Press Release Details
For More Information, Contact:
Brian P. Callahan, Chief Financial Officer
(615) 261-1500
bcallahan@spheris.com
Lisa DeMoss
Director, Marketing and Communications
(615) 261-1716
ldemoss@spheris.com
For Immediate Release
Spheris Reports First Quarter 2006 Results
Franklin, Tenn — June 05, 2006 — Spheris, a leading global outsource provider of medical transcription technology and services, today announced results for the first quarter ended March 31, 2006.Financial Highlights
Net revenue for the first quarter of 2006 was $52.0 million compared with $53.3 million in the first quarter of 2005. The $1.3 million decline in net revenues during the first quarter of 2006 from the prior-year period was primarily due to customer contracts the Company terminated in 2005 that did not have acceptable operating margins and the continued impact of lost business related to the industry-wide domestic medical transcriptionist, or MT, capacity shortage in 2005. However, operating income increased to $1.1 million during the first quarter of 2006 compared with $0.5 million during the prior-year period. The improvement in operating income was primarily due to integration savings from the Company's December 2004 HealthScribe acquisition, as well as improved turn-around-time credits and other operational efficiencies.
Earnings before interest, taxes and depreciation and amortization, or EBITDA, increased to $7.7 million in the first quarter compared with $7.3 million in the prior-year period. Both operating income and EBITDA were reduced by $0.3 million during the first quarter of 2006 by a non-cash charge resulting from the write-off of in-process research and development upon consummation of the Company's acquisition of Vianeta Communications on March 31, 2006. Excluding this non-cash charge, operating income and EBITDA would have been $1.4 million and $8.0 million, respectively, for the first quarter of 2006. EBITDA is a non-GAAP financial measure. Please refer to the "Supplemental Financial Information" and related note contained in this press release for further discussion and reconciliation of GAAP financial measures to EBITDA. The Company's net loss during the first quarter of 2006 was $2.9 million compared with $2.7 million in the prior-year period.
"Our 2006 first quarter results highlight the significant progress we have made in addressing the production capacity issues we faced during 2005 and leveraging the HealthScribe integration and our technology investments to generate cost efficiencies and competitive advantages," said Steven E. Simpson, president and chief executive officer of Spheris.
Simpson added, "Given the number of customer contracts we terminated in 2005 that did not have acceptable operating margins, the impact of the industry-wide domestic MT capacity shortage in 2005 and the resulting loss of business that continues to impact us in 2006, we anticipated a modest decline in net revenues in our year-over-year comparisons. However, new customer wins secured in the first quarter and thus far in the second quarter, as well as a strong pipeline of potential new business, have served to validate the differentiated technology and service offerings we can now supply to our customers. Together with ongoing cost-saving efforts, operational improvements and the anticipated future impact of the Vianeta acquisition, we expect this activity to help us build momentum in the second half of the year."
Balance Sheet Highlights
On March 31, 2006, Spheris completed the acquisition of Vianeta Communications. As a result of the Vianeta acquisition, the Company held an additional $8.5 million in restricted cash as of March 31, 2006, the majority of which was paid to Vianeta shareholders during April and May 2006.
Liquidity Highlights
As of March 31, 2006, Spheris held $6.2 million in unrestricted cash and cash equivalents. During the first quarter of 2006, the Company generated cash from operating activities of $0.2 million compared with a $1.8 million use of cash during the same period in 2005. The $2.0 million improvement over the prior-year period reflects operational efficiencies and certain costs associated with the HealthScribe acquisition incurred during the first quarter of 2005. The availability under the revolver portion of the Company's senior secured credit facility increased during the first quarter of 2006, improving to $7.8 million as of March 31, 2006 from $7.4 million as of December 31, 2005.
Investor Conference Call and Webcast
Spheris will host a conference call on June 6, 2006, at 8:00 a.m. CDT. The number to call for this interactive teleconference is 507-726-3546. The live broadcast of Spheris' quarterly conference call will be available online at www.spheris.com and http://www.videonewswire.com/event.asp?id=34143 on June 6, 2006, at 8:00 a.m. CDT. The online replay will be available shortly after the call and continue for 30 days.
Forward-Looking Statements
This press release contains statements as to the Company's beliefs and expectations of the outcome of future events that are forward-looking statements as defined within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties as described in the filings made from time to time by the Company with the Securities and Exchange Commission, including, without limitation, the following: (i) the effect our substantial indebtedness has on our ability to raise additional capital to fund our business, to react to changes in the economy or our business and to fulfill our obligations under our indebtedness, including our ability to meet financial covenants and other conditions of our senior secured credit facilities and indenture relating to our senior subordinated notes; (ii) our history of losses and accumulated deficit; (iii) our ability to effectively manage our domestic and global production capacity, including our ability to recruit, train and retain qualified MTs and other technical and managerial personnel and to maintain high standards of quality service in our operations; (iv) our ability to adapt and integrate new technology into our medical transcription platforms to improve our production capabilities and expand the breadth of our service offerings; (v) the reluctance of potential customers to outsource or change providers of their medical transcription services and its impact on our ability to attract new customers and increase revenues; (vi) the effect on our business if we incur additional debt, contingent liabilities and expenses in connection with future acquisitions or if we cannot effectively integrate newly acquired operations; and (vii) financial and operational risks inherent in our global operations, including foreign currency rate fluctuations between the United States and India.
The Company takes no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release.
Note to Supplemental Financial Information
Earnings before interest expense, income taxes, depreciation and amortization, or EBITDA, is a financial measure not computed in accordance with United States generally accepted accounting principles, or GAAP. The Company believes that this non-GAAP measure, when presented in conjunction with the comparable GAAP measure, is useful to both management and investors in analyzing the Company's ongoing business and operating performance. EBITDA should be considered in addition to, but not as a substitute for, items prepared in accordance with GAAP that are presented in the release, as the items excluded in the presentation of EBITDA are significant components in understanding and assessing financial performance. A reconciliation of EBITDA to the nearest comparable GAAP financial measure is provided above. EBITDA, as presented, may not be comparable to similarly titled measures of other companies.
About Spheris Spheris is a leading provider of clinical documentation services and technology to health systems, hospitals and group practices throughout the U.S. Founded by physicians in 1993, Spheris employs a global network of medical language specialists for true 24-hour service, seven days a week, 365 days a year. The proprietary Spheris Clarity™ technology platform integrates the full range of clinical documentation software and hardware into one seamless, customizable system, including embedded speech recognition technologies. The Spheris solution is flexible and scalable to balance the needs of HIM directors, CFOs, IT directors and physicians with an emphasis on verifiable quality, turnaround time, security and pricing. Spheris' worldwide corporate headquarters is located in Franklin, Tenn. For more information, please visit www.spheris.com.