MedQuist Announces Preliminary, Partial and Unaudited Financial Results.MT. LAUREL Laurel, cities, United States Laurel. 1 Town (1990 pop. 19,438), Prince Georges co., central Md., about halfway between Washington, D.C., and Baltimore; patented in the late 1600s, inc. 1870. , N.J. -- MedQuist Inc. (Pink Sheets: MEDQ.PK) announced today certain preliminary, partial and unaudited financial results, and provided updated information regarding previously-announced litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and governmental investigations and proceedings. Once the Company completes the financial assessment and review of its billing practices disclosed in the Company's previous filings with the SEC, KPMG KPMG Klynveld Peat Marwick Goerdeler (accounting firm) KPMG Kaiser Permanente Medical Group KPMG Keiner Prüft Mehr Genau (German) KPMG Kommen Prüfen Meckern Gehen LLP LLP - Lower Layer Protocol , the Company's independent registered public accounting firm, will complete the audit of the Company's financial statements. The Company is continuing the process of working toward becoming current in its periodic reports pursuant to the Securities Exchange Act of 1934. The Company's review of its current and prior period unaudited financial statements, as well as KPMG LLP's audits for those periods, may identify adjustments or reclassifications which may be reflected in the periods to which they relate. At this time, the Company cannot estimate the total costs of (i) the billing review, (ii) defense of the class action matters, (iii) the SEC investigation, and (iv) compliance with the Department of Justice investigation, all of which have been previously disclosed in either the Company's filings with the SEC or the Company's press releases. Accordingly, the only costs related to the defense of these matters that have been included in the results below are actual costs incurred through September 30, 2006 by the Company. Because the completion of the billing review and resolution of the litigation and governmental investigatory matters are pending, the Company is not certain whether any changes to the accounting treatment of any component of its consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge will be required and, if any changes are necessary, whether any such changes would have a material impact on its current or prior period consolidated financial statements. Accordingly, the financial information set forth below is preliminary, unaudited, and subject to change based on the completion of the financial assessment and review of the Company's billing practices, resolution of the class action matters and governmental investigations and proceedings, and the completion of the review and/or audit of its financial statements, as appropriate. The financial information and related narrative discussion set forth below are derived from the Company's internal books and records. The Company cautions investors not to place undue reliance on the financial information presented below. As a result of the developments described above and in the Company's previous SEC filings, the Company's financial statements have not been audited or reviewed by KPMG LLP, its independent registered public accounting firm. The financial information contained in this press release also has not been audited or reviewed by an independent registered public accounting firm. Such information is not a substitute for the information required to be reported to be spoken of; to be mentioned, whether favorably or unfavorably. See also: Report in the Company's Forms 10-K and Forms 10-Q that have not yet been filed. There can be no assurance that the results of the billing review and resolution of the litigation and governmental investigatory matters will not have a material adverse effect on the Company's revenue, results of operations and financial condition. Legal Proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. Investigations and Proceedings Commenced by the SEC and the Department of Justice As previously announced, the Securities and Exchange Commission (the "SEC") is currently conducting a formal investigation of the Company. MedQuist has been cooperating with the SEC since it opened its investigation in 2004. The Company has complied and is continuing to comply with information and document requests. As previously announced, the Company received an administrative HIPAA (Health Insurance Portability & Accountability Act of 1996, Public Law 104-191) Also known as the "Kennedy-Kassebaum Act," this U.S. law protects employees' health insurance coverage when they change or lose their jobs (Title I) and provides standards for patient health, subpoena subpoena (səpē`nə) [Lat.,=under penalty], in law, an order to a witness to appear before a court. A subpoena ad testificandum [Lat. for documents from the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Attorney's Office for the District of Massachusetts on December 17, 2004. The subpoena sought information primarily about the Company's provision of medical transcription
tr.v. vi·o·lat·ed, vi·o·lat·ing, vi·o·lates 1. To break or disregard (a law or promise, for example). 2. To assault (a person) sexually. 3. federal laws in connection with the provision of medical transcription services. MedQuist has been cooperating with the DOJ (Department Of Justice) The legal arm of the U.S. government that represents the public interest of the United States. It is headed by the Attorney General. since it began its investigation in 2004. MedQuist has complied and is continuing to comply with information and document requests. Shareholder Securities Litigation As previously announced, a shareholder putative Alleged; supposed; reputed. A putative father is the individual who is alleged to be the father of an illegitimate child. A putative marriage is one that has been contracted in Good Faith and pursuant to ignorance, by one or both parties, that certain class action lawsuit class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax was filed against the Company in the United States District Court United States District Court In the U.S., any of the 94 trial courts of general jurisdiction in the federal judicial system. Each state, as well as the District of Columbia and the Commonwealth of Puerto Rico, has at least one federal district court. District of New Jersey on November 8, 2004. The action, entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: William Steiner v. MedQuist, Inc., et al., Case No. 1:04-cv-05487-FLW (the "Shareholder Putative Action"), was filed against the Company and certain former Company officials, purportedly pur·port·ed adj. Assumed to be such; supposed: the purported author of the story. pur·port on behalf of an alleged class of all persons who purchased MedQuist common stock during the period from April 23, 2002 through November 2, 2004, inclusive (the "Class Period"). The complaint specifically alleged that defendants violated federal securities laws by purportedly issuing a series of false and misleading statements to the market throughout the Class Period, which statements allegedly had the effect of artificially inflating the market price of the Company's securities. The complaint asserts claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, thereunder. Named as defendants, in addition to the Company, were its former president and chief executive officer and its former executive vice president and chief financial officer. On August 16, 2005, a First Amended Complaint amended complaint n. what results when the party suing (plaintiff or petitioner) changes the complaint he/she has filed. It must be in writing, and can be done before the complaint is served on any defendant, by agreement between the parties (usually their lawyers), in the Shareholder Putative Class Action was filed against the Company in the United States District Court District of New Jersey. The First Amended Complaint named additional defendants, including certain current and former directors, certain former Company officers, the Company's former and current external auditors The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. and Koninklijke Philips Electronics N.V. ("Philips"). Like the original complaint, the First Amended Complaint asserted claims under Sections 10b and 20(a) of the Securities and Exchange Act of 1934 (the "Act") and Rule 10b5 of the Act. The Class Period of the original complaint was expanded 20 months and now includes the period from March 29, 2000 through June 14, 2004. Pursuant to an October 17, 2005 consent order approved by the Court, Lead Plaintiff Greater Pennsylvania Pension Fund filed a Second Amended Complaint on November 15, 2005. The Second Amended Complaint dropped Philips as a defendant, but alleges the same claims and the same purported pur·port·ed adj. Assumed to be such; supposed: the purported author of the story. pur·port  ed·ly adv. class period as the First Amended Complaint. Plaintiffs seek
unspecified Adj. 1. unspecified - not stated explicitly or in detail; "threatened unspecified reprisals"specified - clearly and explicitly stated; "meals are at specified times" damages. Pursuant to the provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and , discovery in the action was stayed pending the filing and resolution of the defendants' motions to dismiss, which were filed on January 17, 2006, and which were fully briefed as of June 16, 2006. On September 29, 2006, the Court denied our motions to dismiss and the motion to dismiss of the individual defendants. In the same order, the Court granted the motion to dismiss filed by the Company's former and current external auditors. The Company believes that the claims asserted in the Second Amended Complaint are without merit, and is vigorously defending the action. Customer Litigation As previously announced, a putative class action was filed in the United States District Court Central District of California. The action, entitled South Broward Hospital District, dba Memorial Regional Hospital, et al. v. MedQuist, Inc. et al., Case No. CV-04-7520-TJH-VBKx, was filed on September 9, 2004 against the Company and certain present and former Company officials, purportedly on behalf of an alleged class of non-Federal governmental hospitals and medical centers that the complaint claims were wrongfully wrong·ful adj. 1. Wrong; unjust: wrongful criticism. 2. Unlawful: wrongful death. and fraudulently overcharged for transcription services by defendants based primarily on the Company's use of the AAMT AAMT American Association for Medical Transcription. line billing unit of measure discussed below. The complaint charges fraud, violation of the California Business and Professions Code, unjust enrichment A general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained. , conversion, negligent negligent adj., adv. careless in not fulfilling responsibility. (See: negligence) supervision and violation of the Racketeer Influenced and Corrupt Organizations Act. Plaintiffs seek damages in an unspecified amount, plus costs and interest, an injunction against alleged continuing illegal activities, an accounting, punitive damages Monetary compensation awarded to an injured party that goes beyond that which is necessary to compensate the individual for losses and that is intended to punish the wrongdoer. and attorneys' fees. Named as defendants, in addition to the Company, were a senior vice president, its former executive vice president of marketing and new business development, its former executive vice president and chief legal officer, and its former executive vice president and chief financial officer. On December 20, 2004, the Company and individual defendants filed motions to dismiss for lack of personal jurisdiction and improper venue, or in the alternative, to transfer the putative action to the United States District Court District of New Jersey. On February 2, 2005, plaintiffs filed a Second Amended Complaint both adding and deleting named plaintiffs A named plaintiff is one of the small group of individual plaintiffs in a class action who are identified by name and who stand in for and represent the interests of the larger group of people who comprise the plaintiff class. in an attempt to keep the putative action in the United States District Court Central District of California. On March 30, 2005, the United States District Court Central District of California issued an order transferring the putative action to the United States District Court District of New Jersey. On August 1, 2005, the Company and the individual defendants filed their respective Answers denying the material allegations contained in the Second Amended Complaint. On August 31, 2005, the Company and individual defendants filed motions to dismiss the Second Amended Complaint for failure to state a claim Within a judicial forum, the failure to present sufficient facts which, if taken as true, would indicate that any violation of law occurred or that the claimant is entitled to a legal remedy. Failure to state a claim is frequently raised as a defense in civil litigation. and a motion to dismiss in favor of arbitration, or in the alternative, to stay pending arbitration. On December 12, 2005, the plaintiffs filed an Amendment to the Second Amended Complaint. On December 13, 2005, the Court issued an order requiring plaintiffs to file a Third Amended Complaint. Plaintiffs filed the Third Amended Complaint on January 4, 2006. The Third Amended Complaint expands the claims made beyond issues arising from contracts based on AAMT line billing and beyond customers billed based on an AAMT line, alleging that the Company engaged in a scheme to inflate inflate - deflate customers' invoices without regard to the terms of individual contracts and even in the absence of any written contract. The Third Amended Complaint also limits plaintiffs' claim for fraud in the inducement fraud in the inducement n. the use of deceit or trick to cause someone to act to his/her disadvantage, such as signing an agreement or deeding away real property. of the agreement to arbitrate to the three named plaintiffs whose contracts contain an arbitration provision and a subclass In programming, to add custom processing to an existing function or subroutine by hooking into the routine at a predefined point and adding additional lines of code. subclass - derived class of similarly situated similarly situated adj. with the same problems and circumstances, referring to the people represented by a plaintiff in a "class action," brought for the benefit of the party filing the suit as well as all those "similarly situated. customers. On January 20, 2006 the Company and individual defendants filed motions to dismiss the Third Amended Complaint for failure to state a claim and a motion to compel A motion to compel asks the court to order either the opposing party or a third party to take some action. This sort of motion most commonly deals with discovery disputes, when a party who has propounded discovery to either the opposing party or a third party believes that the arbitration of all claims by the arbitration subclass and to stay the case in its entirety pending arbitration. On March 8, 2006 the Court held a hearing on these motions, and took the matter under submission. The Court has not yet ruled on the motions. The Company believes that the claims asserted have no merit and intends to vigorously defend the putative action. Medical Transcriptionist medical tran·scrip·tion·ist n. A person who transcribes medical reports dictated by a physician concerning a patient's health care. Litigation Hoffmann Putative Class Action As previously announced, a putative class action lawsuit was filed against the Company in the United States District Court Northern District of Georgia. The action, entitled Brigitte Hoffmann, et al. v. MedQuist, Inc., et al., Case No. 1:04-CV-3452, was filed with the Court on November 29, 2004 against the Company and certain current and former Company officials, purportedly on behalf of an alleged class of current and former employees and statutory workers of MedQuist, who are or were compensated on a "per line" basis for medical transcription services (the "Class Members") from January 1, 1998 to the time of the filing of the complaint (the "Class Period"). The complaint specifically alleged that defendants systematically and wrongfully underpaid un·der·paid v. Past tense and past participle of underpay. underpaid Adjective not paid as much as the job deserves underpaid adj → the Class Members during the Class Period. The complaint asserted the following causes of action: fraud, breach of contract, demand for accounting, quantum meruit [Latin, As much as is deserved.] In the law of contracts, a doctrine by which the law infers a promise to pay a reasonable amount for labor and materials furnished, even in the absence of a specific legally enforceable agreement between the parties. , unjust enrichment, conversion, negligence, negligent supervision, and Racketeer Influenced and Corrupt Organizations Act violations. Plaintiffs sought unspecified compensatory damages A sum of money awarded in a civil action by a court to indemnify a person for the particular loss, detriment, or injury suffered as a result of the unlawful conduct of another. , punitive damages, disgorgement Disgorgement A repayment of ill-gotten gains that is imposed on wrongdoers by the courts. Funds that were received through illegal or unethical business transactions are disgorged, or paid back, with interest to those affected by the action. and restitution In the context of Criminal Law, state programs under which an offender is required, as a condition of his or her sentence, to repay money or donate services to the victim or society; with respect to maritime law, the restoration of articles lost by jettison, done when the . On December 1, 2005, the Hoffmann matter was transferred to the United States District Court District of New Jersey. As discussed immediately below under the heading Myers Putative Class Action, the Company believes that the claims presently asserted have no merit and intends to vigorously defend the putative action. Myers Putative Class Action As previously announced, a putative class action entitled, Myers, et al. v. MedQuist Inc. and MedQuist Transcriptions, Ltd., Case No. 05CV 4608 (JBS JBS John Birch Society JBS Journal of Biosocial Science JBS Journal of Business Strategies JBS Johnson Behavioral System JBS Johanson-Blizzard Syndrome JBS Journal of British Studies JBS Jamaica Bureau of Standards JBS Journal of Biomolecular Screening ), was filed against the Company on September 22, 2005 in the United States District Court District of New Jersey. The action was brought on behalf of a putative class of MedQuist's employee and independent contractor A person who contracts to do work for another person according to his or her own processes and methods; the contractor is not subject to another's control except for what is specified in a mutually binding agreement for a specific job. transcriptionists who claim that they contracted with the Company to be paid on a 65 character line, but were allegedly underpaid due to intentional in·ten·tion·al adj. 1. Done deliberately; intended: an intentional slight. See Synonyms at voluntary. 2. Having to do with intention. miscounting of the number of characters and lines transcribed. The named plaintiffs asserted claims for breach of contract, unjust enrichment, and request an accounting. The allegations contained in the Myers case are substantially similar to those contained in the Hoffmann putative class action and the two actions have now been consolidated. A consolidated amended complaint was filed on January 31, 2006. The named plaintiffs assert claims for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment and demand an accounting. On March 7, 2006 the Company filed a motion to dismiss all claims in the consolidated amended complaint. The motion was fully briefed and argued on August 7, 2006. The Court took the matter under submission and has not reached its decision. The Company believes that the claims asserted in the consolidated actions have no merit and intends to vigorously defend the suit. Derivative Litigation On October 4, 2005, the Company announced the dismissal with prejudice dismissal with prejudice n. see dismissal. of a shareholder derivative action A lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do. A derivative action, more popularly known as a Stockholder's Derivative Suit, is derived from the primary right of the filed in United States District Court District of New Jersey. The suit, Rhoda Kanter (Plaintiff) v. Hans M. Barella et al. (Defendants), was filed on November 12, 2004 against Philips and ten current and former members of MedQuist's Board of Directors. MedQuist was named as a nominal defendant. In a ruling dated September 21, 2005, the Court found Plaintiff's allegations that MedQuist's Board members breached their fiduciary duties Noun 1. fiduciary duty - the legal duty of a fiduciary to act in the best interests of the beneficiary legal duty - acts which the law requires be done or forborne to the Company to be insufficient. The Plaintiff had alleged that for a period from 2001 through 2004, the Defendants violated their fiduciary duties by permitting artificial inflation of billing figures; failing to adequately ensure accurate and lawful Licit; legally warranted or authorized. The terms lawful and legal differ in that the former contemplates the substance of law, whereas the latter alludes to the form of law. A lawful act is authorized, sanctioned, or not forbidden by law. billing practices; and failing to accurately report the Company's true financial condition in its published financial statements. To the contrary, the Court concluded: "Far from alleging facts supporting a substantial likelihood of liability, Plaintiff here has painted a picture of a board of directors that acted responsively given the circumstances . . . ." On October 3, 2005, plaintiffs filed a motion for reconsideration re·con·sid·er v. re·con·sid·ered, re·con·sid·er·ing, re·con·sid·ers v.tr. 1. To consider again, especially with intent to alter or modify a previous decision. 2. of the Court's order dismissing the action with prejudice. On November 16, 2005, the Court denied Plaintiffs' motion for reconsideration. On December 13, 2005, Plaintiffs filed a Notice of Appeal with the United States Court of Appeals for the Third Circuit The United States Court of Appeals for the Third Circuit is a federal court with appellate jurisdiction over the district courts for the following districts:
Customer Accommodations As previously disclosed, the primary allegations in a number of the litigation matters relate to how the Company interpreted the AAMT line billing unit of measure. The AAMT line billing unit of measure was developed in 1993 through collaboration among several industry organizations with the intent of providing standardization standardization In industry, the development and application of standards that make it possible to manufacture a large volume of interchangeable parts. Standardization may focus on engineering standards, such as properties of materials, fits and tolerances, and drafting in industry billing practices. However, due to inherent ambiguities in the definition of this unit of measure not fully anticipated at the time of its introduction, AAMT line-based billing was applied inconsistently throughout the medical transcription industry and eventually renounced by the groups initially responsible for its development. Despite these issues, a number of companies in the industry have continued to use AAMT line-based billing, and some customers still request proposals and contracts based on the AAMT line. Like many medical transcription service providers, MedQuist once used the AAMT line unit of measure to calculate invoices for many of its medical transcription clients. It has been widely recognized and well documented throughout the industry, however, that the AAMT definition of a "line" is inherently ambiguous and subject to a wide variety of interpretations. In fact, no single set of AAMT characters was ever defined for this unit of measure. Accordingly, MedQuist began the process in 2004 of transitioning its AAMT line-based customers off the AAMT line unit of measure and, in April 2005, the Company completely eliminated the use of the AAMT line for billing and called on other industry transcription providers to follow its lead. Due to these AAMT line unit of measure ambiguities, and the disparity dis·par·i·ty n. pl. dis·par·i·ties 1. The condition or fact of being unequal, as in age, rank, or degree; difference: "narrow the economic disparities among regions and industries" in its interpretation, health care providers have raised concerns regarding charges for transcription services by their respective transcription providers, including the Company. In response to those concerns, and to foster ongoing business relationships with its customers, the Company has approached certain customers and offered to resolve any issues related to their prior AAMT line and other billing related issues. As previously disclosed, the Company's Board of Directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: Company management to make accommodation offers, up to an aggregate amount of $65.0 million, to certain customers to resolve any concerns over AAMT and other billing related issues. As of September 30, 2006, (i) the Company has entered into agreements with certain customers who have accepted accommodation offers to resolve concerns over AAMT and other billing related issues, and paid or credited to their account an aggregate amount of $43.9 million as an accommodation to those customers and (ii) additional accommodation offers have been made by the Company to certain other customers in the aggregate amount of $7.9 million. From October 1, 2006 through the date of this release, the Company has entered into agreements with additional customers and paid or credited to their account an aggregate amount of $5.7 million and has extended accommodation offers to additional customers in the aggregate amount of $0.6 million. Company management currently intends to make additional accommodation offers in the future, consistent with the Board's authorization described above, although the timing and amount of such offers have not yet been determined and the Company's plans may change in the future. To resolve concerns over AAMT and other billing related issues, the Board has further authorized the Company to establish an accommodation program for certain other customers that involves the issuance of credits ("accommodation credits") that can be used as an offset against the future purchase of goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. from MedQuist. On July 21, 2006, the Board authorized management to make accommodation credit offers up to an additional $8.7 million (inclusive of inclusive of prep. Taking into consideration or account; including. the amounts set forth in the balance of this paragraph) beyond the original cash payment program of $65.0 million. As of September 30, 2006 the Company has entered into agreements with certain customers who have accepted the accommodation credit offers with a total credit value of $3.6 million and have extended additional accommodation credit offers with the credit value of $1.9 million. From October 1, 2006, through the date of this release, the Company has entered into additional accommodation credit agreements with a total credit value of $0.4 million and has not extended any additional accommodation credit offers. The Company is unable to predict how many customers, if any, will accept the outstanding accommodation offers on the terms proposed by the Company, nor is the Company able to predict the timing of the acceptance (or rejection) of any of these outstanding accommodation offers. Until such offers are accepted, the Company may withdraw or modify the terms of the accommodation offers at any time. In addition, the Company is unable to predict how many of the future offers, if made, will be accepted on the terms proposed by the Company. The Company believes that its existing cash resources and cash flows from operations are sufficient to fund all of the customer accommodation offers it may make. The accommodation offers do not represent an estimate of potential liability, if any, in any of the previously disclosed litigation or investigatory matters pending against the Company. The Company does not anticipate any increases to the existing authorized amounts under either accommodation program. By accepting the Company's accommodation offers, the customer must agree, among other things, to release the Company from any and all claims and liability regarding prior AAMT and other billing related issues. The accommodation offers made to date, and those offers which may be made in the future, are not an admission of liability by the Company of any wrongdoing wrong·do·er n. One who does wrong, especially morally or ethically. wrong do or an admission or acknowledgement that its
billing practices with respect to such customers were or are incorrect.
[TABLE OMITTED] [TABLE OMITTED] Three Months Ended September 30, 2006 Revenues: Preliminary, unaudited results indicate that the Company's revenues decreased approximately $12 million to $90 million for the three months ended September 30, 2006 from $102 million for the comparable 2005 period. This decline in revenues is largely due to decreases in transcription outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. services and product sales, of $8 million, or 9%, and $2 million, or 38%, respectively. The decline in transcription outsourcing revenues is largely due to a decrease in the volume of lines transcribed primarily related to clients for whom we no longer provide transcription services. Additionally, pricing pressures continued on the base transcription business during the third quarter 2006, but revenues were impacted less by pricing pressures than in the comparable 2005 period. Management expects that pricing pressures will continue for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future. The decline in product sales is largely due to a strategic shift from standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. sales of a mature product line to sales of our new generation of products which link product and outsourcing solutions. This new generation of products has been launched and is currently available. Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. (Loss): Preliminary, unaudited results indicate that the Company's operating income improved $17 million to income of approximately $5 million for the three months ended September 30, 2006 from an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $12 million for the comparable 2005 period. The increase in operating income was primarily attributable to a $10 million insurance recovery coupled with a reduction in costs of $7 million, related to the ongoing billing practices review including (i) legal fees incurred in connection with governmental investigations and proceedings and defense of the class action matter, (ii) non-legal professional fees and (iii) accommodation payments and credits offered to clients. The insurance recovery was based upon agreement with the insurance carrier and management's determination that the recovery was probable. Operating income was also impacted by the $12 million decline in revenues over the same period offset by $4 million of restructuring savings and $2 million of reduced depreciation and amortization. Nine Months Ended September 30, 2006 Revenues: Preliminary, unaudited results indicate that the Company's revenues decreased approximately $35 million to $280 million for the nine months ended September 30, 2006 from $315 million for the comparable 2005 period. This decline in revenues is largely due to decreases in transcription outsourcing services and product sales, of $24 million, or 9%, and $8 million, or 41%, respectively. The decline in transcription outsourcing revenues is largely due to a decrease in the volume of lines transcribed primarily related to clients for whom we no longer provide transcription services. Additionally, pricing pressures continued on the base transcription business during the first nine months of 2006, but revenues were impacted less by pricing pressures than in the comparable 2005 period. Management expects that pricing pressures will continue for the foreseeable future. The decline in product sales is largely due to a strategic shift from standalone sales of a mature product line to sales of our new generation of products which link product and outsourcing solutions. This new generation of products has been launched and is currently available. Operating Loss: Preliminary, unaudited results indicate that the Company's operating loss decreased approximately $14 million to a loss of approximately $6 million for the nine months ended September 30, 2006 from an operating loss of $20 million for the comparable 2005 period. The improvement in operating loss was primarily attributable to a $10 million insurance recovery coupled with a reduction in costs of $9 million, related to the ongoing billing review including (i) legal fees incurred in connection with governmental investigations and proceedings and defense of the class action matter, (ii) non-legal professional fees and (iii) accommodation payments and credits offered to clients. The insurance recovery was based upon agreement reached with the insurance carrier and management's determination that the recovery was probable. Operating loss was also impacted by the $35 million decline in revenues over the same period offset by $10 million of restructuring savings and $6 million of reduced depreciation and amortization. Excluding unusual items, the Company experienced a $5 million decrease in operations due to reduced revenues and a reduction in gross margin. Balance Sheet Highlights: As of September 30, 2006, the Company had $155 million in cash and cash equivalents and no debt. The $23 million decrease in cash as of September 30, 2006 compared with December 31, 2005, was primarily attributable to accommodation payments ($23 million) and capital expenditures ($8 million), which were offset by working capital improvements ($8 million). There were no issuances of capital stock or other securities for the nine months ended September 30, 2006. The Company expects to incur significant costs and expenses in the future relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the ongoing billing review, defense of the class action matters and governmental investigations and proceedings, and accommodation agreements. These costs and expenses include (i) legal fees relating to the SEC and Department of Justice investigations and proceedings, (ii) legal fees relating to defense and resolution of the litigation matters described above, (iii) customer accommodation payments and credits, and (iv) non-legal professional fees. The timing and level of these costs and expenses is, in many cases, not within the Company's control. While the Company is unable to predict the timing and level of these costs and expenses, the Company currently believes that it has sufficient resources, including cash on hand and cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses to fund these costs and expenses. However, there cannot be any assurance that unanticipated changes in the level of these costs will not exceed the Company's available cash resources, nor can there be any assurance that sufficient financing from external sources will be available to the Company on acceptable terms, if at all. In the event that the Company's cash requirements exceed its available cash resources, or if the timing of such costs and expenses requires the Company to divert di·vert v. di·vert·ed, di·vert·ing, di·verts v.tr. 1. To turn aside from a course or direction: Traffic was diverted around the scene of the accident. 2. cash resources away from operations, the Company may not be able to execute its operating plan, which could have a material adverse effect on the Company's business and results of operations. Other Developments Restructuring: As previously disclosed, in conjunction with the Company's movement to a single national service and support organization, a restructuring plan was developed in 2005 to consolidate approximately forty-eight (48) operating facilities and centralize cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. certain components of the business in order to improve operating efficiencies. The Company is expecting to incur total restructuring costs of up to $8.5 million associated with this plan. The Company incurred $2.9 million of restructuring costs for the nine months ended September 30, 2006. This restructuring is expected to generate annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. savings of at least $18.5 million. The Company realized approximately $10.4 million in savings during the nine months ended September 30, 2006. Specifically, the Company has shifted resources to a single national service delivery and support organization for all of the Company's services and products and is in the process of eliminating local service centers. The plan does not contemplate reductions of, and the Company has no current intentions to reduce, its medical transcription workforce. Rather, the Company will continue in its efforts to hire additional qualified transcriptionists. Further, although the Company has consolidated its local service centers as described above, customer-facing teams, led by account managers, will continue to coordinate customer support on the local level. The customer-facing teams will work with and be supported by the Company's centrally managed customer service organization. About MedQuist: MedQuist, a member of the Philips Group of Companies, is a leading provider of electronic medical transcription, health information and document management products and services. MedQuist provides document workflow management, digital dictation Digital dictation is a method of recording and editing the spoken word in real-time within a digital audio format. Digital dictation offers several advantages over traditional cassette tape based dictation: Disclosure Regarding Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : Some of the statements in this Press Release constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are not historical facts but rather are based on the Company's current expectations, estimates and projections regarding the Company's business, operations and other factors relating thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. . Words such as "may," "will," "could," "would," "should," "anticipate," "predict," "potential," "continue," "expects," "intends," "plans," "projects," "believes," "estimates" and similar expressions are used to identify these forward-looking statements. The forward-looking statements contained in this Press Release include, without limitation, statements about the Company's results of operations, financial condition, ongoing legal proceedings and government investigations, restructuring plan, and accommodation programs. 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. Forward-looking statements are based upon assumptions as to future events of the Company's future financial performance that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. As a result, these statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The Company's actual results may differ from the forward-looking statements for many reasons, including any direct or indirect impact of the matters disclosed in the Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed by the Company on November 9, 2006 on the Company's operating results or financial condition; any continuation of pricing pressures and declining billing rates; difficulties relating to the implementation of management changes throughout the Company; and the outcome of pending and future legal and regulatory proceedings and investigations, including costs and expenses related thereto. Web site: http://www.medquist.com |
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