Financial Highlights – First Quarter of 2009

The $7.5 million decrease in net revenues during the first quarter of 2009 compared with the prior-year period was due primarily to the impact of net lost business and lower average contract pricing.

Operating income for the first quarter of 2009 was $4.6 million, or 11.0% of net revenues, compared with an operating loss of $0.7 million, or 1.4% of net revenues, during the prior-year period. The increase in operating income during the first quarter of 2009 compared with the prior-year period was due largely to improved operating margins associated with increased utilization of the company’s global production workforce and speech recognition technologies. These cost improvements more than offset the impact from lower revenues as noted above. Additionally, general and administrative expenses were lower in 2009 versus 2008 due to $1.3 million of expenses recognized in the first quarter of 2008 relating to a transaction that was not consummated, as well as lower overhead costs in 2009 associated with company restructuring efforts. Operating income for the first quarter of 2009 also improved versus the prior year period due to $4.2 million less depreciation and amortization expense associated with customer list assets that were fully amortized during 2008.

The company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, other expense or income, and restructuring charges. Adjusted EBITDA for the company was $7.0 million, or 16.7% of net revenues, in the first quarter of 2009 compared with $5.2 million, or 10.5% of net revenues, in the prior-year period. The increase in Adjusted EBITDA in the first quarter of 2009 compared with the prior-year period was due to the operating income improvements described above, excluding the impact of the lower depreciation and amortization expense.

Adjusted EBITDA is a financial measure not computed in accordance with United States generally accepted accounting principles, or GAAP. Please refer to the “Supplemental Financial Information” and related note contained in this press release for further discussion and reconciliation of Adjusted EBITDA to GAAP financial measures.

Commenting on the first quarter 2009 results, Daniel J. Kohl, president and chief executive officer of Spheris, stated, “We made progress in the quarter with the initiatives to get Spheris back on track. The first quarter results are encouraging and reflect the benefit of cost reduction efforts as well as efficiencies from utilizing speech recognition and global production capabilities. However, this is only the start to what we expect will be a very challenging year.”

Balance Sheet Highlights

As of March 31, 2009, the outstanding indebtedness under the company’s senior secured credit facility was $75.2 million and the outstanding indebtedness under the company’s senior subordinated notes was $125.0 million.

Liquidity Highlights

As of March 31, 2009, Spheris held $9.9 million in unrestricted cash and cash equivalents. During the first quarter of 2009, the company generated cash from operating activities of $6.9 million compared with $2.2 million of cash used in operating activities during the same period in 2008. The $9.1 million period over period improvement in cash from operating activities was primarily attributable to changes in working capital items including: (a) changes in accrued wages and benefits resulting from the timing of bi-weekly payrolls, and bonus payments made in the first quarter of 2008 that were not paid during 2009; (b) timing of receivables collections; and (c) timing of payables disbursements. Cash provided by operating activities was also higher during the first quarter of 2009 due to the increase in Adjusted EBITDA as described above.