ALPHARETTA, Ga., Aug. 10 /PRNewswire/ -- MQ Associates, Inc. (“MedQuest”), a leading national provider of diagnostic imaging services, today announced its results for the second quarter and six months ended June 30, 2006.
Net revenue was $69.1 million for the second quarter 2006, representing a decrease of $5.4 million, or 7.3%, from net revenue of $74.5 million for the second quarter 2005. Net revenue was $140.8 million for the six months ended June 30, 2006, representing a decrease of $7.7 million, or 5.1%, from net revenue of $148.5 million for the six months ended June 30, 2005. For the second quarter 2006 and the six months ended June 30, 2006, the decrease in net revenue was driven in large part by our termination of certain wholesale contracts, fewer lower modality procedures and a net reduction in centers.
Income from operations was $3.5 million for the second quarter 2006, representing a decrease of $0.7 million, or 17.0%, from income from operations of $4.2 million for the second quarter 2005. Income from operations was $8.6 million for the six months ended June 30, 2006, representing an increase of $1.6 million, or 22.7%, from income from operations of $7.0 million for the six months ended June 30, 2005.
Capital expenditures were $5.7 million for the second quarter 2006 compared to $2.5 million for the second quarter 2005, and $11.6 million for the six months ended June 30, 2006, compared to $6.7 million for the six months ended June 30, 2005. Cash provided by operating activities was $11.8 million for the six months ended June 30, 2006 compared to $16.4 million for the six months ended June 30, 2005. The decrease was primarily due to changes in working capital.
Adjusted EBITDA, which is defined below, was $13.6 million for the second quarter 2006, a decrease of $2.0 million, or 13.0%, compared to $15.6 million for the second quarter 2005. Adjusted EBITDA was $27.7 million for the six months ended June 30, 2006, a decrease of $3.5 million, or 11.1%, compared to $31.2 million for the six months ended June 30, 2005. Adjusted EBITDA, as defined by MedQuest, is net income plus (a) interest expense, net, (b) income taxes, (c) depreciation and amortization, (d) non-cash expenses and (e) audit committee review and other charges. For a more detailed discussion of Adjusted EBITDA and a reconciliation to net income, see the “Adjusted EBITDA” table at the end of this release.
Second Quarter 2006 Earnings Conference Call
MedQuest will conduct a conference call to discuss its second quarter 2006 results and related matters. The conference call is scheduled for 11:00 a.m. EDT on Friday, August 18, 2006 and can be accessed at (866) 202-3109 (domestic) or (617) 213-8844 (international). Interested parties should call at least ten (10) minutes prior to the call to register and should use participant passcode #48836233. The conference call will be broadcast live, and will be available for telephonic replay at (888) 286-8010 (domestic) or (617) 801-6888 (international) with participant passcode #14129887 through Friday, September 1, 2006.
Selected Financial Data
The following tables set forth selected financial data derived from MedQuest’s unaudited financial statements filed with its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006 and audited financial statements filed with its Annual Report on Form 10-K for the year ended December 31, 2005.
Condensed Consolidated Balance Sheets (in thousands) June 30, December 31, 2006 2005 Assets Cash and cash equivalents $ 5,127 $ 11,604 Patient receivables, net of allowances 26,684 27,784 Other current assets 7,324 6,263 Total current assets 39,135 45,651 Property and equipment, net 79,239 86,151 Other assets 63,614 66,644 Total assets $ 181,988 $ 198,446 Liabilities and stockholders’ deficit Other current liabilities $ 38,140 $ 40,333 Current portions of long-term debt and capital leases 1,645 10,911 Total current liabilities 39,785 51,244 Long-term debt and capital leases 334,492 326,794 Other 8,997 8,711 Total liabilities 383,274 386,749 Redeemable preferred stock 70,000 70,000 Total stockholders’ deficit (271,286) (258,303) Total liabilities and stockholders’ deficit $ 181,988 $ 198,446 Condensed Consolidated Statement of Operations (in thousands) Second Quarter Six Months Ended Ended June 30, June 30, 2006 2005 2006 2005 Net revenue $69,058 $74,520 $140,822 $148,455 Costs of services 31,617 34,640 64,208 68,956 MG&A expenses 24,151 26,539 49,348 53,096 Loss on disposal of assets 1,372 98 1,501 1,243 Depreciation and amortization 8,438 9,049 17,149 18,140 Income from operations 3,480 4,194 8,616 7,020 Interest expense, net 10,446 10,247 20,788 19,119 Equity in earnings of unconsolidated joint ventures (72) (58) (116) (124) Provision for income taxes 274 775 949 1,548 Net loss $(7,168) $(6,770) $(13,005) $(13,523) Adjusted EBITDA
This press release contains a discussion of Adjusted EBITDA, which, according to applicable Securities and Exchange Commission (“SEC”) rules, is a “non-GAAP financial measure” of MedQuest’s historical performance that is different from measures calculated and presented in accordance with GAAP. MedQuest defines Adjusted EBITDA as net income plus (a) interest expense, net, (b) income taxes, (c) depreciation and amortization, (d) non-cash expenses and (e) audit committee review and other charges. Adjusted EBITDA as calculated by MedQuest is not necessarily comparable to similarly titled measures by other companies. In addition, Adjusted EBITDA (a) does not represent net income or cash flows from operations as defined by GAAP, (b) is not necessarily indicative of cash available to fund MedQuest’s cash flow needs, and (c) should not be considered as an alternative to net income, operating income, cash flows from operating activities or MedQuest’s other financial information as determined under GAAP.
Management uses Adjusted EBITDA in its internal analysis of operating performance and monitors it to ensure compliance with certain maintenance and debt incurrence covenants under MedQuest’s senior credit facility, which is described in more detail in MedQuest’s Annual Report on Form 10-K for the year ended December 31, 2005. Management believes that Adjusted EBITDA provides useful information to investors for meaningful comparison to prior periods and analysis of critical components of results of operations, since it allows investors to compare the company’s ongoing performance before the effect of various items that do not directly affect the company’s ongoing financial performance. Management also believes that disclosure of Adjusted EBITDA is valuable to investors because it allows them to monitor a key component of maintenance and debt incurrence covenants that determine MedQuest’s compliance with, and its ability to incur further indebtedness under, its senior credit facility.
A reconciliation from net loss to Adjusted EBITDA, as defined by MedQuest, is shown below (in thousands):
Second Quarter Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Net loss $(7,168) $(6,770) $(13,005) $(13,523) Interest expense, net 10,446 10,247 20,788 19,119 Provision for income taxes 274 775 949 1,548 Depreciation and amortization 8,438 9,049 17,149 18,140 EBITDA 11,990 13,301 25,881 25,284 Non-cash expenses(1) 1,523 64 1,711 1,468 Audit Committee review and other charges(2) 43 2,207 149 4,458 Adjusted EBITDA $13,556 $15,572 $27,741 $31,210 (1) MedQuest incurred approximately $1.4 million and $0.1 million of non- cash expenses related to the loss on disposal of assets in the second quarter of 2006 and 2005, respectively, the majority of which were driven by closed centers. MedQuest also had approximately $0.1 million of non-cash expenses in the second quarter of 2006, primarily for exit activities related to those closed centers. MedQuest incurred approximately $1.5 million and $1.2 million of non-cash expenses related to the loss on disposal of assets in the six months ended June 30, 2006 and 2005, respectively, the majority of which were driven by closed centers. MedQuest also had approximately $0.2 million and $0.3 million of non-cash expenses in the six months ended June 30, 2006 and 2005, respectively, primarily for exit activities related to those closed centers. (2) MedQuest incurred approximately $0.1 million of non-recurring cash expenses in the six months ended June 30, 2006, related to the SEC’s formal inquiry concerning, among other things, MedQuest’s previous announcement that it expected to restate its financial statements for prior periods and its inability to timely file its Annual Report on Form 10-K for the year ended December 31, 2004 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, and June 30, 2005, which were filed in September and November 2005, and the U.S. Attorney’s Office investigation relating to the resignation of MedQuest’s former executive officers and its announcements that it expected to restate certain of its financial statements for prior periods. In the second quarter 2005 and the six months ended June 30, 2005, MedQuest incurred approximately $2.2 million and $4.5 million, respectively, of non-recurring cash expenses related to the audit committee review, the restatement, the amendment of the senior credit facility, consent solicitation to holders of its notes, executive search fees and other related expenses. About MQ Associates, Inc.
MQ Associates, Inc. is a holding company and has no material assets or operations other than its ownership of 100% of the outstanding capital stock of MedQuest, Inc. MedQuest, Inc. is a leading operator of independent, fixed- site, outpatient diagnostic imaging centers in the United States. These centers provide high quality diagnostic imaging services using a variety of technologies, including magnetic resonance imaging (MRI), computed tomography (CT), nuclear medicine, general radiology, bone densitometry, ultrasound and mammography. MedQuest, Inc. operates a network of 91 centers in thirteen states located primarily throughout the southeastern and southwestern United States.
Forward-Looking Statements
This press release contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, statements regarding MedQuest’s future growth and profitability, growth strategy and trends in the industry in which it operates. These forward-looking statements are based on MedQuest’s current expectations and are subject to a number of risks, uncertainties and assumptions. MedQuest can give no assurance that such forward-looking statements will prove to be correct. Among the important factors that could cause actual results to differ significantly from those expressed or implied by such forward-looking statements are the results of the investigation by the U.S. Attorney’s Office, the inquiry by the SEC or any other future action taken by the SEC or the U.S. Attorney’s Office, general economic and business conditions, the effect of healthcare industry trends on third-party reimbursement rates and demand for its services, limitations and delays in reimbursement by third-party payors, changes in governmental regulations that affect its ability to do business, actions of its competitors, introduction of new technologies, risks associated with its acquisition strategy and integration costs, and the additional factors and risks contained in MedQuest’s Annual Report on Form 10-K for the year ended December 31, 2005 filed with the SEC on March 31, 2006.
MQ Associates, Inc.
CONTACT: Todd E. Andrews, Chief Financial Officer of MQ Associates, Inc.,+1-770-300-0101
