TRANSCEND SERVICES, INC. (NASDAQ: TRCR), a leading provider of clinical documentation solutions to the U.S. healthcare market, today announced its unaudited financial results for the second quarter ended June 30, 2011.

Second Quarter Results

Transcend's diluted earnings per share increased to $0.33 for the second quarter of 2011 compared to $.15 for the second quarter of 2010. During the second quarter of 2011, the Company incurred $139,000 of acquisition-related transaction costs which impacted diluted earnings per share by approximately $(.01). The results for 2010 include the $(.06) per diluted share impact of two unusual expenses: $601,000 of transaction fees related to an unsuccessful acquisition and $445,000 related to a cumulative stock-based compensation adjustment. Excluding these two unusual expenses, non-GAAP diluted earnings per share for the second quarter of 2010 was $.21 (see table below for a reconciliation of GAAP to non-GAAP results). The improvement in earnings was primarily due to the positive impact of acquisitions and gross margin improvement.

Revenue for the second quarter of 2011 increased $8,453,000 or 38% to $30,662,000 compared to $22,209,000 for the second quarter of 2010, including $6,729,000 of revenue contributed by the Heartland and DTS acquisitions. Excluding these two recent acquisitions, revenue increased 8%.

Gross profit for the second quarter of 2011 increased 53% to $12,313,000, or 40% of revenue, compared to $8,031,000, or 36% of revenue, for the second quarter of 2010.

Operating income for the second quarter of 2011 increased 120% to $5,934,000, or 19% of revenue, compared to $2,692,000, or 12% of revenue, for the second quarter of 2010. Excluding the two unusual 2010 expenses mentioned above, operating income increased 59% for the second quarter of 2011 compared to non-GAAP operating income of $3,738,000 or 17% of revenue for the same quarter of last year.

The effective income tax rate for the second quarter of 2011 was 40% compared to 41% in the second quarter of 2010.

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