Q2 and Half Year Results -13-
19 8월 2010 - 3:00PM
UK Regulatory
million in senior secured credit facilities, consisting of a $50.0 million term
loan, and a revolving credit facility of up to $50.0 million. The credit
facilities are secured by a first priority lien on substantially all of the
property of the Loan Parties. The term loan is repayable in equal quarterly
installments of $5.0 million beginning October 1, 2010, with the balance payable
2.5 years from the date of closing. The Term Loan maturity date is the earlier
of October 22, 2012 or the date on which the Company's 6% Convertible note is
repaid or otherwise becomes due and payable. Borrowings under the revolving
credit facility may be made from time to time, subject to availability under
such facility, until the fourth anniversary of the closing date. Amounts
borrowed under the GE Credit Agreement bear interest at a rate selected by
MedQuist Transcriptions equal to the Base Rate or the Eurodollar Rate (each as
defined in the GE Credit Agreement) plus a margin, all as more fully set forth
in the GE Credit Agreement. At June 30, 2010, the revolving credit facility and
the term loan had interest rates of 6.25% and 6.75%, respectively.
The GE Credit Agreement contains customary covenants, including covenants
relating to reporting and notification, payment of indebtedness, taxes and other
obligations, and compliance with applicable laws. There are also financial
covenants, which include a Minimum Consolidated Fixed Charge Coverage Ratio, and
a Maximum Consolidated Senior Leverage Ratio and a Maximum Consolidated Total
Leverage Ratio and a Minimum Liquidity, each as defined In the GE Credit
Agreement. The GE Credit Agreement also imposes certain customary limitations
and requirements with respect to the incurrence of indebtedness and liens,
investments, mergers, acquisitions and dispositions of assets. Amounts due under
the GE Credit Agreement may be accelerated upon an Event of Default (as defined
in the GE Credit Agreement), including failure to comply with obligations under
the credit agreement, bankruptcy or insolvency, and termination of certain
material agreements. The Company will continue to evaluate the classification of
the term loan at each reporting date.
The Company incurred $6.1million in costs with the GE Credit Agreement which are
included in Other current assets and Other assets. These costs associated with
debt incurred in connection with the Acquisition will be amortized as additional
interest expense over the life of the underlying debt instruments.
Borrowings under the revolving credit facility are limited to the lesser of 85%
of Eligible Receivables or the aggregate Revolving Credit Commitments, as
defined in the credit facility. As of June 30, 2010, the Company had available
borrowings under the facility of $8.9 million.
The GE Credit Agreement also contains subjective acceleration clauses and a
springing lock box arrangement under which MedQuist retains control and dominion
over cash receipts unless there is an Event of Default or Excess Availability is
less than 20% of the aggregate Revolving Credit Commitments, as defined in the
GE Credit Agreement. Pursuant to these provisions, MedQuist elected to make a
payment of $5 million in July 2010 to maintain cash dominion and prevent
enactment of the springing lock box provisions. The Company believes this
payment will be sufficient to avoid enactment of the springing lock box in
future periods. The Company also believes the probability of default under the
agreement within the next 12 months to be remote.
The GE Credit Agreement also contains excess cash flow repayments provisions
that require 25% of Excess Cash Flows, as defined in the agreement, to be
remitted to the lenders within 95 days after year-end. The Company currently
estimates that the amount of repayments that would be due during April 2011 at
approximately $10 million. Such amount is currently classified as current.
Actual payments, if any, may differ from this estimate.
Total Current maturities under the GE Credit Agreement consists of (a) the $5
million paid during July 2010 related to prevention of enactment of the
springing lockbox, (b) $10 million estimated for excess cash flow sweeps in
April 2011, and (c) $15 million of contractual maturities of the term loan
obligations.
As of June 30, 2010, the Company believes that it is in compliance with the
covenants of the GE Credit Agreement. However, there can be no assurance of
future compliance.
When the Company entered into the GE Credit Agreement, the five-year $25.0
million revolving credit agreement with Wells Fargo Foothill, LLC (the "Wells
Credit Agreement") that it entered into on August 31, 2009 was terminated. No
borrowings were ever made under the Wells Credit Agreement. In the three month
period ended June 30, 2010 the Company wrote off deferred financing fees of $1.1
million and incurred termination fees of $0.6 million in connection with the
termination of this facility. Such costs are included in Interest Expense on
the Statement of Operations.
In connection with the Acquisition, the Company entered into a subordinated
promissory note with Spheris, Inc. (the "Subordinated Promissory Note"). The
loan matures in five years from the date of the Acquisition. The face amount of
the Subordinated Promissory Note totals $17.5 million with provisions for
prepayment at discounted amounts, ranging from 77.5% of the principal if paid
within six months, 87.5% from six to nine months, 97.5% from nine to twelve
months, 102.0% by year two, 101.0% by year three and 100.0% thereafter. For
purposes of the purchase price allocation, the note is discounted at 77.5% of
the principal ($13.6 million). This note was a non-cash transaction. The fair
value of the note was determined through the use of a Monte Carlo model which is
Level 3 in the Fair Value hierarchy based upon significant unobservable inputs.
The Subordinated Promissory Note bears interest at 8.0% for the first six
months, 9.0% from six to nine months, and 12.5% thereafter of which 2.5% may be
paid by increasing the principal amount. Payments of interest are made
semi-annually on each six month anniversary of the Acquisition. For financial
statement purposes the interest has been calculated using the average interest
rates over the term of the Subordinated Promissory Note.
11. Segment Reporting
The Company operates in one reportable operating segment which is technology
enabled BPO (Business Process Outsourcing) for the healthcare industry based on
the fact that the Company engages primarily in outsourcing services for the
health care business solutions.
Concentration of Risk, Geographic Data and Enterprise-wide Disclosures
No single customer accounted for more than 10% of the Company's net revenues in
any period. There is no single geographic area of significant concentration
other than the United States.
+--------------------------------------+-+--+--+---------+-+----------+
| The following summarizes the Company's net revenues and |
| property and equipment, net by geography: |
+---------------------------------------------------------------------+
| | | | | Six months |
| | | | | ended June |
| | | | | 30, |
+--------------------------------------+-+--+--+----------------------+
| Revenue | | | | 2010 | | 2009 |
+--------------------------------------+-+--+--+---------+-+----------+
| | | | | | | |
+--------------------------------------+-+--+--+---------+-+----------+
| United States of America | | |$ | 197,521 |$ | 183,343 |
+--------------------------------------+-+--+--+---------+-+----------+
| Others | | | | 3,071 | | 5,196 |
+--------------------------------------+-+--+--+---------+-+----------+
| | | |$ | 200,592 |$ | 188,539 |
+--------------------------------------+-+--+--+---------+-+----------+
| | | | | | | |
+--------------------------------------+-+--+--+---------+-+----------+
| | | | | | | |
+--------------------------------------+-+--+--+---------+-+----------+
| | | | | June | | December |
| | | | | 30, | | 31, |
+--------------------------------------+-+--+--+---------+-+----------+
| Property and equipment, net | | | | 2010 | | 2009 |
+--------------------------------------+-+--+--+---------+-+----------+
| | | | | | | |
+--------------------------------------+-+--+--+---------+-+----------+
| United States of America | | |$ | 18,826 |$ | 13,765 |
+--------------------------------------+-+--+--+---------+-+----------+
| Others | | | | 7,391 | | 5,746 |
+--------------------------------------+-+--+--+---------+-+----------+
| Total | | |$ | 26,217 |$ | 19,511 |
+--------------------------------------+-+--+--+---------+-+----------+
12. Related Party Transaction
On May 4, 2010, the audit committee of MedQuist's board of directors approved
the payment of and the Company expensed a $1,500 success-based fee to S A C
Private Capital Group, LLC in connection with the work performed on the
Acquisition. SAC is the majority shareholder of the Company.
13. Subsequent Events
The Company evaluated subsequent events through August 18, 2010 and noted no
other subsequent events that are required to be recognized or disclosed in the
consolidated financial statements.
This information is provided by RNS
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