period |
$ | 75,635 | $ | 23,707 | ||||
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MedQuist Holdings Inc. and Subsidiaries
Reconciliation of Net Income to Adjusted EBITDA
(In thousands)
Unaudited
Reconciliation of Net Income to Adjusted EBITDA
(In thousands)
Unaudited
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net income attributable to MedQuist Holdings Inc. |
$ | 9,312 | $ | 2,088 | ||||
Net income attributable to noncontrolling interests |
1,506 | 2,229 | ||||||
Income from discontinued operations, net of tax |
| (30 | ) | |||||
Income tax provision (benefit) |
1,144 | (20 | ) | |||||
Interest expense, net |
7,037 | 1,869 | ||||||
Depreciation and amortization |
8,418 | 6,139 | ||||||
Acquisition and restructuring |
6,878 | 984 | ||||||
Cost of legal proceedings, settlements and accomodations |
(7,513 | ) | 1,043 | |||||
Equity in income of affiliated company |
| (514 | ) | |||||
Adjusted EBITDA |
$ | 26,782 | $ | 13,788 | ||||
Adjusted EBITDA as a percentage of net revenues |
24.1 | % | 16.2 | % |
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MedQuist Holdings Inc. and Subsidiaries
Free Cash Flow
(In thousands)
Unaudited
Free Cash Flow
(In thousands)
Unaudited
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Adjusted EBITDA |
$ | 26,782 | $ | 13,788 | ||||
Less: Interest expense (net of
non-cash interest expense of
$858 and
$60, respectively) |
(6,179 | ) | (1,809 | ) | ||||
Capital expenditures (including
capitalized software
development costs) |
(6,688 | ) | (3,037 | ) | ||||
Current tax provision |
(598 | ) | (110 | ) | ||||
Free Cash Flow |
$ | 13,317 | $ | 8,832 | ||||
MedQuist Holdings Inc. and Subsidiaries
Adjusted Net Income
(In thousands)
Unaudited
Adjusted Net Income
(In thousands)
Unaudited
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Adjusted Net Income: |
||||||||
Adjusted EBITDA |
$ | 26,782 | $ | 13,788 | ||||
Less: Amortization of capitalized intangible assets (excluding
acquired intangibles) |
(3,598 | ) | (3,172 | ) | ||||
Interest expense (net of non-cash interest expense of $858 and
$60, respectively) |
(6,179 | ) | (1,809 | ) | ||||
Current tax provision |
(598 | ) | (110 | ) | ||||
Adjusted Net Income |
$ | 16,407 | $ | 8,697 | ||||
Adjusted Net Income Per Share Adjusted for IPO and Exchange Offer: |
||||||||
Basic (a) |
$ | 0.32 | $ | 0.17 | ||||
Diluted (a) |
$ | 0.31 | $ | 0.17 |
(a) | Based on proforma shares outstanding for the IPO and Exchange Offer. See Share Calculation below. |
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MedQuist Holdings Inc. and Subsidiaries
Share Calculation
(In thousands)
Unaudited
Share Calculation
(In thousands)
Unaudited
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
MedQuist Holdings Shares |
||||||||
Basic outstanding |
40,933 | 35,013 | ||||||
Effect of
dilutive options |
1,047 | 170 | ||||||
Diluted shares |
41,980 | 35,183 | ||||||
Proforma impact of Minority Interest Shares (1) |
||||||||
Minority interest basic |
7,906 | 11,685 | ||||||
Minority interest diluted |
7,906 | 11,685 | ||||||
Proforma impact of IPO and Minority Shareholder Shares (2) |
||||||||
Basic |
2,309 | 4,320 | ||||||
Diluted |
2,309 | 4,320 | ||||||
Proforma Shares Outstanding for IPO and Exchange Offer |
||||||||
Basic |
51,148 | 51,018 | ||||||
Fully Diluted |
52,195 | 51,188 |
(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%. Also assumes exercise of in-the-money MedQuist Inc. options. We have completed our exchange offers, and we currently own approximately 97% of MedQuist Inc. | |
(2) | Adjusts for timing of issuance of shares of common stock to a related party during the quarter, as well as unissued shares to another minority owner. |
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Total Clinical Documentation Volume
Management believes that total clinical documentation volume is an important measure of the
Companys 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 Companys 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 Companys 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 and restructuring charges, discontinued operations
and certain non-recurring accrual reversals.
Management believes Adjusted EBITDA is useful as supplemental measures of the Companys financial
results because it removes costs not related to the Companys 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 Companys 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 for capitalized intangible assets (excluding 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.
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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.
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 and shares issued by us to a related party during the quarter in connection with
our initial public offering and shares to be issued to another minority shareholder.
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