FRANKLIN, Tenn., March 26 /PRNewswire/ -- Spheris, a leading global outsource provider of clinical documentation technology and services, today announced results for the three and twelve months ended December 31, 2007.
Financial Highlights-Fourth Quarter of 2007
Net revenues for the fourth quarter of 2007 were $48.6 million compared with $51.4 million in the fourth quarter of 2006. The $2.8 million decrease in net revenues during the fourth quarter of 2007 from the prior-year period was primarily caused by delayed implementations during the first half of 2007 of signed new business, industry pricing pressures affecting both our existing and new customer relationships and less signed new business driven, in part, by the timing of the Company's new technology development initiatives. Operating income was $1.2 million, or 2.5% of net revenues, during the fourth quarter of 2007 compared with $1.3 million, or 2.4% of net revenues, during the prior-year period. The slight improvement in operating income margin during the fourth quarter of 2007 compared with the prior-year period was primarily due to operational cost savings from increased utilization of the Company's global production capabilities, lower medical language specialist, or MLS, direct costs and other operating expense reductions, as well as decreased depreciation expense. These savings were partially offset by the impact of unfavorable foreign currency exchange rates associated with production costs of the Company's Indian operations.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, was $7.3 million, or 15.0% of net revenues, in the fourth quarter of 2007 compared with $8.1 million, or 15.8% of net revenues, in the prior-year period. The decrease in EBITDA in the fourth quarter of 2007 as compared with the prior-year period was primarily due to the impacts of lower net revenues and the unfavorable foreign currency exchange rates described above.
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.
Financial Highlights - Year Ended December 31, 2007
Net revenues for the year ended December 31, 2007 were $200.4 million compared with $207.1 million in 2006. The decline in net revenues during 2007 as compared with 2006 was primarily caused by delayed implementations during the first half of 2007 of signed new business, industry pricing pressures affecting both our existing and new customer relationships and less signed new business driven, in part, by the timing of the Company's new technology development initiatives. Operating income was $7.4 million, or 3.7 % of net revenues, during 2007 compared with $4.1 million, or 2.0% of net revenues, during 2006. The improvement in operating income margin during 2007 was primarily due to operational cost savings from increased utilization of the Company's global production capabilities, lower MLS-related direct costs and other operating expense reductions, as well as decreased depreciation expense. These savings were partially offset by the impact of unfavorable foreign currency exchange rates associated with production costs of the Company's Indian operations.
EBITDA was $31.6 million, or 15.8% of net revenues, in the year ended December 31, 2007 compared with $30.7 million, or 14.8% of net revenues, in 2006. The increase in 2007 EBITDA as compared with 2006 was primarily due to the impacts of operating cost savings and decreased depreciation expense described above.
Commenting on the fourth quarter and year-end 2007 results, Steven E. Simpson, president and chief executive officer of Spheris, stated, "I'm pleased to announce that we not only finished the year with a strong annual EBITDA performance, but also with great confidence that the sound technology investments we've made over the past two years will position Spheris to drive future top line growth. Operational efficiencies provided by our global resources and speech recognition capabilities have allowed us to successfully manage through a year marked by significant transformation as we continue our evolution to become the leading clinical documentation technology and services company."
Simpson added, "Our blended technology and services approach is gaining momentum in the marketplace and comes at a time when we are focusing our efforts more intensely on a true end-to-end clinical documentation solution. Our immediate priorities for 2008 will be to further accelerate our speech recognition and global utilization initiatives and the development of our Spheris Clarity(R) technology enhancements. By doing so, we expect to continue our positive EBITDA trend in 2008 and to position Spheris for substantial new business opportunities."
Balance Sheet Highlights
As of December 31, 2007, the outstanding indebtedness under the Company's senior secured credit facility was $70.0 million and the outstanding indebtedness under the Company's senior subordinated notes was $125.0 million. During the third quarter of 2007, the Company entered into a new financing agreement to replace the Company's previous senior secured credit facility. Concurrent with the closing of the new senior secured credit facility, the Company utilized operating cash flows to reduce its senior debt by $3.0 million.
Liquidity Highlights
As of December 31, 2007, Spheris held $7.2 million in unrestricted cash and cash equivalents. During 2007, the Company generated cash from operating activities of $13.6 million compared with $7.8 million of cash generated from operating activities during 2006. The $5.8 million increase in cash generated by operating activities over the prior year resulted primarily from the operating income improvements described above.
Investor Conference Call and Webcast
Spheris will host a conference call on March 27, 2008, at 8 a.m. CT. The number to call for this interactive teleconference is (800) 240-4186. Following the conference call, the audio replay will be available for one week by dialing (303) 590-3000 and entering the confirmation number 11106043#. The live broadcast of Spheris' quarterly conference call will be available online at http://www.spheris.com and http://www.videonewswire.com/event.asp?id=44839 on March 27, 2008, at 8 a.m. CT. The online replay will be available on Spheris' Web Site shortly after the call and will continue for 30 days.
About Spheris
Spheris is a leading global outsource provider of clinical documentation technology and services to more than 500 health systems, hospitals and group practices throughout the U.S. Spheris offers a highly advanced, Web-based technology platform, available as an independent solution to support in-house departments or blended with Spheris' outsource services. Spheris employs approximately 5,500 skilled medical language specialists supporting the Company's clients through a secure network. Using a Follow the Sun(SM) service strategy, customer support is provided 24 hours a day, 365 days a year with an emphasis on verifiable quality, turnaround time and pricing. Spheris' world- wide corporate headquarters are located in Franklin, Tenn. For more information, please visit http://www.spheris.com.
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 senior secured credit facility and indenture relating to our senior subordinated notes; (ii) our history of losses and accumulated deficit; (iii) our ability to effectively manage our global production capacity, including our ability to recruit, train and retain qualified medical language specialists and maintain high standards of quality service in our operations; (iv) our ability to adapt and integrate new technology into our clinical documentation platforms to improve our production capabilities and expand the breadth of our technology and service offerings; (v) our ability to maintain our competitive position against current and future competitors, including our ability to gain new business with acceptable operating margins and ongoing price pressures related to our technology and services and the healthcare market in general; (vi) the reluctance of potential customers to outsource or change providers of their clinical documentation technology and services and its impact on our ability to attract new customers and increase revenues; (vii) financial and operational risks inherent in our global operations, including foreign currency exchange rate fluctuations and transfer pricing laws between the United States and India; (viii) our ability to attract, hire and retain skilled technical and managerial personnel necessary to develop and implement technology and services to our customers; (ix) 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 (x) our ability to adequately protect our intellectual property rights, including our proprietary technology and the intellectual property we license from third parties.
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. 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 management and the Company's senior lenders view the Company's operating results. Management believes EBITDA is useful as a supplemental measure of the performance of the Company's operations because it isolates the Company's operating performance from the accounting impact of the Company's financing strategies, tax provisions, and depreciation and amortization. Additionally, since EBITDA is a significant component of certain financial covenants under the Company's senior secured credit facility agreement, management believes EBITDA is useful for investors to better assess the Company's compliance with these financial covenants. Management believes EBITDA should be considered in addition to, but not as a substitute for, items prepared in accordance with GAAP that are presented in this press 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.
CONTACT: Brian P. Callahan, Chief Financial Officer, +1-615-261-1500,
bcallahan@spheris.com, or Michele Peden, Director of Communications,
+1-615-261-1580, mpeden@spheris.com, both of Spheris
Web site: http://www.spheris.com/
http://www.videonewswire.com/event.asp?id=44839/
