Radiologix, Inc. Reports Second Quarter 2006 Results
29 August 2006 Radiologix, Inc. (Amex: RGX), a leading national provider of diagnostic imaging services, today announced financial results for its second quarter ended June 30, 2006.
Select Financial Information
(in thousands of dollars) For the Three Months For the Six Months
Ended June 30, Ended June 30,
2006 2005 2006 2005
(As restated) (As restated)
Service fee revenue $65,129 $64,311 $130,246 $127,062
Service fee revenue
excluding terminated
operations $65,129 $64,272 $130,246 $126,093
EBITDA from continuing
operations (A) $11,008 $11,804 $23,744 $23,688
EBITDA from continuing
operations excluding
terminated operations (A) $11,016 $11,866 $23,737 $23,418
Net income $241 $1,206 $2,277 $2,159
Income from continuing
operations $201 $1,176 $2,000 $2,563
Income from continuing
operations excluding
terminated operations (A) $209 $1,238 $1,993 $2,294
(A) As defined and reconciled below
Second Quarter 2006 Results
For the second quarter ended June 30, 2006, service fee revenue was $65.1 million, compared to $64.3 million for the second quarter of 2005. Radiologix earned net income of $200,000, or $0.01 per diluted share, compared to net income of $1.2 million or $0.05 per diluted share for the second quarter of 2005.
* Service fee revenue excluding terminated operations was $65.1 million,
compared to $64.3 million for the second quarter of 2005.
* Income from continuing operations was $0.2 million, compared to $1.2
million for the second quarter of 2005.
* Income from continuing operations excluding terminated operations was
$0.2 million, compared to $1.2 million for the second quarter of 2005.
* EBITDA was $11.0 million, compared to $11.8 million for the second
quarter of 2005.
* EBITDA excluding terminated operations was $11.0 million, compared to
$11.9 million for the second quarter of 2005.
Year to Date June 30, 2006 Results
For the six months ended June 30, 2006, service fee revenue was $130.2 million, compared to $127.1 million for the six months ended June 30, 2005. Radiologix earned net income of $2.3 million, or $0.10 per diluted share, compared to net income of $2.2 million or $0.10 per diluted share for the six months ended June 30, 2005.
* Service fee revenue excluding terminated operations was $130.2
million, compared to $126.1 million for the six months ended June 30,
2005.
* Income from continuing operations was $2.0 million, compared to $2.6
million for the six months ended June 30, 2005.
* Income from continuing operations excluding terminated operations was
$2.0 million, compared to $2.3 million for the six months ended June
30, 2005.
* EBITDA was $23.7 million, compared to $23.7 million for the six months
ended June 30, 2005.
* EBITDA excluding terminated operations was $23.7 million, compared to
$23.4 million for the six months ended June 30, 2005.
Restated 2005 Results
As we discussed in our 2005 Form 10-K, in addition to restating our financial statements for the year ended December 31, 2004, the Company restated its financial statements for each of the three quarters ended March 31, June 30, and September 30, 2005 to correct the accounting treatment of the PresGar equipment lease contract acquired on October 31, 2004, for $13.9 million. This restatement also resulted in a revision of our tax expense for the three and six months ended June 30, 2005. The impact of the restatement in the three months ended June 30, 2005 is a reduction in depreciation and amortization expense of $0.2 million, a reduction in income tax expense of $0.4 million, and an increase in net income of $0.6 million. The impact of the restatement in the six months ended June 30, 2005 is a reduction in depreciation and amortization expense of $0.4 million, a reduction in income tax expense of $0.6 million, and an increase in net income of $1.0 million. The financial information contained in this press release reflects these restated amounts.
Charges and Gains
Radiologix recorded the following pre-tax charges and gains/losses to continuing operations, excluding terminated operations, during the second quarter of 2006 and 2005:
* $245,000 in the second quarter of 2006 and $0 in the second quarter of
2005 to record litigation expenses;
* $360,000 in the second quarter of 2006 and $112,000 in the second
quarter of 2005 to record compensation expense for restricted stock
awards and stock options outstanding; and
* $55,000 loss in the second quarter of 2006 and $125,000 gain in the
second quarter of 2005 to record gains/losses on sales of diagnostic
imaging equipment.
For the six months ended June 30, 2006 and 2005, Radiologix recorded the following pre-tax charges and gains to continuing operations, excluding terminated operations:
* $245,000 for the six months ended June 30, 2006 and $0 for the six
months ended June 30, 2005 to record litigation expenses;
* $747,000 for the six months ended June 30, 2006 and $213,000 for the
six months ended June 30, 2005 to record compensation expense for
restricted stock awards and stock options outstanding; and
* $752,000 for the six months ended June 30, 2006 and $450,000 for the
six months ended June 30, 2005 to record net gains on sales of
diagnostic imaging equipment.
Income Taxes
Due to losses for the last three years, it is uncertain if our deferred tax assets will be realized. Valuation allowances for net deferred tax assets were recorded in 2004 and 2005. The tax provision of $0.1 million and $0.2 million for the three and six months ended June 30, 2006, respectively, is for state income taxes and federal alternative minimum tax.
Balance Sheet
Cash and cash equivalents were $43.7 million at June 30, 2006, compared to $36.0 million at December 31, 2005, primarily reflecting continued strong cash collections during the six months ended June 30, 2006.
Net debt (total debt less cash and cash equivalents and restricted cash) was $120.9 million at June 30, 2006, compared to net debt of $128.7 million at December 31, 2005. Total debt was $170.3 million at June 30, 2006 and December 31, 2005.
Days sales outstanding (DSO) was 44 days for June 30, 2006 compared to 48 days for December 31, 2005.
"We are pleased with our second quarter financial and operational results, as they are in line with our internal expectations and targets. While EBITDA for the quarter is lower than last year's results, this was expected as we concluded the implementation of our REWARD Program at our largest subsidiary, incurred start-up costs associated with the opening of two new imaging centers in California, and recorded $245,000 for litigation expenses," said Sami S. Abbasi, president and chief executive officer of Radiologix. "In addition to our operating progress, we continue to make positive strides towards completing our merger with Primedex Health Systems, and expect to complete the merger during the fourth quarter of this year."
Plan of Merger With Primedex Health Systems, Inc.
On July 6, 2006, the Company entered into a Merger Agreement with Primedex Health Systems, Inc. in which a wholly owned subsidiary of Primedex will merge with and into Radiologix. The transaction will create the largest owner and operator of fixed-site diagnostic imaging centers in the United States, with 131 locations.
Under the terms of the Merger Agreement, which has been approved by each company's Board of Directors, Radiologix shareholders will receive an aggregate consideration of 22,621,922 shares of Primedex common stock and $42.95 million in cash. Based on the July 6 closing price of Primedex common stock of $1.75, each Radiologix shareholder would receive $1.84 in cash for each Radiologix share, plus one share of Primedex common stock for total consideration valued at $3.59. Based upon the July 6 closing price of Primedex common stock of $1.75, Radiologix shareholders will collectively own approximately 33% of the Primedex shares on a fully diluted basis.
The merger is expected to be completed in the second half of 2006, subject to regulatory approvals, the approvals of Primedex's and Radiologix's stockholders, as well as other customary closing conditions.
Sarbanes-Oxley Section 404
As noted in our 2005 Form 10-K, subsequent to December 31, 2005, but prior to the finalization of our 2005 consolidated financial statements, Radiologix placed into operation new controls to address the material weakness we identified in our accounting for lease terminations. These new controls include a more thorough and detailed review of material unusual transactions by senior financial officers, and outside accounting experts if deemed necessary.
We believe these new controls have remediated the material weakness that existed as of December 31, 2005, and that these controls operated effectively during the six months ended June 30, 2006.
Regulation G: GAAP and Non-GAAP Financial Information
This release contains certain financial information not derived in accordance with GAAP. Radiologix uses both GAAP and non-GAAP metrics to measure its financial results. We believe that, in addition to GAAP metrics, these non-GAAP metrics assist Radiologix in measuring its cash-based performance.
Radiologix believes this information is useful to investors and other interested parties because it removes unusual and nonrecurring charges that occur in the affected period and provides a basis for measuring the Company's financial condition against other quarters.
As Radiologix has historically reported non-GAAP results to the investment community, management also believes the inclusion of non-GAAP measures provides consistency in its financial reporting.
Such information should not be considered as a substitute for any measures calculated in accordance with GAAP, and may not be comparable to other similarly titled measures of other companies. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Reconciliation of this information to the most comparable GAAP measures is included in this release in the tables below.
Income from continuing operations is defined as income from continuing operations calculated in accordance with GAAP.
Income from continuing operations excluding terminated operations is defined as income from continuing operations excluding terminated San Antonio and certain Mid-Atlantic operations.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization, each from continuing operations, plus restricted stock compensation expense, and is reconciled to its nearest comparable GAAP financial measure.
EBITDA from continuing operations excluding terminated operations is defined as EBITDA excluding terminated San Antonio and certain Mid-Atlantic operations.
EBITDA and EBITDA from continuing operations excluding terminated operations are non-GAAP financial measures used as analytical indicators by Radiologix management and the healthcare industry to assess business performance. They also serve as measures of leverage capacity and ability to service debt.
EBITDA and EBITDA from continuing operations excluding terminated operations should not be considered measures of financial performance under GAAP, and the items excluded from EBITDA and EBITDA from continuing operations excluding terminated operations should not be considered in isolation or as an alternative to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity.
As EBITDA and EBITDA from continuing operations excluding terminated operations are not measurements determined in accordance with GAAP and are therefore susceptible to varying methods of calculation, these metrics, as presented, may not be comparable to other similarly titled measures of other companies.
About Radiologix
Radiologix (http://www.radiologix.com ) is a leading national provider of diagnostic imaging services, owning and operating multi-modality diagnostic imaging centers that use advanced imaging technologies such as positron emission tomography (PET), magnetic resonance imaging (MRI), computed tomography (CT) and nuclear medicine, as well as x-ray, general radiography, mammography, ultrasound and fluoroscopy. The diagnostic images created, and the radiology reports based on these images, enable more accurate diagnosis and more efficient management of illness for ordering physicians. Radiologix owned or operated 69 diagnostic imaging centers located in 7 states as of June 30, 2006.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include words such as "may," "will," "would," "could," "likely," "estimate," "intend," "plan," "continue," "believe," "expect" or "anticipate" and other similar words, and include all discussions about our acquisition and development plans. We do not guarantee that the events described in this press release will occur as described, or that any positive trends noted in this press release will continue.
These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's reasonable estimates of future results or trends. Although we believe that our plans and objectives reflected in, or suggested by, such forward-looking statements are reasonable, we may not achieve such plans or objectives. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this press release. You should read this press release completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future. Specific factors that might cause actual results to differ from our expectations include, but are not limited to:
* economic, demographic, business and other conditions in our markets;
* the highly competitive nature of the healthcare business;
* changes in patient referral patterns;
* changes in the rates or methods of third-party reimbursement for
diagnostic imaging services;
* changes in our contracts with radiology practice groups;
* changes in the number of radiologists operating in our contracted
radiology practice groups;
* the ability to recruit and retain technologists;
* the availability of additional capital to fund capital expenditure
requirements;
* lawsuits against Radiologix and our contracted radiology practice
groups;
* changes in operating margins, particularly changes due to our managed
care contracts and capitated fee arrangements;
* failure by Radiologix to comply with state and federal anti-kickback
and anti-self referral laws or any other applicable healthcare
regulations;
* changes in business strategy and development plans;
* changes in federal, state or local regulations affecting the
healthcare industry;
* our indebtedness, debt service requirements and liquidity constraints;
* risks related to our Senior Notes and healthcare securities generally;
* interruption of operations due to severe weather or other
extraordinary events;
* charges for unusual or infrequent (non-recurring) matters; and
* risks related to certain closing provisions of the merger with
Primedex that, if not satisfied or waived, will result in the merger
not being completed.
A more comprehensive list of such factors is set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and our other filings with the Securities and Exchange Commission.
Any forward-looking statement speaks only as of the date on which such statement is made. The information in this press release is as of August 8, 2006. Radiologix undertakes no obligation to update any forward-looking statement or statements to reflect new events or circumstances or future developments.
Radiologix, Inc.
Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2006 2005
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $43,671 $36,004
Restricted cash 5,750 5,662
Accounts receivable, net of allowances 41,237 40,815
Due from affiliates 704 1,737
Federal and state income tax receivable 6,101 6,189
Other current assets 4,643 5,491
Total current assets $102,106 $95,898
Property and equipment, net 68,610 67,965
Investments in joint ventures 9,113 10,597
Intangible assets, net 52,384 54,050
Deferred financing costs, net 4,117 4,942
Other assets 824 1,076
Total assets $237,154 $234,528
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued expenses $8,777 $10,157
Accrued physician retention 8,115 7,051
Accrued salaries and benefits 7,767 6,987
Accrued interest 683 685
Current maturities of capital lease obligations 33 32
Other current liabilities 682 477
Total current liabilities $26,057 $25,389
Long-term debt, net of current portion 158,270 158,270
Convertible debt 11,980 11,980
Capital lease obligations, net of current portion 45 62
Deferred revenue 6,290 6,494
Other liabilities 1,372 1,488
Total liabilities $204,014 $203,683
Commitments and contingencies
Minority interests in consolidated subsidiaries 1,145 1,874
STOCKHOLDERS' EQUITY:
Common stock 2 2
Treasury stock (180) (180)
Additional paid-in capital 16,362 15,615
Retained earnings 15,811 13,534
Total stockholders' equity $31,995 $28,971
Total liabilities and stockholders' equity $237,154 $234,528
Radiologix, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2006 2005 2006 2005
(As restated) (As restated)
Service fee revenue $65,129 $64,311 $130,246 $127,062
Costs of operations:
Cost of services 41,332 40,629 81,248 80,449
Equipment lease 3,886 3,231 7,642 6,037
Provision for doubtful
accounts 5,608 4,659 10,887 9,126
Depreciation and
amortization 6,054 5,858 12,024 11,502
Gross profit $8,249 $9,934 $ 18,445 $19,948
Corporate general
and administrative 4,448 4,985 9,164 9,333
Interest expense, net,
including amortization
of deferred financing
costs 4,326 4,565 8,803 9,241
Income (loss) before equity
in earnings of unconsolidated
affiliates, minority
interests in consolidated
subsidiaries, income taxes
and discontinued
operations $ (525) $ 384 $ 478 $1,374
Equity in earnings
of investments 1,025 1,039 2,070 1,661
Minority interests in
income of consolidated
subsidiaries (232) (154) (378) (303)
INCOME BEFORE INCOME TAXES
AND DISCONTINUED OPERATIONS $ 268 $ 1,269 $ 2,170 $2,732
Income tax expense 67 93 170 169
INCOME FROM CONTINUING
OPERATIONS $ 201 $ 1,176 $ 2,000 $2,563
Discontinued Operations:
Income (loss) from
discontinued operations
before income taxes 40 30 277 (404)
Income tax expense (benefit) --- --- --- ---
Income (loss) from
discontinued
operations $ 40 $ 30 $ 277 $ (404)
NET INCOME $ 241 $1,206 $ 2,277 $2,159
INCOME PER COMMON SHARE
Income from continuing
operations-basic $ 0.01 $ 0.05 $ 0.09 $ 0.12
Income (loss) from
discontinued
operations-basic $ 0.00 $ 0.00 $ 0.01 $(0.02)
Net income-basic $ 0.01 $ 0.05 $ 0.10 $ 0.10
Income from continuing
operations-diluted $ 0.01 $ 0.05 $ 0.09 $ 0.12
Income (loss) from
discontinued
operations-diluted $ 0.00 $ 0.00 $ 0.01 $(0.02)
Net income-diluted $ 0.01 $ 0.05 $ 0.10 $ 0.10
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 22,242,417 22,339,815 22,242,417 22,128,425
Diluted 22,309,365 22,572,909 22,316,713 22,625,931
Radiologix, Inc.
Reconciliation of Non-GAAP Financial Information
(In thousands)
Reconciliation of Income from Continuing Operations
to EBITDA from Continuing Operations
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2006 2005 2006 2005
(As restated) (As restated)
GAAP: Income from
continuing operations $ 201 $ 1,176 $ 2,000 $ 2,563
Add: Income tax expense 67 93 170 169
Add: Interest expense, net 4,326 4,565 8,803 9,241
Add: Depreciation
and amortization 6,054 5,858 12,024 11,502
Add: Restricted stock
compensation expense 360 112 747 213
EBITDA from
continuing operations $ 11,008 $ 11,804 $ 23,744 $ 23,688
Radiologix, Inc.
Reconciliation of Non-GAAP Financial Information, Excluding Terminated
Operations
(In thousands)
Reconciliation of Income from Continuing Operations
to EBITDA from Continuing Operations,
Excluding Terminated Operations
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2006 2005 2006 2005
(As restated) (As restated)
GAAP: Income from continuing
operations, excluding
terminated operations $ 209 $ 1,238 $ 1,993 $ 2,294
Add: Income tax expense 67 93 170 169
Add: Interest expense, net 4,326 4,565 8,803 9,241
Add: Depreciation
and amortization 6,054 5,858 12,024 11,501
Add: Restricted stock
compensation expense 360 112 747 213
EBITDA from continuing
operations excluding
terminated operations $ 11,016 $ 11,866 $ 23,737 $ 23,418
Radiologix, Inc.
Reconciliation of Financial Information, Excluding Terminated Operations
(In thousands)
For the Three Months Ended June 30, 2006
Terminated Radiologix Excluding
Radiologix Operations Terminated Operations
Service fee revenue $ 65,129 $ --- $ 65,129
Costs of operations:
Cost of services 41,332 13 41,319
Equipment lease 3,886 2 3,884
Provision for
doubtful accounts 5,608 (7) 5,615
Depreciation and
amortization 6,054 --- 6,054
Gross profit $ 8,249 $ (8) $ 8,257
Corporate general
and administrative 4,448 --- 4,448
Interest expense, net,
including amortization
of deferred financing costs 4,326 --- 4,326
Income (loss) before equity
in earnings of unconsolidated
affiliates, minority interests
in consolidated subsidiaries,
income taxes and
discontinued operations $ (525) $ (8) $ (517)
Equity in earnings of
unconsolidated affiliates 1,025 --- 1,025
Minority interests
in income of consolidated
subsidiaries (232) --- (232)
INCOME (LOSS) BEFORE INCOME
TAXES AND DISCONTINUED
OPERATIONS $ 268 $ (8) $ 276
Income tax expense 67 --- 67
INCOME (LOSS) FROM
CONTINUING OPERATIONS $ 201 $ (8) $ 209
Radiologix, Inc.
Reconciliation of Financial Information, Excluding Terminated Operations
(In thousands)
For the Three Months Ended June 30, 2005
(As restated)
Radiologix Terminated Radiologix Excluding
Operations Terminated Operations
Service fee revenue $ 64,311 $ 39 $ 64,272
Costs of operations:
Cost of services 40,629 84 40,545
Equipment lease 3,231 18 3,213
Provision for
doubtful accounts 4,659 (1) 4,660
Depreciation and
amortization 5,858 --- 5,858
Gross profit $ 9,934 $ (62) $ 9,996
Corporate general
and administrative 4,985 --- 4,985
Interest expense, net,
including amortization
of deferred financing costs 4,565 --- 4,565
Income (loss) before
equity in earnings of
unconsolidated affiliates,
minority interests in
consolidated subsidiaries,
Income taxes and discontinued
operations $ 384 $ (62) $ 446
Equity in earnings
of unconsolidated
affiliates 1,039 --- 1,039
Minority interests in
income of consolidated
subsidiaries (154) --- (154)
INCOME (LOSS) BEFORE
INCOME TAXES AND
DISCONTINUED OPERATIONS $ 1,269 $ (62) $ 1,331
Income tax expense 93 --- 93
INCOME (LOSS) FROM
CONTINUING OPERATIONS $ 1,176 $ (62) $ 1,238
Radiologix, Inc.
Reconciliation of Financial Information, Excluding Terminated Operations
(In thousands)
For the Six Months Ended June 30, 2006
Radiologix Terminated Radiologix Excluding
Operations Terminated Operations
Service fee revenue $ 130,246 $ --- $ 130,246
Costs of operations:
Cost of services 81,248 15 81,233
Equipment lease 7,642 8 7,634
Provision for
doubtful accounts 10,887 (30) 10,917
Depreciation and
amortization 12,024 --- 12,024
Gross profit $ 18,445 $ 7 $ 18,438
Corporate general
and administrative 9,164 --- 9,164
Interest expense, net,
including amortization of
deferred financing costs 8,803 --- 8,803
Income before equity in
earnings of unconsolidated
affiliates, minority interests
n consolidated subsidiaries,
Income taxes and
discontinued operations $ 478 $ 7 $ 471
Equity in earnings of
unconsolidated affiliates 2,070 --- 2,070
Minority interests in
income of consolidated
subsidiaries (378) --- (378)
INCOME BEFORE INCOME TAXES
AND DISCONTINUED
OPERATION $ 2,170 $ 7 $ 2,163
Income tax expense 170 --- 170
INCOME FROM
CONTINUING OPERATIONS $ 2,000 $ 7 $ 1,993
Radiologix, Inc.
Reconciliation of Financial Information, Excluding Terminated Operations
(In thousands)
For the Six Months Ended June 30, 2005
(As restated)
Radiologix Terminated Radiologix Excluding
Operations Terminated Operations
Service fee revenue $ 127,062 $ 969 $ 126,093
Costs of operations:
Cost of services 80,449 438 80,011
Equipment lease 6,037 18 6,019
Provision for
doubtful accounts 9,126 243 8,883
Depreciation and
amortization 11,502 1 11,501
Gross profit $ 19,948 $ 269 $ 19,679
Corporate general
and administrative 9,333 --- 9,333
Interest expense, net,
including amortization
of deferred financing costs 9,241 --- 9,241
Income before equity in
earnings of unconsolidated
affiliates, minority interests
in consolidated subsidiaries,
Income taxes and
discontinued operations $ 1,374 $ 269 $ 1,105
Equity in earnings of
unconsolidated affiliates 1,661 --- 1,661
Minority interests in
income of consolidated
subsidiaries (303) --- (303)
INCOME BEFORE INCOME TAXES
AND DISCONTINUED
OPERATIONS $ 2,732 $ 269 $ 2,463
Income tax expense 169 --- 169
INCOME FROM
CONTINUING OPERATIONS $ 2,563 $ 269 $ 2,294
Source: prnewswire
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