SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
--------------------
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------
For the quarterly period Commission file number
ended September 30, 1997 0-19941
MedQuist Inc.
-------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2531298
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
Five Greentree Centre, Suite 311, Marlton, NJ 08053
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(Address of principal executive offices) (Zip Code)
(609) 596-8877
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No | |
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 10,675,774 shares
of common stock, no par value, as of November 10, 1997.
<PAGE>
MedQuist Inc.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I. FINANCIAL INFORMATION
- ------- ---------------------
PAGE NO.
--------
Item 1. Consolidated Financial Statements
- ------- ---------------------------------
Consolidated Balance Sheets at September 30, 1997
(Unaudited) and December 31, 1996 1
Consolidated Statements of Income for the nine months
ended September 30, 1997 and 1996 (Unaudited) 2
Consolidated Statements of Income for the three months
ended September 30, 1997 and 1996 (Unaudited) 3
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 (Unaudited) 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Special Note Concerning Forward Looking Statements 12
PART II. OTHER INFORMATION
- ------- -----------------
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
- ---------
<PAGE>
MEDQUIST INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
----------- -----------
(in thousands) (in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $13,300 $ 8,878
Accounts receivable, net of allowance
of $378 and $318 16,333 14,239
Prepaid expenses and other current assets 438 360
------- -------
Total current assets 30,071 23,477
Property and equipment - net 9,211 8,105
Other assets 361 323
Intangible assets - net 45,691 42,436
------- -------
$85,334 $74,341
======= =======
Liabilities and shareholders' equity
Current liabilities:
Current portion of long term debt $ 1,750 $ 314
Accounts payable 1,153 1,034
Accrued payroll 3,192 1,913
Accrued expenses 3,705 1,861
------- -------
Total current liabilities 9,800 5,122
------- -------
Long-term debt 1,471 1,719
------- -------
Other liabilities 562 631
------- -------
Deferred income taxes 1,174 1,174
------- -------
Commitments and contingencies
Shareholders' equity:
Common stock, no par value,
30,000 shares authorized,
10,509 and 10,322 issued and
outstanding 57,647 56,437
Retained earnings 14,680 9,258
------- -------
Total shareholders' equity 72,327 65,695
------- -------
$85,334 $74,341
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
MEDQUIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in thousands, except per share data)
NINE MONTHS ENDED
September 30,
1997 1996
-------- -------
Revenues $ 60,707 $ 43,862
-------- --------
Costs and expenses:
Cost of revenues 44,674 32,607
Selling, general and administrative 3,376 2,558
Depreciation 2,563 1,770
Amortization of intangible assets 1,106 835
-------- --------
Total operating expenses 51,719 37,770
-------- --------
Operating income 8,988 6,092
Interest expense 150 1,552
-------- --------
Income before income taxes 8,838 4,540
Income tax provision 3,416 1,848
-------- --------
Net income $ 5,422 $ 2,692
======== ========
Net Income Per Share:
Net income $ 0.48 $ 0.33
Inducement of warrant exercise -- (0.09)
-------- --------
Net income available to common shareholders $ 0.48 $ 0.24
======== ========
Shares used in computing net income 11,213 8,292
per share (Note 3) ======== =======
See Accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
MEDQUIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in thousands, except per share data)
THREE MONTHS ENDED
September 30,
-------------------
1997 1996
------- -------
Revenues $21,897 $15,511
------- -------
Costs and expenses:
Cost of revenues 16,076 11,490
Selling, general and administrative 1,188 857
Depreciation 964 609
Amortization of intangible assets 396 291
------- -------
Total operating expenses 18,624 13,247
------- -------
Operating income 3,273 2,264
Interest expense 29 63
------- -------
Income before income taxes 3,244 2,201
Income tax provision 1,249 890
------- -------
Net income $ 1,995 $ 1,311
======= =======
Net Income Per Share:
Net Income available to common shareholders $ 0.18 $ 0.12
======= =======
Shares used in computing net income 11,304 10,895
per share (Note 3) ======= =======
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
MEDQUIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1996
---- ----
(in thousands) (in thousands)
<S> <C> <C>
Operating activities:
Net income $ 5,422 $ 2,692
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,669 2,605
Amortization of debt discount -- 54
Changes in assets and liabilities:
Accounts receivable, net (1,775) (3,092)
Prepaid expenses and other current assets (49) 325
Other assets (38) 247
Accounts payable (184) (464)
Accrued payroll 1,419 904
Accrued expenses 1,889 (497)
Other liabilities (69) (197)
-------- --------
Net cash provided by operating activities 10,284 2,577
-------- --------
Investing activities:
Purchases of property and equipment, net (3,304) (2,369)
Other assets -- (153)
Acquisitions, net of cash acquired (3,232) (2,619)
-------- --------
Net cash used in investing activities (6,536) (5,141)
-------- --------
Financing activities:
Net borrowings on revolving line of credit -- --
Repayments of long-term debt (131) (28,350)
Repayments of obligations under capital leases (205) (229)
Net proceeds from issuance of common stock 1,477 39,653
Repurchase of common stock (467) --
-------- --------
Net cash provided by financing activities 674 11,074
-------- --------
Net increase in cash and cash equivalents 4,422 8,510
Cash and cash equivalents, beginning of period 8,878 1,812
-------- --------
Cash and cash equivalents, end of period $ 13,300 $ 10,322
======== ========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest $ 130 $ 655
======== ========
Income taxes $ 1,811 $ 1,303
======== ========
New capital lease arrangements $ -- $ 190
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Nine Month Period Ended September 30, 1997
(Unaudited - dollar amounts in thousands except per share amounts)
Note 1. Basis of Presentation
The information set forth in these statements is unaudited. The information
reflects adjustments, consisting only of normal recurring adjustments, that, in
the opinion of management, are necessary to present a fair statement of
operations of MedQuist Inc. (the "Company"), and its consolidated subsidiaries
for the periods indicated. Results of operations for the interim periods ended
September 30, 1997 are not necessarily indicative of the results of operations
for the full year.
Certain information in footnote disclosures normally included in financial
statements have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission.
On September 9, 1997, the Company effected a three for two stock split. All
share data presented herein has been adjusted to reflect the stock split.
Note 2. Acquisitions
Effective May 1, 1994, the Company purchased substantially all of the
assets of Transcriptions, Ltd. and affiliates ("Transcriptions") as well as
assumed certain liabilities, as defined, for $16,930 in cash, including
acquisition costs of $322, plus the payment of Transcriptions' interest bearing
debt of $5,816, plus a deferred purchase price based on future operating
results. Effective December 29, 1995, and in connection with the sale of the
receivables management division (see Note 5), the Company fixed the deferred
purchase price by agreeing to pay the former owners of Transcriptions $18,375 in
cash and issue 1,292 shares of Common Stock (valued at $4,550 for financial
reporting purposes) on August 31, 1996.
The total purchase price for the Transcriptions acquisition was $44,797.
The acquisition has been accounted for using the purchase method with the
purchase price allocated to the fair value of the acquired assets and
liabilities.
During 1996, the Company completed five acquisitions. The acquisitions have
been accounted for using the purchase method. Pro forma information is not
presented as these acquisitions are not material to the Company.
During 1997, the Company completed four acquisitions. The acquisitions have
been accounted for using the purchase method. Pro forma information is not
presented as these acquisitions are not material to the Company.
Note 3. Net Income Per Share
For the three and nine month period ended September 30, 1997 and 1996, the
Company has performed the net income per share computations under the Treasury
Stock method, as required under Accounting Principle Board Opinion No. 15 (See
Note 4).
5
<PAGE>
Note 4. New Accounting Pronouncements
In March 1997, the FASB issued Statement 128, "Earnings Per Share" (SFAS
128), which provides changes in the calculation of earnings per share. This
Statement is effective December 15, 1997 and, when adopted, will require
restatement of prior years' EPS. The effect of adopting SFAS 128 is included on
a pro forma basis as presented below:
<TABLE>
<CAPTION>
Pro forma disclosure of impact of FAS 128
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Per share amounts:
Primary net income per share, as reported $0.48 $0.33 $0.18 $0.12
Effect of FAS 128 0.04 0.04 0.01 0.01
----- ----- ----- -----
Pro forma basic net income per share $0.52 $0.37 $0.19 $0.13
===== ===== ===== =====
Fully diluted net income per share as reported $0.48 $0.33 $0.18 $0.12
Effect of FAS 128 -- -- -- --
----- ----- ----- ----
Pro forma diluted net income per share $0.48 $0.33 $0.18 $0.12
===== ===== ===== =====
</TABLE>
Note 5. Subordinated Payable to Related Parties.
Effective December 29, 1995, the Company and the former owners of
Transcriptions, who include the Company's current Chief Executive Officer and
Chief Operating Officer, amended the Transcriptions purchase agreement to fix
the amount of the deferred purchase price (see Note 2). The amendment provided
for the Company to pay $18,375 in cash and issue 1,292 shares of Common Stock
(valued at $4,550 for financial reporting purposes) on August 31, 1996. The cash
portion of the deferred purchase price was discounted and presented as a
subordinated payable of $17,337 at December 31, 1995. The shares to be issued
were also included in the subordinated payable at December 31, 1995. In May
1996, the Company repaid the cash portion of the payable, and the Common Stock
was issued in August 1996.
Note 6. Shareholders' Equity
In May 1996, the Company consummated a secondary public offering of its
Common Stock, selling 3,300 shares at a price of $11.33 per share. In June 1996,
the underwriters exercised their overallotment option for an additional 461
shares. After deducting the underwriters' discount and offering
6
<PAGE>
expenses, the net proceeds to the Company were $39,442.
In connection with the 1992 issuance of a senior subordinated note, the
Company sold to the holder for $1,100 warrants to purchase 866 shares of Class A
and 534 shares of Class B preferred stock at an exercise price of $5.00 per
share. Each share of Class A and Class B preferred stock was convertible into
one share of common stock. During 1994, the holder was issued additional
warrants and all warrant exercise prices were reset at $4.85, in accordance with
the antidilution provisions of the original warrant agreement. Simultaneous with
the closing of the secondary stock offering, the Company and the holder agreed
that the holder would exercise the warrants by tendering the $7,000 principal
amount of the senior subordinated note and simultaneously converting the shares
of Preferred Stock received upon such exercise into 1,443 shares of Common
Stock. As an inducement for the holder to exercise the warrants and convert the
Preferred Stock, the Company issued the holder 65 additional shares of Common
Stock. This inducement, valued at $707 or $0.09 per share, had been recorded as
a deduction from the net income available to common shareholders in 1996.
In connection with the Company's May 1994 Credit Agreement, the Company
issued the agent bank warrants to purchase 113 shares of Common Stock at an
exercise price of $4.49 per share. These warrants were exercised on June 12,
1997 by the agent bank for proceeds to the Company of $507.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company is a leading national provider of electronic transcription and
document management services to the healthcare industry.
Fees for transcription related services are based primarily on contracted
rates, and revenue is recognized upon the rendering of services and delivery of
reports. Cost of revenues consists of all direct costs associated with providing
transcription related services, including payroll, telecommunications, software
customization, repairs and maintenance, rent and other direct costs. Selling,
general and administrative expenses include costs associated with the Company's
senior executive management, marketing and sales, finance, legal and other
administrative functions.
On September 9, 1997, the Company effected a three for two stock split. All
share data presented herein has been adjusted to reflect the stock split.
Results of Operations
The following table sets forth for the periods indicated, certain financial data
in the Company's Unaudited Consolidated Statements of Operations as a percentage
of net revenues:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues ............................ 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Costs and expenses:
Cost of revenues .................. 73.6 74.3 73.4 74.1
Selling, general and administrative 5.6 5.8 5.4 5.5
Depreciation ...................... 4.2 4.1 4.4 3.9
Amortization of intangible assets . 1.8 1.9 1.8 1.9
----- ----- ----- -----
Operating income .................... 14.8 13.9 15.0 14.6
Interest expense .................... 0.3 3.5 0.2 0.4
----- ----- ----- -----
Income before income taxes .......... 14.5 10.4 14.8 14.2
Income tax provision ................ 5.6 4.3 5.7 5.7
----- ----- ----- -----
Net income .......................... 8.9% 6.1% 9.1% 8.5%
===== ===== ===== =====
</TABLE>
8
<PAGE>
Nine Months Ended September 30, 1997 and 1996
Revenues. Revenues increased 38.4% to $60.7 million for the nine months ended
September 30, 1997 from $43.9 million for the comparable 1996 period. The $16.8
million increase reflected approximately $10.5 million of additional revenues
generated from new and existing clients, and $6.3 million of base revenues from
the Company's 1996 and 1997 medical transcription acquisitions.
Cost of Revenues. Cost of revenues increased from $32.6 million for the nine
months ended September 30, 1996 to $44.7 million for the comparable 1997 period.
As a percentage of revenues, cost of revenues decreased from 74.3% for the nine
months ended September 30, 1996 to 73.6% for the comparable 1997 period. The
percentage decrease in cost of revenues primarily resulted from a decrease in
telecommunication costs.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $3.4 million for the nine months ended September 30, 1997
from $2.6 million for the comparable 1996 period. As a percentage of revenues,
selling, general and administrative expenses decreased from 5.8% for the nine
months ended September 30, 1996 to 5.6% in the comparable 1997 period. The
decrease in selling, general and administration costs as a percentage of revenue
is primarily due to the ability of the Company to leverage its overhead
expenses.
Depreciation. Depreciation expense increased from $1.8 million for the nine
months ended September 30, 1996 to $2.6 million for the comparable 1997 period.
As a percentage of revenue, depreciation increased to 4.2% for the nine months
ended September 30, 1997 as compared to 4.1% for the same period in 1996.
Amortization. Amortization of intangible assets was $1.1 million for the nine
months ended September 30, 1997 as compared to $835,000 for the comparable 1996
period. The increase is attributable to the amortization of intangible assets
associated with the Company's five acquisitions completed in 1996 and four
acquisitions completed in 1997. As a percentage of revenue, amortization
remained relatively consistent at 1.8% for the nine months ended September 30,
1997 as compared to 1.9% in the same period for 1996.
Interest. Interest expense decreased from $1.6 million for the nine months ended
September 30, 1996 to $150,000 for the comparable 1997 period. The decrease was
due to the reduction in interest expense related to the Company's senior term
loans, borrowings under the Revolving credit facility and the cash portion of
the deferred purchase price being paid in full on May 30, 1996 with a portion of
the proceeds from the Company's 1996 equity offering. Additionally, for the nine
months ended September 30, 1996, the Company had recorded $640,000 related to
non-cash imputed interest expense associated with the fixing of the deferred
purchase price for Transcriptions, Ltd. which does not exist in 1997.
9
<PAGE>
Three Months Ended September 30, 1997 and 1996
Revenues. Revenues increased 41.2% to $21.9 million for the three months ended
September 30, 1997 from $15.5 million for the comparable 1996 period. The $6.4
million increase reflected approximately $4.0 million of additional revenues
generated from new and existing clients, and $2.4 million of base revenues from
the Company's medical transcription acquisitions since July 1, 1996.
Cost of Revenues. Cost of revenues increased from $11.5 million for the three
months ended September 30, 1996 to $16.1 million for the comparable 1997 period.
As a percentage of revenues, cost of revenues decreased from 74.1% in the second
quarter of 1996 to 73.4% for the comparable 1997 period. The percentage decrease
in cost of revenues primarily resulted from a decrease in telecommunication
costs.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.2 million for the three months ended September 30, 1997
from $857,000 for the comparable 1996 period. As a percentage of revenues,
selling, general and administrative expenses decreased from 5.5% in the second
quarter of 1996 to 5.4% in the comparable 1997 period.
Depreciation. Depreciation expense increased from $609,000 for the three months
ended September 30, 1996 to $964,000 for the comparable 1997 period. As a
percentage of revenue, depreciation increased to 4.4% for the three months ended
September 30, 1997 compared to 3.9% for the comparable period in 1996. The
increase in depreciation expense is largely due to increased capital
expenditures in the quarter ended September 30, 1997, which has added additional
capacity for future growth.
Amortization. Amortization of intangible assets was $396,000 for the three
months ended September 30, 1997 as compared to $291,000 for the comparable 1996
period. The increase is attributable to the amortization of intangible assets
associated with the Company's five acquisitions completed in 1996 and four
acquisitions completed in 1997. As a percentage of revenue, amortization
remained relatively consistent at 1.8% for the three months ended September 30,
1997 as compared to 1.9% in the same period for 1996.
Interest. Interest expense decreased from $63,000 for the three months
ended September 30, 1996 to $29,000 for the comparable 1997 period.
10
<PAGE>
Liquidity and Capital Resources
At September 30, 1997, the Company had working capital of $20.3 million,
including $13.3 million of cash and cash equivalents. During the nine months
ended September 30, 1997, the Company's operating activities provided cash of
$10.3 million as compared to $2.6 million in the comparative prior year nine
month period. The increase in cash provided by operating activities was
primarily related to increases in net income from operations, accrued payroll
and accrued expenses, as well as improvement of the accounts receivable
collections.
During the nine months ended September 30, 1997, the Company purchased $3.3
million of capital equipment and completed the acquisition of four medical
transcription businesses. These expenditures were financed through cash flows
from operations and the issuance of subordinated notes payable to sellers.
On April 23, 1997, the Company amended the borrowing facility with Chase
Manhattan Bank (the "Chase Facility"). The Chase Facility provides for a $10
million senior unsecured revolving credit facility expiring April 23, 2000. The
revolver bears interest at resetting rates selected by the Company from various
alternatives. The interest rate alternatives are either (i) the greater of (x)
prime rate, (y) the federal funds rate plus 0.5% (z) the bank's certificate of
deposit rate plus 1%, or (ii) LIBOR plus 0.75%. The Chase Facility also allows
for the Company to finance up to 100% of any acquisitions of companies that are
in the business of providing transcriptions-related services. The financing of
these acquisitions may be carved out of the revolving credit facility and
amortized over five year periods (20 consecutive quarters). Each acquisition
term loan that is created would permanently reduce the remaining revolving
credit commitment by a like amount.
In addition to acquisitions, the revolver can be used for working capital
and general corporate purposes. To the extent any amounts under the revolver are
repaid, other than acquisition term loans, the Company may reborrow such
amounts. The Chase Facility includes certain financial and other covenants
applicable to the Company, including limitations on capital expenditures and
dividends.
Effective December 29, 1995 the Company and the former owner of
Transcriptions, Ltd., who include the Company's current Chief Executive Officer
and Chief Operating Officer, amended the Transcriptions purchase agreement to
fix the amount of the deferred purchase price (see Note 2 of Notes to
Consolidated Financial Statements). The amendment provided for the Company to
pay $18,375 in cash and issue 1,292 shares of Common Stock (valued at $4,550 for
financial reporting purposes) on August 31, 1996. The cash portion of the
deferred purchase price was discounted and presented as a subordinated payable
at December 31, 1995. In May 1996, the Company repaid the cash portion of the
payable, and the Common Stock was issued in August 1996.
The Company believes that cash flow generated from the Company's operations
and its borrowing capacity under the Chase Facility should be sufficient to meet
its current working capital and capital expenditure requirements. Additional
funds may be required in connection with future acquisitions, if any.
11
<PAGE>
Special Note Concerning Forward Looking Statements
Other than the historical Financial Information and related Notes contained
in Part I, Item 1 hereof, this Report, including, without limitation,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in any such forward-looking statements as a result of various risks,
including, without limitation, the dependence on a single line of business;
rapid technological change; inability to expand into new markets; inability to
make and successfully integrate acquisitions; inability to attract and retain
key personnel and transcriptionists; the effects of regulatory changes in the
healthcare industry; the potential for significant fluctuations in operating
results; and the potential volatility of the Company's common stock.
12
<PAGE>
Part II - Other Information
Item 1. - Legal Proceedings - Not Applicable
Item 2. - Changes in Securities and Use of Proceeds - Not Applicable
Item 3. - Default upon Senior Securities - Not Applicable
Item 4. - Submission of Matters to Security Holders - Not Applicable
Item 5. - Other Information - Not Applicable
Item 6. - Exhibits and Reports on Form 8-K
a) Exhibits:
Computation of earnings per share 11.0
Financial Data Schedule 27.0
b) Reports on Form 8-K
During the quarter ended September 30, 1997, the Company
filed a Report on Form 8-K dated August 15, 1997, relating
to the three for two stock split of the Company's common
stock, without par value.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MedQuist Inc.
Registrant
Date: November 12, 1997
-----------------
By:/s/John R. Emery
-------------------------
John R. Emery
Chief Financial Officer
14
Exhibit 11.0
MEDQUIST INC.
EARNINGS PER SHARE COMPUTATION
UNAUDITED SUPPLEMENTAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, 1997 September 30, 1997
------------------ ------------------
<S> <C> <C>
Weighted average shares outstanding......... 10,448 10,596
Common stock equivalents.................... 723 708
Shares repurchased.......................... 42 --
------ -----
Weighted average shares adjusted............ 11,213 11,304
====== ======
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MEDQUIST INC.
FINANCIAL DATA SCHEDULE
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,300
<SECURITIES> 0
<RECEIVABLES> 16,711
<ALLOWANCES> 378
<INVENTORY> 0
<CURRENT-ASSETS> 30,071
<PP&E> 16,114
<DEPRECIATION> 6,903
<TOTAL-ASSETS> 85,334
<CURRENT-LIABILITIES> 9,800
<BONDS> 0
0
0
<COMMON> 57,647
<OTHER-SE> 14,680
<TOTAL-LIABILITY-AND-EQUITY> 85,334
<SALES> 0
<TOTAL-REVENUES> 60,707
<CGS> 0
<TOTAL-COSTS> 44,674
<OTHER-EXPENSES> 7,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> 8,838
<INCOME-TAX> 3,416
<INCOME-CONTINUING> 5,422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,422
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>