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EXHIBIT 99.1
[MEDAPHIS(R) NEWS]
MEDAPHIS CORPORATION
2700 Cumberland Parkway
Suite 300
Atlanta, Georgia 30339
(770) 444-5300
FOR IMMEDIATE RELEASE
INVESTOR CONTACT:
Caryn Dickerson
Vice President and Treasurer
(770) 444-5357
investors@medaphis.com
MEDAPHIS COMMENTS ON SECOND QUARTER RESULTS
AND ANNOUNCES EFFECTIVENESS OF REGISTRATION
STATEMENT
ATLANTA, GEORGIA - (June 25, 1998) - Medaphis Corporation [NASDAQ: MEDA]
announced today that it expects its earnings for the second quarter ended June
30, 1998 to be modestly above the Company's first quarter 1998 operating
performance but below second quarter 1997 operating performance. The Company
further reported that the Securities and Exchange Commission has declared the
registration of its $175 million Senior Note offering effective.
The Company said that, while the quarter is not complete and events could occur
which may cause actual earnings to differ from expectations, it expects revenue
for the second quarter to approximate the $140.3 million revenue reported in the
first quarter and EBITDA, defined as earnings before interest, taxes,
depreciation, amortization and restructuring and other charges, to be modestly
above the $12.8 million reported in the first quarter. The forecasted revenue
and earnings figures would represent a decline from the strong second quarter of
1997 when revenue was $145.2 million and EBITDA was $19.2 million. All 1997
financial information included herein excludes the results of Healthcare
Recoveries, Inc., which was sold in May of that year.
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Allen W. Ritchie, president and chief operating officer of Medaphis, said, "As
Medaphis executes its operating strategy, we expect year-on-year improvement.
Based on our current forecast of software sales and preliminary operating
results, we believe the second quarter operating performance will be less than
Medaphis achieved in the second quarter of 1997. This is primarily related to a
slow down in software license fees in our patient scheduling product line and
increased production costs in the Company's emergency room billing business."
Expanding on these issues, Ritchie explained, "Patient scheduling products have
historically comprised a large portion of Per Se Technologies Application
Software revenue. As we disclosed at the end of the first quarter, we
experienced performance issues with a release of our patient scheduling software
that were discovered after substantial sales of the product had been made in
1997. Although these problems were resolved in early 1998 and a new version was
released, the performance issues in the prior release have had a more pronounced
effect on our sales in the first half of 1998 than we anticipated. We have been
working diligently to ensure that our customers are satisfied with the
performance of the new version. Based on recent successful installations of the
new release as well as being recognized as a market leader, we believe sales of
the patient scheduling product should get back on track in the second half of
1998."
Commenting on second quarter Physician Services' operating results, Ritchie
said, "While the operating performance at the vast majority of the Physician
Services operations is in line with our expectations, we have experienced
additional costs and processing delays in the emergency room segment of our
billing and accounts receivable management operations due to recent processing
changes. This has led to an increase in the backlog of unprocessed claims in
that operation."
Ritchie said that additional resources have been added to the emergency room
billing and accounts receivable segment of Physician Services in an effort to
reduce the backlog to more reasonable levels over the upcoming months.
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Ritchie added, "We have experienced an increase in headcount largely as a result
of our conversion to manual coding processes. Emergency room billing is the most
complex specialty in physician billing and we have had to dedicate additional
resources to ensure that our emergency room physician clients' billings are in
compliance with the various regulatory requirements during the transition from
automated coding to manual processing. Because of the extremely complex nature
of emergency room billing, we believe a manual coding process will ultimately be
more efficient than the current process that is based upon an automated coding
tool. During the transition period, which should be completed by the fall of
1998, we will continue to incur additional personnel expenses to ensure the
accuracy of our processing and compliance with government regulations."
Medaphis also confirmed that the financial difficulties being experienced by FPA
Medical Management, Inc. ("FPA") have resulted in an increase of several million
dollars in the past due accounts receivable balance due from an FPA subsidiary,
Sterling Healthcare Group, Inc. ("Sterling"), a significant client of the
Physician Services' emergency room billing operations. Commenting on the
situation, David E. McDowell, chairman and chief executive officer, said, "FPA
is working to address its financial difficulties and has been consulting closely
with us in an effort to manage this exposure. We have a longstanding
relationship with Sterling, which FPA acquired in late 1996, which is valuable
and important to both companies, and are prepared to work with FPA towards a
continuing relationship."
McDowell added, "While we will continue to invest in initiatives to further
improve client service, expand product offerings, increase the efficiency of our
operations and position Medaphis for the future, we are working diligently to
improve our near-term performance. We are pleased with our many accomplishments
in the past year and are striving to translate this into an acceptable level of
profitability."
Medaphis also said that its registration statement relating to the registration
of $175 million 9 1/2 % Senior Notes due February 15, 2005 has been declared
effective by the Securities and Exchange Commission. This financing was
completed earlier this year in a private placement
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market under Rule 144A together with a $100 million three-year senior secured
revolving credit facility.
McDowell reiterated "We are anxious to discuss our overall operating strategy as
well as our plans for growth with our shareholders and look forward to being
able to share this information with you in the upcoming weeks."
Medaphis Corporation expects to announce final results for the second quarter
during the week of July 20, 1998.
ABOUT MEDAPHIS CORPORATION
Medaphis is a leader in delivering healthcare information products and services,
together with enabling technologies in selected industries. Based in Atlanta,
Georgia, Medaphis currently services more than 20,700 physicians and 2,700
hospitals across the nation, and over 100 systems integration customers in
service industries such as healthcare, communications, energy and high tech.
This Press Release contains statements that constitute "forward-looking
statements" within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act
of 1995. "Forward-looking" statements contained in this Press Release include
the intent, belief or current expectations of the Company and members of its
senior management team with respect to the Company's future business operations
as well as the assumptions upon which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance, and involve risks and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements. Important factors currently known to management that
could cause actual results to differ materially from those contemplated by the
forward-looking statements in this Press Release include, but are not limited
to, adverse developments with respect to the operation of the Company's business
units or implementation of the Company's operating strategy, failure of sales of
the Company's patient scheduling software product to rebound, and failure to
recognize anticipated efficiencies in the Company's emergency room billing
operations. Additional factors that would cause actual results to differ
materially from those contemplated within this Press Release can
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also be found in the Company's Safe Harbor Compliance Statement filed as Exhibit
99.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 and Exhibit 99.13 to the Company's Annual Report on Form 10-K as
amended by Form 10-K/A for the year ended December 31, 1997.
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EDITOR'S NOTE:
Further information on Medaphis is available on the World Wide Web at
www.Medaphis.com. Medaphis is a registered trademark of Medaphis Corporation.
All other trademarks are the property of their respective owner.