“Although results have improved, our stock price has clearly been under pressure particularly since the announcement of the civil investigative demand in August 2011. As a result, we were required by accounting guidance to take a non-cash goodwill impairment charge. This charge has no impact on the Company’s business operations or cash flow.
“2011 presented a number of challenges for the Company and the healthcare industry overall; however, we improved our year-over-year operating results and are even more excited about the future. With a number of operational improvements in place and the full commercialization of our next-generation MCOT TM device, we are confident that we can continue to enhance performance and strategically leverage our balance sheet.”
Fourth Quarter Financial Results
Revenue for the fourth quarter 2011 was $26.8 million, a decrease of 6.6% compared to $28.7 million in the fourth quarter 2010. Patient revenue decreased $3.9 million due to slightly lower MCOT TM volume which correlates to the lower volumes being experienced in physicians’ offices, partially offset by an increase in event and Holter volumes. Largely offsetting the patient revenue decline was the addition of Biotel, which generated revenue of $2.0 million. For the three months ended December 31, 2011, patient revenue was comprised of 36% Medicare and 64% commercial, and patient volume was comprised of 54% Medicare and 46% commercial.Gross profit for the fourth quarter 2011 decreased to $16.6 million, or 62.1% of revenue, compared to $16.7 million, or 58.3% of revenue, in the fourth quarter 2010. The increase in gross profit percentage was related to cost reduction initiatives implemented during the quarter. On a GAAP basis, operating expenses for the fourth quarter 2011 were $66.2 million, an increase of 210.7% compared to $21.3 million in the fourth quarter 2010. This increase was driven by a goodwill impairment charge of $46.0 million due to a suppressed market price which the Company believes is primarily a result of market reaction to the ongoing Department of Justice inquiry. Operating expenses on an adjusted basis declined by 11.1% compared to the prior year quarter, excluding $48.7 million in the fourth quarter 2011 and $1.6 million in the fourth quarter 2010 related to restructuring and other nonrecurring charges. The decrease in operating expenses was driven partially by the implementation of cost reductions in the quarter as well as a reduction in bad debt expense. These reductions were partially offset by the addition of Biotel’s operating expenditures in the quarter.