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Radiologix, Inc. (RGX) Reports Third Quarter 2005 Results



11/3/2005 12:54:11 PM

DALLAS, Nov. 3 /PRNewswire-FirstCall/ -- Radiologix, Inc. , a leading national provider of diagnostic imaging services, today announced financial results for its third quarter and nine months ended September 30, 2005.

Select Financial Information (in thousands of dollars) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2005 2004 2005 2004 Service fee revenue, as reported $62,258 $63,613 $189,320 $195,866 Service fee revenue excluding terminated operations(A) $62,259 $62,164 $188,352 $185,252 EBITDA(A) $11,165 $10,217 $34,853 $35,052 EBITDA from continuing operations excluding terminated operations(A) $11,221 $10,221 $34,639 $31,776 Net income (loss), as reported $(199) $(5,387) $968 $(10,203) Income (loss) from continuing operations, as reported $162 $(5,176) $1,578 $(3,513) Income (loss) from continuing operations excluding terminated operations(A) $199 $(379) $1,453 $(3,408) (A) As defined and reconciled below Third Quarter 2005 Results

For the third quarter ended September 30, 2005, service fee revenue was $62.3 million, compared to $63.6 million for the third quarter 2004. Radiologix lost $199,000, or $0.01 per diluted share, compared to a net loss of $5.4 million or $0.25 per diluted share for the third quarter 2004.

* Service fee revenue excluding terminated operations was $62.3 million, compared to $62.2 million for the third quarter 2004. * Income from continuing operations was $162,000, or $0.01 per diluted share, compared to a loss from continuing operations of $5.2 million, or $0.24 per diluted share, for the third quarter 2004. * Income from continuing operations excluding terminated operations (defined and reconciled below) was $199,000, or $0.01 per diluted share, compared to a loss of $379,000, or $0.02 per diluted share for the third quarter 2004. * EBITDA (defined and reconciled below) was $11.2 million, compared to $10.2 million for the third quarter 2004. * EBITDA from continuing operations excluding terminated operations (defined and reconciled below) was $11.2 million, compared to $10.2 million for the third quarter 2004. Nine Months Ended September 30, 2005 Results

For the nine months ended September 30, 2005, service fee revenue was $189.3 million, compared to $195.9 million for the same period last year. Radiologix earned $1.0 million, or $0.04 per diluted share, compared to a net loss of $10.2 million or $0.47 loss per share for the nine months ended September 30, 2004.

* Service fee revenue excluding terminated operations was $188.4 million, compared to $185.3 million for the nine months ended September 30, 2004. * Income from continuing operations was $1.6 million, or $0.07 per diluted share, compared to a loss from continuing operations of $3.5 million, or $0.16 per diluted share, for the nine months ended September 30, 2004. * Income from continuing operations excluding terminated operations was $1.5 million or $0.06 per diluted share, compared to a loss of $3.4 million, or $0.16 per diluted share for the nine months ended September 30, 2004. * EBITDA was $34.9 million, compared to $35.1 million for the nine months ended September 30, 2004. * EBITDA from continuing operations excluding terminated operations was $34.6 million, compared to $31.8 million for the nine months ended September 30, 2004. Balance Sheet * Cash and cash equivalents were $42.4 million at September 30, 2005, compared to $34.1 million at December 31, 2004. * Net debt (total debt less cash and cash equivalents and restricted cash) was $122.3 million at September 30, 2005, compared to $130.9 million at December 31, 2004. Total debt at September 30, 2005 was $170.3 million, compared to $170.5 million at December 31, 2004. * Days sales outstanding (DSOs) were 45 days at September 30, 2005, compared to 48 days at December 31, 2004.

"The third quarter and year-to-date results show good progress from a year ago. We grew service fee revenue and EBITDA excluding the terminated operations, generated strong positive cash flow from operations, further improved our DSO performance, and maintained strong liquidity," said Sami S. Abbasi, president and chief executive officer of Radiologix. "We are pleased with the progress that we are making against our three key focus areas for 2005. Our primary operations are improving, we are on track with our Radiologix Enhanced Workflow And Record Distribution (REWARD) Program, and we have the right pieces in place to execute our longer-term strategy."

Sarbanes-Oxley 404

As noted in our 2004 Form 10-K, subsequent to December 31, 2004, but prior to the finalization of our 2004 consolidated financial statements, Radiologix placed into operation new controls to address the material weakness we identified in our accounts receivable estimation process. These new controls include a retrospective collection analysis that matches cash collections to billed charges by month of service.

We believe these new controls have remediated the material weakness that existed as of December 31, 2004, and that these controls operated effectively during the nine months ended September 30, 2005.

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.

Conference Call

In connection with this press release, you are invited to listen to our conference call with Sami S. Abbasi, president and chief executive officer, and Michael N. Murdock, senior vice president and chief financial officer, on Thursday, November 3, 2005, at 8:00 a.m. Central Time / 9:00 a.m. Eastern Time.

You may access the call by dialing (800) 811-0667 and entering code 8184087. A replay of the call will be available by dialing (888) 203-1112 and entering code 8184087.

In addition, the conference call will be broadcast live over the Internet. You may listen to the call via the Internet by navigating to Radiologix's Web site (http://www.radiologix.com ) and from the "Investor Relations" drop-down menu, click on "Conference Calls & Presentations."

If you are unable to participate during the live Webcast, the Third Quarter Results Conference Call will be archived on Radiologix's Web site (http://www.radiologix.com ). To access the replay, from the "Investor Relations" drop-down menu, click on "Conference Calls & Presentations."

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 73 diagnostic imaging centers located in 8 states as of September 30, 2005.

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; and * charges for unusual or infrequent (non-recurring) matters.

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, 2004, 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 November 3, 2005. 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) September 30, December 31 2005, 2004 ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $42,440 $34,084 Restricted cash 5,613 5,539 Accounts receivable, net of allowances 41,122 44,197 Due from affiliates 1,413 2,029 Federal and state income tax receivables 6,954 3,905 Assets held for sale --- 305 Other current assets 5,818 6,996 Total current assets 103,360 97,055 Property and equipment, net 65,449 58,627 Investments in joint ventures 10,057 8,137 Goodwill 2,241 2,241 Intangible assets, net 68,121 71,200 Deferred financing costs, net 5,354 6,591 Deferred income taxes 3,639 8,892 Other assets 1,076 1,328 Total assets $259,297 $254,071 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and other accrued expenses $7,364 $11,342 Accrued physician retention 8,048 8,384 Accrued salaries and benefits 9,525 7,339 Deferred income taxes 3,649 3,202 Accrued interest 4,841 708 Current portion of capital lease obligations 31 48 Current portion of long-term debt (26) 109 Other current liabilities 582 536 Total current liabilities 34,014 31,668 Long-term debt, net of current portion 158,270 158,270 Convertible debt 11,980 11,980 Capital lease obligations, net of current portion 83 92 Deferred revenue 6,596 6,903 Other liabilities 1,296 1,000 Total liabilities 212,239 209,913 Commitments and contingencies Minority interests in consolidated subsidiaries 1,729 1,242 STOCKHOLDERS' EQUITY: Common stock 2 2 Treasury stock (180) (180) Additional paid-in capital 15,655 14,210 Retained earnings 29,852 28,884 Total stockholders' equity 45,329 42,916 Total liabilities and stockholders' equity $259,297 $254,071 Radiologix, Inc. Consolidated Statements of Operations (In thousands, except per share data) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2005 2004 2005 2004 Service fee revenue $62,258 $63,613 $189,320 $195,866 Costs of operations: Cost of services 40,389 39,825 120,838 119,408 Equipment leases 3,545 4,554 9,582 13,945 Provision for doubtful accounts 4,521 5,329 13,647 16,185 Depreciation and amortization 6,125 5,449 18,014 17,484 Gross profit 7,678 8,456 27,239 28,844 Severance and other related costs --- 405 --- 405 Corporate general and administrative 3,862 5,285 13,195 13,783 Impairment of goodwill, intangible and long-lived assets --- 7,474 --- 13,226 Gain on sale of operations --- --- --- (4,669) Interest expense, net, including amortization of deferred financing costs 4,561 4,603 13,802 14,015 Income (loss) before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, income taxes and discontinued operations (745) (9,311) 242 (7,916) Equity in earnings of investments 1,227 982 2,888 2,336 Minority interests in income of consolidated subsidiaries (184) (195) (487) (639) INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS 298 (8,524) 2,643 (6,219) Income tax expense 136 (3,348) 1,065 (2,706) INCOME (LOSS) FROM CONTINUING OPERATIONS 162 (5,176) 1,578 (3,513) Discontinued Operations: Loss from discontinued operations before income taxes (582) (351) (986) (11,150) Income tax benefit (221) (140) (376) (4,460) Loss from discontinued operations (361) (211) (610) (6,690) NET INCOME (LOSS) $(199) $(5,387) $968 $(10,203) INCOME (LOSS) PER COMMON SHARE Income (loss) from continuing operations-basic $0.01 $(0.24) $0.07 $(0.16) Loss from discontinued operations-basic (0.02) (0.01) (0.03) (0.31) Net income (loss)-basic $(0.01) $(0.25) $0.04 $(0.47) Income (loss) from continuing operations-diluted $0.01 $(0.24) $0.07 $(0.16) Loss from discontinued operations-diluted (0.02) (0.01) (0.03) (0.31) Net income (loss)-diluted $(0.01) $(0.25) $0.04 $(0.47) WEIGHTED AVERAGE SHARES OUTSTANDING Basic 22,138,145 21,805,607 22,030,959 21,780,557 Diluted 22,411,042 21,805,607 22,342,653 21,780,557 Radiologix, Inc. Reconciliation of Non-GAAP Financial Information (In thousands) Reconciliation of Income from Continuing Operations to EBITDA For the Three Months For the Nine Months Ended September 30, Ended September 30, 2005 2004 2005 2004 GAAP: Income (loss) from continuing operations $162 (5,176) $1,578 (3,513) Add: Income tax benefit 136 (3,348) 1,065 (2,706) Add: Severance and other related costs --- 405 --- 405 Add: Interest expense, net 4,561 4,603 13,802 14,015 Add: Depreciation and amortization 6,125 5,449 18,014 17,484 Add: Impairment of goodwill, intangible, and long-lived assets --- 7,474 --- 13,226 Add: Gain on sale of operations --- --- --- (4,669) Add: Litigation settlement --- 295 --- 295 Add: Charges related to contract cancellations --- 515 --- 515 Add: Restricted stock compensation expense 181 --- 394 --- EBITDA $11,165 $10,217 $34,853 $35,052 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 Nine Months Ended September 30, Ended September 30, 2005 2004 2005 2004 Income (loss) from continuing operations excluding terminated operations $199 $(379) $1,453 $(3,408) Add: Income tax benefit 156 (535) 978 (2,376) Add: Severance and other related costs --- 405 --- 405 Add: Interest expense, net 4,560 4,585 13,801 13,847 Add: Depreciation and amortization 6,125 5,387 18,013 16,798 Add: Impairment of goodwill, intangible, and long-lived assets --- 263 --- 6,015 Add: Litigation settlement --- 295 --- 295 Add: Charges related to contract cancellations --- 200 --- 200 Add: Restricted stock compensation expense 181 --- 394 --- EBITDA from continuing operations excluding terminated operations $11,221 $10,221 $34,639 $31,776 Radiologix, Inc. Reconciliation of Financial Information, Excluding Terminated Operations (In thousands) For the Three Months Ended September 30, 2005 Radiologix Excluding Terminated Terminated Radiologix Operations Operations Service fee revenue $62,258 $(1) $62,259 Costs of operations: Cost of services 40,389 48 40,341 Equipment leases 3,545 8 3,537 Provision for doubtful accounts 4,521 (1) 4,522 Depreciation and amortization 6,125 --- 6,125 Gross profit 7,678 (56) 7,734 Corporate general and administrative 3,862 --- 3,862 Interest expense, net, including amortization of deferred financing costs 4,561 1 4,560 Income (loss) before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, income taxes and discontinued operations (745) (57) (688) Equity in earnings of unconsolidated affiliates 1,227 --- 1,227 Minority interests in income of consolidated subsidiaries (184) --- (184) INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS 298 (57) 355 Income tax expense (benefit) 136 (20) 156 INCOME (LOSS) FROM CONTINUING OPERATIONS $162 $(37) $199 Radiologix, Inc. Reconciliation of Financial Information, Excluding Terminated Operations (In thousands) For the Three Months Ended September 30, 2004 Radiologix Excluding Terminated Terminated Radiologix Operations Operations Service fee revenue $63,613 $1,449 $62,164 Costs of operations: Cost of services 39,825 1,185 38,640 Equipment leases 4,554 (8) 4,562 Provision for doubtful accounts 5,329 591 4,738 Depreciation and amortization 5,449 62 5,387 Gross profit 8,456 (381) 8,837 Severance and other related costs 405 --- 405 Corporate general and administrative 5,285 --- 5,285 Impairment of goodwill, intangible and long-lived assets 7,474 7,211 263 Interest expense, net, including amortization of deferred financing costs 4,603 18 4,585 Income (loss) before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, income taxes and discontinued operations (9,311) (7,610) (1,701) Equity in earnings of unconsolidated affiliates 982 --- 982 Minority interests in income of consolidated subsidiaries (195) --- (195) INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS (8,524) (7,610) (914) Income tax expense (benefit) (3,348) (2,813) (535) INCOME (LOSS) FROM CONTINUING OPERATIONS $(5,176) $(4,797) $(379) Radiologix, Inc. Reconciliation of Financial Information, Excluding Terminated Operations (In thousands) For the Nine Months Ended September 30, 2005 Radiologix Excluding Terminated Terminated Radiologix Operations Operations Service fee revenue $189,320 $968 $188,352 Costs of operations: Cost of services 120,838 486 120,352 Equipment leases 9,582 26 9,556 Provision for doubtful accounts 13,647 242 13,405 Depreciation and amortization 18,014 1 18,013 Gross profit 27,239 213 27,026 Corporate general and administrative 13,195 --- 13,195 Interest expense, net, including amortization of deferred financing costs 13,802 1 13,801 Income before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, income taxes and discontinued operations 242 212 30 Equity in earnings of unconsolidated affiliates 2,888 --- 2,888 Minority interests in income of consolidated subsidiaries (487) --- (487) INCOME BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS 2,643 212 2,431 Income tax expense 1,065 87 978 INCOME FROM CONTINUING OPERATIONS $1,578 $125 $1,453 Radiologix, Inc. Reconciliation of Financial Information, Excluding Terminated Operations (In thousands) For the Nine Months Ended September 30, 2004 Radiologix Excluding Terminated Terminated Radiologix Operations Operations Service fee revenue $195,866 $10,614 $18


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