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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported) March 25, 1999
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MEDQUIST INC.
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(Exact name of registrant as specified in charter)
New Jersey 0-19941 22-2531298
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Five Greentree Centre, Marlton, New Jersey 08053
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 596-8877
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N/A
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
NEW REGISTRATION STATEMENT.
On March 25, 1999, MediQuist Inc. filed a registration
statement on Form S-3 (the "Registration Statement") for a public offering of
4,193,467 shares of its common stock. Of the total shares being offered,
1,000,000 shares are expected to be offered by MedQuist and 3,193,467 shares are
expected to be offered by existing MedQuist shareholders. In addition, MedQuist
expects to grant the underwriters an over-allotment option with respect to an
additional 629,020 registered shares.
RISK FACTORS.
The Registration Statement sets forth risk factors which
investors should consider carefully before investing in MedQuist. An investment
in MedQuist common stock involves many risks, including market, liquidity,
credit, operational, legal and regulatory risks. These risks are inherent in
MedQuist's business. If any of the following risks actually occur, our business
prospects could be materially adversely affected, the trading price of our
common stock could decline, and investors might lose all or part of their
investment.
Our success depends upon our ability to recruit and retain qualified
transcriptionists
Our success depends, in part, upon our ability to attract and retain
qualified transcriptionists who can provide accurate transcription quickly.
Competition for skilled transcriptionists is intense. In addition, we require
that transcriptionists have substantial experience or receive substantial
training before being hired.
Our growth strategy includes acquisitions
As part of our growth strategy, we have made, and plan to continue to
make, acquisitions of other companies. A portion of our recent growth in
revenue is a result of acquisitions of other medical transcription companies.
The number of large acquisition candidates is decreasing. As a result, our
acquisition activities may not be as significant in the future and our growth
rate could decline.
In addition, if we are successful in pursuing acquisitions, we may need
to borrow money or incur other liabilities to finance our acquisition activity.
This could limit our financial flexibility. We may also be required to issue
additional shares of stock which could result in dilution to our shareholders.
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We depend on our senior management team
Our senior management team is crucial to our success. David A. Cohen,
our chief executive officer, and John A. Donohoe, our chief operating officer,
have 56 years of combined experience in the medical transcription industry.
New services or products using new technologies could adversely affect the
demand for our services
The introduction of competing services or products incorporating new
technologies, such as voice recognition capabilities or other alternative means
of data entry, could adversely affect the demand for our services. To maintain
our leadership position, we must improve our services to keep pace with
technological developments and changes in the marketplace.
We depend on a single line of business
We anticipate that we will continue to derive substantially all of our
revenue from providing medical transcription services. A reduction in demand or
an increase in competition in the market for our transcription services could
have a material adverse effect on our business, financial condition and results
of operations.
Our growth strategy includes the expansion of our customer base
Our core customer base has been the medical records departments of
hospitals. We plan to continue the recent expansion of our client base to
include additional outpatient clinics, physician practice groups and direct
patient care departments within hospitals. The success of our ongoing expansion
is important to our future because we expect an increase in the provision of
healthcare services at sites other than hospitals.
If we are not able to maintain our current rate of growth in revenue and
earnings, the market price of our common stock could decline
Our revenue and profits have grown in recent periods as a result of both
internal growth and acquisitions. The rate of growth in revenue and profits may
decline as a result of a variety of factors, including:
o our ability to hire and retain transcriptionists;
o size and timing of acquisitions;
o integration of acquired businesses into our operations;
o changes in demand for our services; and
o competitive conditions in the industry.
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It is possible that our future operating results may be below the
expectations of stock market analysts and investors. Any shortfall could cause
a decline in the price of our common stock.
In addition, a decline in the price of our common stock could make it
more difficult or expensive for us to acquire companies by issuing common
stock.
The market price of our common stock may be volatile
The market price of our common stock has been volatile in the past and
may be volatile in the future. Our common stock price may be affected by many
factors, including the following:
o fluctuations in our operating results;
o acquisitions;
o technological innovations or new product or service introductions by
us or our competitors;
o government regulations;
o healthcare legislation and reforms; and
o general market and economic conditions.
The stock market in recent years has experienced substantial price and
volume fluctuations. This has been accompanied by extreme volatility in the
stock prices of healthcare service companies that often has been unrelated to
the operating performance of these companies. Similar market activity could
adversely affect the market price of our common stock in the future.
We compete with many others in the market
for medical transcription services
We compete with approximately 1,500 medical transcription service
companies in the United States. These companies offer services that are similar
to ours and compete with us for both clients and qualified transcriptionists.
We also compete with the in-house transcription staffs of our current and
potential clients. Increased competition may result in lower prices for our
services, higher payroll costs, reduced operating margins and the inability to
increase our market share.
Although many of our competitors are small local or regional companies,
several of our competitors are large national companies. These companies
include Transcend Services, Inc., Rodeer Systems, Inc., and Lanier
Transcription Services, a subsidiary of Harris Corp. In addition, we anticipate
increasing competition from other large companies that were not traditionally
in the medical transcription business, such as IDX Systems Corporation. Current
and potential competitors may have financial, technical and marketing resources
that are greater than ours. As a result, competitors may be able to respond
more quickly to evolving technological developments or changing customer needs
or devote greater resources to the development, promotion or sale of their
services than we can.
In addition, competition may increase due to consolidation of
transcription companies. Current and potential competitors may establish
cooperative relationships with third parties to increase their ability to
attract our current and prospective clients.
A change in law or a challenge to our classification of our at-home
transcriptionists may result in additional employment costs, taxes or penalties
At-home transcriptionists who came to work for MedQuist as a result of
our acquisition of MRC and all at-home transcriptionists hired by our MedQuist
MRC subsidiary are treated as employees for state tax, benefits, unemployment,
federal income tax and social security tax purposes. All other at-home
transcriptionists hired by MedQuist are treated as independent contractors for
state tax, benefits and unemployment purposes and as statutory employees for
federal income tax and social security tax purposes. If there is a change in law
or a successful challenge to our position regarding treatment of at-home
transcriptionists as independent contractors, we may have to pay or incur
additional employment costs, taxes and penalties.
Competitors and software providers may claim that we are infringing on their
proprietary rights
Defending these claims, even if they have no merit, can be
time-consuming and expensive. In addition, in the event of infringement claims,
we may be required to enter into royalty or licensing agreements or cease the
claimed infringing activities.
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We may be subject to liability if we fail to comply with confidentiality
requirements
We are subject to many laws, regulations and contractual provisions that
require us to keep the medical information that we transcribe confidential. We
may be subject to liability if we fail to comply with confidentiality
requirements.
Our customers and suppliers may not be Year 2000 compliant
We rely heavily on the computer systems of our customers, suppliers and
other organizations such as telephone companies in operating our business. If
these systems are not Year 2000 compliant, our business, operating results and
financial position could be materially and adversely affected.
Significant number of shares eligible for future sale could lower the market
price for our common stock
Sales of large numbers of shares of common stock after the offering, or
even the potential of those sales, would likely lower the market price of our
common stock. After the offering, we will have 34,727,120 shares of common
stock outstanding, substantially all of which will be freely tradeable. In
addition, 4,433,000 shares which may be issued upon the exercise of outstanding
options may be sold at various times after the offering.
Anti-takeover provisions may make it more difficult for a third party to acquire
control of us and could reduce the amount that shareholders would receive if we
are sold
Anti-takeover provisions contained in New Jersey law and in our charter,
bylaws and contracts could make it more difficult for a third party to acquire
control of MedQuist, even if that change in control would be beneficial to
shareholders. These provisions could reduce the amount that shareholders would
receive if we are sold. These anti-takeover provisions include the following:
o New Jersey law prohibits us from entering into certain business
combination transactions with any shareholder that owns 10% or more of
our outstanding voting securities, except under limited circumstances.
o Our charter gives our board of directors the authority to issue shares
of preferred stock without shareholder approval. Any preferred stock
could have rights, preferences and privileges that could adversely
affect the voting power and the other rights of the holders of our
common stock.
o Our charter provides for staggered terms for the members of the board
of directors, with each board member serving a three year term.
o We have entered into severance arrangements with most of our senior
management which provide for significant payments upon a change in
control.
o All outstanding options to purchase our stock would become exercisable
immediately upon a change in control.
FORWARD-LOOKING STATEMENTS.
Some of the information in this Form 8-K contains forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act. These statements include forward-looking
language such as "will likely result," "may," "are expected to," "is
anticipated," "estimated," "projected," "intends to" or other similar words.
Our actual results are likely to differ, and could differ materially, from the
results expressed in, or implied by, these forward-looking statements. There
are many factors that could cause these forward-looking statements to be
incorrect, including but not limited to the risks described above under "Risk
Factors". When considering these forward-looking statements, you should keep in
mind these risk factors and the other cautionary statements in this Form 8-K,
and should recognize that those forward-looking statements speak only as of the
date made. MedQuist does not undertake any obligation to update any
forward-looking statement included in this Form 8-K.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release dated March 25, 1999.
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SIGNATURES
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.
Dated: March 25, 1999 By: /s/ John M. Suender
Marlton, New Jersey ------------------------------
John M. Suender
Sr. Vice President and
General Counsel
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE:
MEDQUIST INC. ANNOUNCES FILING OF A REGISTRATION STATEMENT
Marlton, New Jersey -- March 25, 1999 -- MedQuist Inc. (Nasdaq: "MEDQ")
announced today the filing with the Securities and Exchange Commission of a
registration statement on Form S-3 for a public offering of 4,193,467 shares of
its Common Stock. Of the total shares being offered, 1,000,000 shares are
expected to be offered by MedQuist and 3,193,467 shares are expected to be
offered by existing MedQuist shareholders. In addition, MedQuist expects to
grant the underwriters an over-allotment option with respect to an additional
629,020 registered shares. The net proceeds expected to be received by MedQuist
from the proposed offering will be used for its working capital and general
corporate purposes, including acquisitions.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission but has not yet become effective.
These securities may not be sold, nor may offers to buy be accepted, prior to
the time the registration statement becomes effective. This news release shall
not constitute an offer to sell, or the solicitation of an offer to buy, nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State. The offering may be made only by
written prospectus meeting the requirements of Section 10 of the Securities Act
of 1933.
MedQuist is the leading provider of medical transcription services, a
key component in the provision of healthcare services. MedQuist serves
approximately 2,300 customers nationwide through its 77 client service centers.
Contact: John R. Emery, Senior Vice President, Treasurer and
Chief Financial Officer,
MedQuist Inc., (609) 596-8877
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